The Internal Revenue Service could revoke the tax-exempt status of about 20 credit-counseling firms, just as the country's new bankruptcy laws are set to go into effect on Oct. 17.
The bankruptcy changes will require consumers to go through credit counseling before being eligible to file for bankruptcy. The firms whose exempt status is being examined account for about half of the counseling industry's revenues and raise questions of whether any court-approved counseling firms will be available to debtors. The Justice Department's U.S. Trustee Program, which oversees the nation's bankruptcy courts, is developing a list of firms that it has approved to provide the education and counseling required by the new law.
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