Required Credit Counseling If You are Filing for Bankruptcy
As part of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act if you want to file for bankruptcy you will have to complete two credit counseling courses. The first course you will need to complete before you file your petition to claim bankruptcy. The second course you will need to take will be after you have filed your paperwork, before the judge can finalize your case. Only courses completed through a credit counseling provider approved by the U.S. Trustee Program of the Department of Justice will fulfill the requirement. For a current list of approved credit counseling providers by state click here.
There are two main credit counseling requirements you must fulfill in order to file for bankruptcy:
1) First, you must complete pre-filing bankruptcy counseling at least six months prior to submitting paperwork to the courts to claim bankruptcy. The requirement is intended to make sure that you understand the advantages and disadvantages of filing for bankruptcy and what your other options might be besides filing. Pre-filing bankruptcy credit counseling can be provided by an approved nonprofit credit counseling agency or attorney.
The law requires that the courses not be less than 90 minutes long and the fee for the class not be more than $50. If you're afraid that you can't afford the course, don't worry. Credit counseling providers cannot deny anyone entry to the class due to an inability to pay. Counseling can be taken in-person (either one-on-one or in a group setting), over the phone or by Internet. Examples of topics covered during a standard pre-bankruptcy counseling session include:
- An overview of the bankruptcy process
- Budgeting and a personalized budget analysis
- Understanding and managing credit
- Understanding debt-to-income ratio
- How to reduce debt
- Alternatives and consequences to filing for bankruptcy
2) When you complete the counseling you will receive a certificate of completion that you will need to submit to the bankruptcy court in order to file for bankruptcy.
Once you have filed your paperwork with the courts to claim bankruptcy, your case will not be finalized by a judge (and therefore debts will not be completely forgiven) until you complete pre-discharge bankruptcy counseling. The counseling can be administered by a nonprofit credit counseling agency, attorney, certified public accountant (CPA), or certified financial planner (CFP) approved by the U.S. Trustees program. The course is intended to help you understand the basics of personal financial management so that after you have declared bankruptcy you can get on the road to financial recovery and make different financial choices in the future to avoid bankruptcy again. While there is no packaged curriculum that all approved credit counseling providers use, the course is required to address the following topics:
- Rebuilding your financial life after bankruptcy
- How to create and maintain a budget
- The difference between fixed and variable expenses
- How to keep good financial records
- Types of insurance and how to determine and obtain necessary coverage
- Setting short- and long-term savings goals
- How to use and manage credit
- Understanding credit ratings
- Personal finance resources for consumer
- Consumer laws and regulations
- How to avoid predatory lenders
- How to avoid identity theft
If you and a spouse are filing for bankruptcy you must both take and complete both the pre-filing and pre-discharge bankruptcy counseling courses in order for the bankruptcy petition to be approved. Again, while fees for classes can vary, you cannot be turned away because of an inability to pay.
Once you have completed your pre-discharge bankruptcy education coursework you will receive a completion certificate that you will need to submit to the courts in order to have your case finalized.