Pre-Bankruptcy Credit Counseling Requirement
Pre-bankruptcy credit counseling, also known as the pre-filing course, is something that you will be legally required to do if you ever have to file for bankruptcy. This is the credit counseling course that CC Advising provides.
This requirement was mandated in 2005 when the Bankruptcy Abuse Prevention and Consumer Protection Act was signed into law by President George W. Bush.
Under the law, an individual must complete a counseling session with a U.S. Department of Justice approved credit counseling agency before the individual may receive their bankruptcy certificate, valid for six months or a hundred and eighty days, which must then be submitted to a court before a bankruptcy can be formally filed.
Receiving credit counseling is just one of several requirements that an individual must pass through in order to file for bankruptcy for the court. In addition to receiving the counseling, you (or your attorney) will also need to fill out several official bankruptcy forms to disclose your financial situation, as well as pay the filing fee (or otherwise pay the fee in installments or request a waiver), and complete a post-filing debtor education course after you have filed for bankruptcy but before your debts are discharged.
We will outline and discuss each of these topics in greater detail in this article, to help educate you on the process you will need to undertake if you or your business ever needs to formally file for bankruptcy in the future:
Why Do You Need To Take Pre-Bankruptcy Credit Counseling?
The main reason why the Federal government has mandated pre-bankruptcy credit counseling before an individual can file for bankruptcy is to give the individual considering filing a firm idea as to whether other options for resolving your debt issues exist.
For example, even if your financial situation is very dire, filing for bankruptcy is not your only option. Another option would be to follow through with a repayment plan in order to fix things.
That being said, bankruptcy may be your best option if it is obvious that simply repaying your debts is not financially feasible at the present time.
The counseling agency you work with will then decide if there are any other viable avenues for paying back your debt besides a repayment plan or filing for bankruptcy.
What Happens At The Pre-Bankruptcy Credit Counseling?
Pre-bankruptcy credit counseling is really not as scary of a procedure as it may sound to you. In fact, it doesn’t even have to be done in person, as the counseling can also be done online.
When the counseling session begins, you will need to have many materials prepared, including all information you have concerning your income and your current debts.
The more information you bring, the better, as the counselor will need as much information as possible in order to make a more accurate determination as to a solution that could solve your debt problems.
During the session, you can expect yourself and the counselor to thoroughly review your personal finances, come up with a personal budget plan that you can follow to help ease your financial troubles, and discuss each of the alternatives that you have available to you, if any.
In general, you can expect your credit counseling session to last between one to two hours. The counseling agency will then propose what they believe the most appropriate course of action to take is, and they will help you analyze your finances as well.
One thing that should be noted is you do not have to agree to or follow through with the agency’s recommendations. You are free to make your own decisions regarding how best to resolve your debt issues.
For example, if the counseling agency recommends to you a repayment plan but you decide to file for bankruptcy regardless, that is perfectly acceptable. The main thing is that you have a full picture of all of your available options. In the end, you make the choice.
In other words, Federal law only requires that you be a participant in the credit counseling from an approved agency before filing for bankruptcy. It doesn’t require that you have to agree to what they recommend you do.
Once the counseling session is complete, the agency will provide you with a bankruptcy certificate, which you will then keep and your attorney will submit to the court later when you file. CC Advising actually automatically e-mails it to the e-mail address you provide at registration for your attorney (or to the attorney’s designated e-mail if you use a referral code).
Remember, you can only use an agency that is approved by the U.S. Department of Justice. CC Advising is approved in all U.S. States and Territories, and not every agency is, so be sure to check. In order to protect against fraud, your certificate will be produced via a central automated system and will also be numbered so the court can verify it when you go to file.
This certificate must be filed fifteen days after the date when you have filed for bankruptcy.
Additionally, you will not be allowed to complete pre-bankruptcy credit counseling and pre-discharge debtor education at the same time.
Instead, the credit counseling session will need to take place before you file for bankruptcy, and the pre-discharge debtor education will happen after. We’ll discuss the pre-discharge debtor education in greater detail later.
When Will You Need To Complete The Credit Counseling?
Your pre-bankruptcy credit counseling session must be completed within at least six months before you decide to file for bankruptcy.
In addition, the counseling must be completed at least one day before you officially file. In other words, you can’t participate in the credit counseling session and then file later the same day.
What Should You Look For In A Credit Counseling Agency?
First and foremost, Federal law mandates that the credit counseling agency you choose to work with be approved by the U.S. Department of Justice.
Beyond that requirement, however, it’s entirely up to you to decide which agency you will work with.
That being said, not all credit counseling agencies are equal, which means choosing to work with the very first one you find is not necessarily the best course of action to take.
Instead, there are many qualities that you will want to look for in an agency in order to more efficiently narrow down your selection.
For example, you would be wise to work with a non-profit counseling agency that has been in business for several years.
This agency should also agree to waive the fees if you are unable to pay for them yourself due to your financial situation.
Once you do narrow down your selection based on the above criteria, there are many questions that you will want to be sure to ask when you contact them, including but not limited to:
- Which services do you provide?
- What is the cost for your services?
- Can you waive my fees if I can prove I’m not able to afford them?
- Will you work with me to develop a plan for avoiding more debt in the future?
- What requirements do you have for your counselors before you hire them?
- Will you keep my personally identifiable information confidential?
With this above criteria and set of questions, you should encounter little difficult in narrowing down your list of prospective credit counseling agencies to a high quality one that would work for you. CC Advising is well trusted and used by attorneys all over the U.S., so you can be rest assured if you choose us as your credit counseling agency you will be in good hands.
How Much Does It Cost To Use A Credit Counseling Agency?
You can expect to pay around fifty dollars to receive counseling and the certificate of completion from a credit counseling agency. CC Advising is one of the less expensive agencies out there, and we have low-cost courses that are much cheaper than our competitors.
That being said, agencies are also legally required to provide their services either at a lower cost or even for free if you are unable to afford their fees.
If you are presently unable to afford the fees of the agency you’re working with, you can ask them for an adjustment, but they may require you to also prove that you are unable to afford paying the required fee(s), so have financial documents on hand.
Are There Any Exceptions To The Counseling Requirement?
Yes, there are exceptions to the requirement that you have to undergo a credit counseling session with an approved agency before you file for bankruptcy.
For instance, you will not have to receive the counseling if the U.S. Trustee Program of the Department of Justice certified that there is not an appropriate agency that is available to you in your district.
That being said, as was noted previously, counseling from an approved agency can still be provided online or via phone, which is why that the Department of Justice will very rarely grant this request.
That being said, there are other ways that you can avoid having to receive the counseling as well. One way will be if you have to file for bankruptcy immediately, such as if you have to stop a foreclosure.
Another way will be if you were unable to receive counseling from an approved agency more than five days after you requested it.
In both of these examples, you will need to certify to the court’s satisfaction in order to be granted the exception, so most of the time it makes more sense to just take the course.
In the case of the latter example, if you were unable to receive the counseling five days after requested, and certified to the court you were unable to receive counseling, you will then need to re-seek counseling after having filed for bankruptcy and receive it within thirty days. You can also request the court to grant you an extension by fifteen days.
It’s also possible to be granted an exception to receive counseling from an approved agency if you have a physical or mental disability that prevents from receiving counseling, or if you are service active duty as a military service member in a combat zone. You should discuss any possible exemption with your bankruptcy attorney.
What Is The Post-Filing Debtor Education Course?
After you have filed for bankruptcy, but before you have your debts discharged, you will also be required by law to undertake and complete an approved post-filing debtor education course.
In this course, a counselor will discuss you with you how to develop a budget, how to manage your credit, and how to manage money properly. As with the credit counseling course, these classes last a minimum of 2 hours (120 minutes) and can be conducted in-person, online, or over the phone.
You are required to have a case number before you can sign up for the course. You will receive the case number from your attorney or from the bankruptcy court after your bankruptcy has been filed with the court, and the case number has been assigned. The fee for this course might also be waived upon request if you prove you are unable to afford it.
You will also receive a certificate of completion upon completing the course to prove to the courts and the government that you took it.
In conclusion, if you have to or are planning on filing for bankruptcy in the near future, there are more steps to follow than just walking into a courthouse and filing the paperwork.
As we have seen, the process first begins with receiving pre-bankruptcy credit counseling as mandated by the government since 2005, with the exception for the circumstances and conditions as previously discussed.
While this counseling may seem like just another hoop to jump through in order to formally file for bankruptcy, the truth is that it will be very beneficial to you as you may discover insights about your financial situation that can help put you on the path to success moving forward.
As we also discussed previously, you may have all sorts of options to resolve your debt issues, depending on your particular circumstances.
However, upon receiving your certificate of completion from the approved agency, you will be legally able to formally file for bankruptcy in the court. After filing, you will be required to complete the post-filing debtor education course as well.
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