You’ve decided that declaring bankruptcy is right for you, and you know there are some initial steps you need to take. You see both credit counseling and debtor education on the list, but they sound like the same thing! Do you need both? Or just one? And when do you need them?
You do need to complete both courses, and timing is important. It’s easy get confused as to what they are and what they are for, so we’ve put together an explanation and resources for each!
Completing a credit counseling course within 180 days prior to filing is a requirement for starting the process of declaring bankruptcy. When you successfully complete this short class, you’ll receive a certificate to include with your filing. If you don’t have this certificate, the court will dismiss your case. This is because declaring bankruptcy is a serious decision, and the court wants to make sure you have no other option besides bankruptcy to solve your financial crisis. There are very few exceptions to this requirement, but you can receive a 30-day extension after filing to complete the counseling if your bankruptcy is considered an emergency. Generally, this only applies to a bankruptcy filed to stop a foreclosure or wage garnishment.
The course can be taken in person, over the phone or online, and the focus will be on your income, expenses and debt to help you determine the best course of action. Most often the credit counseling agency will examine your budget and make suggestions as to your other options, such as a repayment plan if feasible.
Don’t worry, you’re under no obligation to take these recommendations, and only attendance and completion of the course is required for certification. A list of approved credit counseling agencies can be found here. Although there are no standard guidelines, approved credit counseling agencies must make their services available to those who cannot afford to pay.
While the debtor education course is not required to file for bankruptcy, you must complete it before the court will discharge your debt. In a Chapter 7 bankruptcy, you must be certified within 60 days of the initial date set for your meeting of creditors, and for Chapter 13, you must be certified before your payment plan is completed. If you fail to do so your case can be closed without discharge, and you’ll have to pay additional fees to reopen it. And, short of a cognitive disability that prevents you from understanding the course or a deployment to an active military zone, it’s unlikely you can be excused from this requirement.
Again, the course can be taken in person, over the phone or online, but this time centers on your life after bankruptcy. You’ll receive tips on money management, working with a budget and using credit properly so you can avoid getting into the same situation again. A list of approved debtor education providers can be found here, and the same payment guidelines apply to debtor education as to the credit counseling course.
If you need assistance with your bankruptcy, or just have questions, please contact our bankruptcy lawyers for a free consultation.