What is the Role of Credit Counseling in Bankruptcy?

Bankruptcy law requires filers to undergo mandatory credit counseling before any debts are forgiven. Often, your attorney will link you with a non-profit credit counseling service. You can also find your own service.

Any counseling service you use must be one of the list of agencies approved by the Department of Justice.

You’ll be able to complete counseling over the phone or from your computer. You should expect the session to take roughly one hour. 

You’ll then receive a certificate which is included in your bankruptcy case file. The certificate is valid for 180 days. 

You must also complete a pre-charge debtor education course to learn money management skills, which theoretically are meant to ensure you don’t ever have to file bankruptcy again. The certificate for the completion of this course must be filed within 45 days of your 341 hearing.

While it may be tempting to breeze through bankruptcy counseling with half an ear, we always encourage our clients to listen closely in case they gain new ideas or insights which can help them. For example, you may gain a deeper understanding of what it will take to rebuild your credit out of bankruptcy.

Costs can range from $25 to $50 per session. If the credit counseling agency determines your household budget is too tight to allow you to make the payment, they may waive the fees.

During the counseling session, the agency might attempt to help you adopt a feasible repayment plan that could serve as an alternative to bankruptcy. Be advised that you aren’t required to agree to that plan even if it could theoretically be workable. You will be required to file the plan with your bankruptcy paperwork, but it should not stand as a barrier between you and filing.

Of course, credit counseling isn’t actually helpful for many filers. If your problem is underearning, rather than overspending, then learning how to make a budget isn’t going to suddenly change your need to file for bankruptcy. Nevertheless, this is what the law requires, even if it feels silly or futile.

Try to think of it like a checkmark that you’ll tick off on the list of things you’ll have to do on the road to financial freedom, and then focus on the goal: a clean credit report, an end to creditor harassment, and an end to bad debt.

Need help? Contact Haysom Law today.

See also:

How to Prepare for Bankruptcy

What to Expect After Your Bankruptcy Discharge

How to Prepare for Your Free Bankruptcy Consultation



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