If you want to file for individual bankruptcy under either Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code, you must meet certain eligibility requirements. Some of these eligibility requirements differ by the type of NY bankruptcy you file. For example, you must pass the means test to show you make below the median income in NY or have a very small disposable income to file for Chapter 7 bankruptcy. If you don’t pass the means test, you are regulated to a Chapter 13 NY bankruptcy.
One requirement in place under the U.S. Bankruptcy Code for Chapter 7 and Chapter 13 filings is credit counseling. To file for NY bankruptcy, you must have completed credit counseling within six months (180 days) of your bankruptcy petition. There are very few exceptions to this restriction.
What is the purpose of credit counseling before an NY bankruptcy and why does the government find credit counseling so valuable that it is required in the federal bankruptcy statutes? In this post, an NY Chapter 7 and Chapter 13 bankruptcy lawyer explain.
What Is Pre-Bankruptcy Credit Counseling?
You don’t need to file for NY bankruptcy or intend to file for NY bankruptcy to attend a credit counseling class. However, before bankruptcy is one of the few times that credit counseling is mandatory. As such, the companies and financial institutions that provide credit counseling are required to offer free services to anyone taking a class just to satisfy the pre-bankruptcy requirement and unable to pay for it.
During a credit counseling session or class, a counselor reviews the full scope of your financial situation to advise on a repayment plan and paths to a healthier financial future. The counselor’s advice is intended to provide options other than NY bankruptcy to solve financial problems and mismanagement. When you leave a credit counseling session, you should have a proposed budget to manage your debt and start making payments and an involved strategy for tackling your specific financial struggles.
The debtor is required to bring financial information, bank statements, pay stubs, credit card statements, utility bills, and other documents. The counselor uses these documents to understand the amount of your debt and ability to repay, making it crucial that you provide as much information about your financial situation and debts as possible. You also need to ensure the documentation is accurate.
There is no reason to skew or falsify the information you take to pre-bankruptcy credit counseling, as the advice and opinions of the counselor are non-binding. You are free to implement the financial practices and changes or fully ignore them. The purpose of pre-bankruptcy counseling is to provide the options, not make them mandatory.
What Is the Purpose of Pre-Bankruptcy Credit Counseling?
It is important to point out that the eligibility requirements and rules of bankruptcy are set at the federal level, not by the State of NY, and the necessity of credit counseling is similarly mandated by federal law. Therefore, Chapter 7 and Chapter 13 debtors from across the United States must complete credit counseling before filing a bankruptcy petition. Why is there this strict requirement?
Many people facing debt view bankruptcy as their way out of a stressful financial situation. Despite its complexities, bankruptcy is recognizable and well known to people across NY. If you are looking at mounting debt and missed payments, bankruptcy might feel like your only option, but this isn’t the case. There are options for repayment plans and strict budgets that would alleviate your debt. A credit counseling course before NY bankruptcy helps you determine if bankruptcy is your best option or not.
NY bankruptcy is seen as a course of last resort for individuals facing massive debt and overwhelming financial situations. Even as NY bankruptcy can open the door to financial freedom, there are certain repercussions and drawbacks to filing Chapter 7 or Chapter 13 bankruptcy. Credit counseling helps you understand if NY bankruptcy is a necessary step and worth the negative implications and ramifications.
Where Can You Find a Credit Counseling Provider?
You can locate a list of credit counseling agencies on the United States Trustee’s website. Once on the website, you simply navigate to the page titled “List of Approved Credit Counseling Agencies” and find a provider in your area. Credit counseling agencies still provide their services in-person, which often limits your choice of provider.
If you are considering NY bankruptcy, it might be time to find a qualified lawyer to take your case. A NY bankruptcy attorney can help you locate a reliable credit counseling provider and give you further insight into the eligibility requirements for Chapter 7 or Chapter 13 bankruptcy. Working with a bankruptcy lawyer can be incredibly helpful because the NY bankruptcy court where you file a petition must approve the course or session you take. Not all providers of credit counseling classes are approved.
Ready to talk with a bankruptcy lawyer in your area? Contact our team at Simon Haysom, LLC.
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