Facing overwhelming financial obligations is a situation no one wants to encounter, but sudden events, such as long-term unemployment, major illness, or serious injury can completely derail a person’s financial situation. Bankruptcy exists to give people a fresh start when mountains of debt threaten to swallow their future. The government, in an effort to discourage repeat filings and abuse of the bankruptcy process, requires debtors to receive education about financial planning as a condition of completing their bankruptcy case. While this requirement may seem onerous, it is an important and necessary step to the end of the bankruptcy process. Two separate requirements related to financial counseling must be met in all Chapter 7 bankruptcy cases. A discussion of what these requirements entail and important information about this aspect of a bankruptcy case will follow below.

Credit Counseling

Within the six-month period before filing for bankruptcy, all debtors must attend a credit counseling course with a consumer credit counseling agency approved by the U.S. Trustee Program. The purpose of the course is to inform the debtor about the alternatives to bankruptcy and the legal consequences of taking this step, such as a negative mark on a person’s credit report for up to 10 years after discharge and potential difficulty obtaining loans. The session typically involves a review of the debtor’s financial situation, the creation of a budget, and a discussion of bankruptcy alternatives, like debt consolidation or negotiating with creditors. The course generally takes between 60 to 90 minutes. There is small fee for the course ($20 to $50), but the fee will be waived for those that cannot afford it. Courses are offered via the internet, telephone, and in-person, so the debtor can choose the most convenient delivery method. A certificate of completion must be attached to the bankruptcy petition, and if it is not included, the case will be dismissed unless the debtor qualifies for an exemption or extension of time.  

Debt Education

In addition to the pre-bankruptcy credit counseling, all bankruptcy debtors must also complete a pre-discharge debt education course. This course is a prerequisite to discharge, so its completion is essential. Again, like credit counseling courses, only courses with approved debt education providers are accepted, and a certificate of completion must be submitted to the bankruptcy court. These classes are longer, lasting about two hours, and the fees are also higher ($50 to $100). However, again, these fees may be waived due to financial hardship upon request. The law does permit providers to charge an additional fee to issue a certificate of completion, but that information must be communicated to the debtor before signing the person up to take a course. The courses are offered over the phone, online, and in-person. These courses generally cover creating a budget, managing money, and using credit responsibly. They may also touch on consumer protection laws, credit scores, dealing with financial crisis, and financial products a person can use to make money management easier. Note that the credit counseling and debt courses cannot be completed at the same time, and an approved provider is not permitted to offer this option.

Consult a Bankruptcy Attorney

If your debt is more than you could ever pay, bankruptcy may be an option to help alleviate your financial situation. The rules on when filing for bankruptcy is appropriate are complex and technical, and require an experienced bankruptcy lawyer to assess whether bankruptcy is the right option. For anyone in the Indianapolis region, attorney Christopher L. Arrington represents clients in all aspects of Chapter 7 bankruptcy, and he can help you regain financial stability. Contact him today to schedule an appointment.