Pre-Bankruptcy Credit Counseling – Mandatory Before You File

In today's economy, many people are experiencing credit problems and mounting debt that are causing adverse effects on their life. For many people in trouble bankruptcy is the best or only option for rebuilding their credit and restoring a normal lifestyle. Filing bankruptcy is a serious decision that should be discussed and understood before the decision is made.

In 2005, the US government passed the The Bankruptcy Abuse Prevention and Consumer Protection Act that requires everyone filing bankruptcy to get credit counseling and debtor education through an approved agency. All agencies must be approved by The Department of Justice's US Trustee Program, and only agencies on an approved list can provide these services. The program mandates rules in all fifty states, except Alabama and North Carolina where court officials can provide credit counseling and debtor education.

Credit Counseling:

Credit counseling must be completed 180 days prior to filing bankruptcy. Only agencies and counselors on an approved list can provide official pre-bankruptcy counseling and issue certificates of completion, so it's important to work with an authorized agency for these services. Certificates of completion are numbered and issued through an automated system to prevent fraud.

Pre-Bankruptcy Counseling:

Credit counseling sessions usually take 60 - 90 minutes and can be done in person with a counselor, by phone or online. The sessions include a thorough evaluation of your personal financial situation, a personal budget plan, and a discussion on possible alternatives to filing bankruptcy. There is an approximate fee of $50 for the pre-bankruptcy counseling session, but the certificate of completion is free. If you can't afford the fee, you can request a fee waiver with the agency. When credit counseling is completed you will receive a certificate showing proof of completion which must be filed with the bankruptcy filing.

Debtor Education:

Debtor education courses must be completed after bankruptcy is filed and before your debts can be discharged. Only agencies on an approved list can provide official debtor education courses and issue certificates of completion.

Post-Filing Debtor Education:

Debtor education courses take approximately 2 hours and can be done in person with a counselor, by phone or online. The course is designed to help you understand how to manage money better, use good credit skills, and budget your money. There is an approximate fee of $50-$100 for the course, but the certificate of completion is usually free. If you can't afford the fee, you can request a fee waiver with the agency. When the debtor education course is completed you will receive a certificate of proof of completion which must be filed with the district court where your bankruptcy is filed.