Bankruptcy and the Required Credit Counseling and Debtors’ Education Courses
All bankruptcies are governed by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The law requires that every person who files for bankruptcy undergo mandatory credit counseling at least 180 days before they can officially file. The credit counseling must be conducted by an organization approved by the government. Besides the credit counseling, those who file for bankruptcy also need to complete a debtors’ education course before the government will officially discharge their debts.
The U.S. Trustee program is the government agency that approves the organizations that provide the mandatory credit counseling and provide the debtors’ education program. If the group’s name appears on the U.S. Trustee program’s list of approved credit counselors and educators, then they are an acceptable option, if not, then don’t waste your time or money.
Each of these programs follows a specific timeline. The credit counseling course must happen before the debtor files for bankruptcy and the debtors’ education course must take place after the debtor has filed the initial claim. When the debtor files for bankruptcy, he must include in the already mountainous pile of paperwork a certificate of completion for the credit-counseling course. The debtor must also submit evidence that he or she has completed the debtors’ education program before the debts can finally be discharged.
The credit counseling session is meant to involve a thorough examination of the debtor’s complete financial life. The credit counselor is supposed to provide the debtor with some alternatives to bankruptcy and also give the debtor an opportunity to learn how to develop a better personal budgeting system. If the debtor cannot afford the counseling session, the credit counseling organization is required to offer the counseling free of charge. The debtor is responsible for telling the organization that he or she cannot afford to pay the fee before the session begins and will then receive a fee waiver from the organization. If the debtor is able to pay for the session, the charge could be as much as $50 dollars.
Once the debtor has completed the required credit-counseling course and has received the certificate of completion, he can then submit the certificate of completion along with the bankruptcy petition and move the process one step closer to being done. The next step is to complete the debtors’ education course. This course includes instructions for the debtor on how to develop a better budget, how to use credit wisely and how to manage money effectively. There is also a fee associated with this course, but just like the credit counseling sessions, if the debtor cannot afford the fee the education provider should waive it.