Bankruptcy Credit Counseling And Debtor Education Requirements

When Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, they included a provision requiring people filing for bankruptcy to complete certain education requirements before they file the petition and receive the debt discharge. Those considering filing for bankruptcy should be aware of the counseling they need to complete.

Pre-Filing Credit Counseling

Before a person can file a bankruptcy petition, he or she must attend a pre-filing credit-counseling session, either in person, on the phone or online. The session typically lasts between 60 and 90 minutes, and during that time the debtor and the credit counselor analyze the debtor's finances. They discuss possible alternatives to bankruptcy and create a budget for the debtor.

At the conclusion of the session, the debtor receives a certificate of completion. The debtor needs the certificate before he or she can file a bankruptcy petition. The session usually costs about $50. However, those who cannot afford the fee can apply for a waiver.

Pre-Discharge Debtor Education

If a person does decide to file for bankruptcy after going through the credit-counseling session, he or she must complete a debtor-education class before the bankruptcy court will grant the debt discharge. Like the credit-counseling session, people may choose to attend debtor education in person, on the phone or online. The debtor-education class usually lasts longer than the credit-counseling session. During the class, the debtor and the counselor revisit the topic of developing a budget, discuss using credit wisely and identify resources for the debtor.

The debtor-education classes generally cost slightly more than credit-counseling sessions. As with the credit-counseling sessions, those who cannot afford the debtor-education classes can apply for a fee waiver. Similar to the credit-counseling session, once a person completes the debtor-education class, he or she receives a certificate that he or she must give to the court before the court will grant the debt discharge.

Choosing a Counselor

The U.S. Trustee Program oversees the approval process for counseling organizations in most states, and those considering filing for bankruptcy need to ensure they use an approved organization for counseling. The Trustee Program posts a list of approved counseling and education providers on its website.

Consult an Attorney

Making the decision to file for bankruptcy is never easy. Those struggling financially should consult an attorney who can discuss their situations with them and help them make informed decisions.