Bankruptcy lawyers regularly field questions from prospective clients about the credit counseling and financial management course requirements set out in the bankruptcy laws. When are these courses required? How much do they cost? Why are there two courses? How long do the courses take?
Here is a brief overview of the credit and financial management courses that you are required to take as part of your bankruptcy filing:
Pre-Bankruptcy Credit Counseling
Before you file, you must complete a "credit counseling" course. This counseling requirement applies whether you are filing Chapter 7 or Chapter 13. The certification certificate that you receive upon completion of this course is part of our standard filing paperwork. Pre-filing credit counselors must be Trustee approved. Here is what will be covered:
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the counselor will evaluate your financial situation the counselor will provide information about consumer debts (i.e., credit cards and consumer loans) and will discuss alternatives to bankruptcy the counselor will discuss budgeting and help you evaluate whether you have enough in your budget to pursue a debt workout rather than bankruptcy if requested, the counselor will refer you to a debt management agency for the creation of a personal debt management plan the counselor will attempt to offer a long term view of your financial activities and habits
Generally the credit counseling courses last anywhere from 60 to 90 minutes and can be done in person, on the web or via telephone. Most of the credit counseling agencies we have seen offer this counseling for between $35 and $50 per person. If you cannot afford to pay the counselor's fee, you may request a fee waiver from the counselor's office. All fees and payment should be discussed and agreed to prior to the session.
Pre-Discharge Financial management Course
If you successfully complete your bankruptcy, your judge will issue an official court document called an "order of discharge." This discharge order formally terminates your obligation to pay the debts that were included in your case. Before you can get this discharge order, however, you must complete a course called the Financial Management Education course. As is the case with pre-bankruptcy credit counseling, the financial management counselor must be approved by the Trustee in your filing jurisdiction. The purpose of the financial management course is to educate you about:
developing a budget and living within your means developing better spending habits learning about money management, including saving, budgeting and checkbook control wise use of credit - what to avoid when accessing available credit
Generally financial management courses last about two hours and can be done in person, on the web or via telephone. As is the case with credit counseling, the fee will be in the $35 to $50 range.
The financial management counseling company will fax or email a certificate to you and/or your lawyer. This certificate must be filed with the clerk of court. If you do not file this certificate prior to the time your case is closed, you will not receive a discharge.
Both course completion certifications together prove that the debtor has been educated by professionals to understand proper budgeting, money management and how to use credit without ending up in trouble. Of course these aren't the only bankruptcy filing requirements, but these are two of the mandatory steps. If you have any specific questions about pre-bankruptcy credit counseling or about pre-discharge financial management education, please call an experienced personal bankruptcy lawyer.
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