Bankruptcy is a legal procedure for dealing with the debt problems of individuals and businesses and discharges financial obligations. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made certain changes to the eligibility criteria for individuals seeking bankruptcy protection. One such change was the introduction of the pre-bankruptcy credit counseling requirement.
Credit Counseling
With limited exceptions, people who plan to file for bankruptcy protection must get credit counseling within 180 days before they file from a credit counseling organization approved by the U.S. Trustee Program. As the U.S. Trustee Program does not operate in Alabama and North Carolina, court officials called Bankruptcy Administrators approve pre-bankruptcy credit counseling organizations in these states. The credit counseling organization must be approved in the judicial district where you are filing bankruptcy. Upon completion of the counseling, you will be given a certificate of completion.
Objective
The pre-bankruptcy credit counseling requirement was introduce to reduce the misuse of bankruptcy protection. The credit counseling organization will check out whether you can pay at least 60% or more of you debts so that you don't have to file bankruptcy. You must undergo this counseling within the 180 days prior to the filing. During the credit counseling, you will be encouraged to look closely at your finances and make an informed decision whether you really do need to file bankruptcy at all. By doing this, you can better determine if you have missed any viable options for arranging agreements with your creditors and potentially avoiding the more drastic step of bankruptcy altogether.
Costs
Generally a pre-bankruptcy credit counseling session will include an evaluation of your personal financial situation, a discussion of alternatives to bankruptcy, and a personal budget plan and can last between 60 to 90 minutes. It can also be done over the telephone or online. Before starting the session, the credit counseling organization is required to discuss any fees with you before starting the counseling session. Generally the fee is about $50 but this can vary depending on where you live and other factors. The law has provision for fee waiver. You can request for a fee waiver if you cannot afford to pay the fees.
Getting Legal Help
Pre-bankruptcy credit counseling is now mandatory under law. Consult with an experienced bankruptcy attorney. The attorney can provide you with the list of approved credit counseling organizations in your jurisdiction.
