Before you can receive a discharge in Chapter 7 or Chapter 13 bankruptcy, you must complete a course in personal financial management (also called the predischarge debtor education course). The purpose of the debtor education course is to teach you how to manage money and use credit wisely after bankruptcy. If you don’t complete the debtor education requirement, the court won’t issue a discharge in your bankruptcy. Read on to learn more about the debtor education course requirement in bankruptcy.
What Is the Debtor Education Course Requirement?
To receive a discharge in Chapter 7 or Chapter 13 bankruptcy, you are required to take a debtor education course after you file your case. The goal of the debtor education requirement is to educate you on making smart financial choices so that you won’t have to seek bankruptcy relief in the future.
When you take the debtor education course, you will typically learn about:
- budget preparation
- money management
- how to use credit wisely and effectively
- consumer protection laws and agencies, and
- how to deal with an unexpected financial crisis.
Who Must Take the Debtor Education Course?
With a few exceptions, all Chapter 7 and Chapter 13 bankruptcy debtors must complete a course in debtor education before they can receive a discharge. (Learn more about the exceptions to the debtor education requirement.)
In general, you must complete the debtor education course unless:
- you have a disability or incapacity that prevents you from taking the course
- you are on active duty in a military combat zone, or
- you don’t have an adequate debtor education course available in your district (this is a very rare occurence).
Approved Debtor Education Course Providers
You must take the debtor education course from a provider approved by the U.S. Trustee (or the Bankruptcy Administrator if you live in Alabama and North Carolina). You can find a list of the approved debtor education providers in your area on the U.S. Trustee’s website.
When Do You Have to Complete the Debtor Education Course?
If you file for Chapter 7 bankruptcy, you must take the debtor education course and file your certificate of completion (discussed below) with the court no later than 60 days after the first scheduled date of your meeting of creditors (also called the 341 hearing). In Chapter 13 bankruptcy, you must file the certificate of completion before you make your last plan payment or file a motion to request a hardship discharge.
What happens if you don’t complete the debtor education requirement? If you don’t complete the debtor education course within the specified deadlines, the court will typically close your bankruptcy case without a discharge. This means that if you want to wipe out your debts, you will need to file a motion, pay the necessary fees, and ask the court to reopen your case so that you can file the certificate and obtain a discharge.
How Much Does the Debtor Education Course Cost?
The cost of the debtor education course will depend on the provider you select. But the new rules published by the Executive Office for U.S. Trustees (EOUST) state that $50 or less is a reasonable fee. If a debtor education provider wants to charge more than $50, it has to get approval from the EOUST. (Learn more about the new debtor education rules.)
Fee waivers. If your household income is below 150% of the poverty line, the law presumes that you are eligible for a waiver of the debtor education course fee. But your provider may still be able to charge a reduced fee if it overcomes the presumption (it can try to do this by demonstrating that you can afford a reduced fee based on the financial information you provide).
What Happens During the Debtor Education Course?
You can usually take the debtor education course in person, over the phone, or on the Internet. Regardless of the method of instruction, the course will typically last at least two hours.
If you attend the course in person, an instructor will provide you with course materials and teach you in a class setting. If you complete the course over the phone, you will usually receive a workbook (or other learning materials) to follow during the session.
In addition, if you take the course online or over the phone, you must also complete a test. If you don’t complete the test in a satisfactory manner or receive a score of less than 70%, the provider must communicate with you directly. For telephonic courses, the instructor must contact you either in person or by phone. For online courses, the communication can be by email, live chat, or phone.
Filing Your Certificate of Completion
When you complete the debtor education course, you must file a form called Debtor’s Certification of Completion of Postpetition Instructional Course Concerning Personal Financial Management (Official Form 23) with the court. In most cases, you will also need to attach the course completion certificate you receive from the provider to Form 23.
You can find the most up to date version of Form 23 on the website of the United States Courts at www.uscourts.gov/FormsAndFees/Forms/BankruptcyForms.aspx.