Exceptions to Bankruptcy's Credit Counseling and Debtor Education Requirements

When individuals file for bankruptcy, they must complete a credit counseling course before filing and a debtor education course afterward as a condition of receiving a debt "discharge," the order that eliminates your responsibility to pay qualifying obligations. Businesses are exempt from the requirement.

Although exceptions for individuals exist, they only apply in limited circumstances. Below, we explain the credit counseling and debtor education requirements and when the court will waive them.

Credit Counseling and Debtor Education Requirements in Bankruptcy

Almost all individuals who file for bankruptcy must take two mandatory bankruptcy education courses before receiving a discharge eliminating qualifying debts. (11 U.S.C. § 109.) You'll find classes that comply with your bankruptcy district's requirements on the U.S. Trustee Program website.

Bankruptcy Credit Counseling

Before filing for bankruptcy, you must take a credit counseling course from an approved provider during the 180 days before you file. The course helps determine whether you can afford to handle your debts outside of bankruptcy.

Most courses are conducted online and take less than three hours to finish. Once complete, you receive a certificate to file with your bankruptcy petition, the paperwork that begins your bankruptcy case. You'll file it even if it states that your finances indicate bankruptcy isn't necessary.

Bankruptcy Debtor Education

After filing your bankruptcy case, you must complete the debtor education requirement by receiving financial counseling and filing the certificate with the bankruptcy court.

A Chapter 7 filer must file a debtor education certificate with the court within 60 days of the first date set for the 341 meeting of creditors, the one hearing all filers must attend. (Bankruptcy Rule 1007(c).) Many providers will file the certificate on your behalf. Most courts will dismiss the case without a discharge if the debtor education certificate isn't filed promptly. When this occurs, the filer must pay the filing fee again to reopen the case and file the certificate.

A Chapter 13 filer has a much longer window to complete this requirement. The certificate must be filed no later than the date the Chapter 13 plan specifies for the last Chapter 13 plan payment or when making a motion for a discharge.

Find out what happens after the 341 meeting of creditors.

When You Won't Need a Credit Counseling Certificate

When you file your bankruptcy petition, you must explain your efforts to obtain credit counseling to the court. Here are the accepted exceptions to bankruptcy credit counseling requirements. You should know that they don't apply to many people, and you'll likely need to fulfill the credit counseling requirement at some point.

The United States Trustee or bankruptcy administrator determines that no courses are available in your district. This exception isn't likely to apply because you can complete the courses in person, over the telephone, or online, meaning they are available to practically everyone.

You are incapacitated, have a disability, or are on active military duty in a combat zone. A claim of incapacitation requires a showing that you suffer from a mental illness or impairment to such an extent that you are not capable of understanding or making rational decisions about your finances. For the court to waive the counseling requirement due to disability, your physical impairment must physically prevent you from completing the course in person, over the phone, or online.

You had to file bankruptcy immediately to avoid substantial, immediate harm. You must show that after contacting an agency that provides the credit counseling course, you couldn't complete the course during the following seven days and had to file for bankruptcy immediately to prevent some "exigent circumstance" or significant harm such as a wage garnishment or sheriff sale. This exception is only a temporary "band-aid." You must complete the course within 30 days of filing your bankruptcy unless the court grants additional time.

When You Won't Need a Debtor Education Certificate

If you're incapacitated, have a disability, or are on active military duty in a combat zone, you won't need to file the certificate. The bankruptcy trustee responsible for your matter is also obligated to provide temporary extensions if a disaster prevents you from completing the course requirement. Contact the trustee's office as soon as possible to make arrangements.

Navigating Your Bankruptcy Case

Bankruptcy is essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because the rules apply to every case, you can't skip a step. We want to help. Below is the bankruptcy form for this topic and other resources we think you'll enjoy. For more easy-to-understand articles, go to TheBankruptcySite.

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.