Bankruptcy Credit Counseling & Financial Management

In 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). One of the major changes that BAPCPA made was that consumers who file for bankruptcy must take two courses – a credit counseling course and a debtor education course. This requirement applies to consumers who file under any chapter of bankruptcy and is a simple process that must be followed for a successful bankruptcy.

11 U.S.C. § 111 sets up the requirement that the bankruptcy clerk must have a publicly available list of bankruptcy credit counseling agencies approved by the United States Trustee and a publicly available list of instructional courses concerning personal financial management approved by the United States Trustee. This section also lists the requirements that a credit counseling agency must meet in order to be approved by the United States Trustee.

The Bankruptcy Credit Counseling Course

The first credit counseling course, also called the “pre-filing course,” must be taken before your case is filed. BAPCPA changed the definition of “debtor” (a person or entity who files for bankruptcy) to “an individual [who] during the 180-day period ending on the date of filing of the petition by such individual, received from an approved nonprofit budget and credit … that outlined the opportunities for available credit counseling and assisted such individual in performing a related budget analysis.” 11 U.S.C. § 109.

This means that in order to meet the definition of an individual eligible to file for bankruptcy, you must take an approved credit counseling course. This course typically lasts between 1-2 hours and can be taken online or over the phone. The United States Department of Justice has approved credit counseling agencies to provide the credit counseling course. In rare circumstances, the requirement to take a credit counseling course may be waived, such as if the debtor is on active military duty, has a mental or physical disability which prevents counseling, or needs to file immediately to stop creditor action. The credit counseling course is an informational course designed to teach financial skills and there is no pass or fail. Realistically, it is simply a hurdle that must be complied with in order to file bankruptcy.

Steiner Law Group has helped many individuals through the credit counseling process and can refer you to approved credit counseling agencies to meet this requirement.

How much does the Bankruptcy Credit Counseling Course Cost?

The first course typically costs between $10-15 per household. This means that if you are filing with your spouse, there is one fee for both spouses to take the course.

Timeline for Taking the Credit Counseling Course

Once you complete the credit counseling course, you will receive a certificate stating that you have completed the course. This certificate is only good for 180 days, which means that your bankruptcy case must be filed within 180 days from completion of the course. If you wait beyond 180 days, you will most likely have to retake the course again. If your case has been filed without the credit counseling certificate, it will most likely be dismissed.

The Debtor Education/Financial Management Course

Once your case has been filed, you must take a second bankruptcy course which is called the Debtor Education or Financial Management Course. Debtor Education/ Financial Management Course is also called the “post-filing” course. This course must be taken in order to receive your bankruptcy discharge in chapter 7 and chapter 13. Similar to the bankruptcy credit counseling course, this course can be taken online or over the phone.

How much does the Debtor Education/Financial Management Course Cost?

Similar to the bankruptcy credit counseling course, the Debtor Education/Financial Management Course typically costs between $10-15 per household.

Timeline for Taking the Financial Management Course

In a chapter 7 bankruptcy, the debtor education/financial management course must be taken within 60 days after your 341 meeting of creditors. In a chapter 13 bankruptcy, it must be taken be before your make your last chapter 13 plan payment. When you complete the debtor education/financial management course, you will receive a certificate of completion that must be filed with the court. If you do not file it within the required deadline, your chapter 7 of chapter 13 case may be closed with a discharge. If this happens, you will have to incur additional costs to reopen the case for purposes of filing the Debtor Education/Financial Management Course.

Steiner Law Group has helped many clients find and complete inexpensive bankruptcy credit counseling and debtor education/financial management courses. If you need help with bankruptcy, please give us a call.