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The Credit Counseling Requirement Prior to Filing Bankruptcy

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Filing for bankruptcy can be an excellent way to help you get a fresh start if you’re facing a serious amount of debt. That said, it’s a serious decision that comes with certain consequences, and it’s important to understand the risks and alternatives before you file. In order to ensure that bankruptcy petitioners understand these risks prior to filing, the federal government has made it mandatory that all petitioners complete a credit counseling course before they can begin the bankruptcy process. Read on to learn more about this requirement.

The credit counseling requirement was created as a result of the 2005 amendments to the federal bankruptcy laws. The process is straightforward. Counseling sessions typically last 60 to 90 minutes and can be completed either online, in person, or over the phone. The petitioner provides information to the counselor on their debts and income, and the counselor attempts to create a budget and payment plan that would allow the petitioner to avoid bankruptcy.  The requirement was intended to expose potential filers to alternatives to filing for bankruptcy, but by the time most debtors reach the point of deciding to file, they have no viable alternatives and would be unable to afford a payment plan. The US Government Accountability Office itself has described the requirement as more of an “administrative obstacle than a timely presentation of meaningful options,” but nevertheless, it’s a requirement prior to filing.

The most important aspect of the credit counseling session is the timing. The certificate you receive at the completion of your credit counseling appointment will expire within six months, and your petition for bankruptcy cannot be filed before you have completed your session and received your certificate. Since the timing of filing a bankruptcy petition is very important and can depend on a number of factors, speak with your attorney about when you should complete the credit counseling requirement to ensure the certificate can be filed before you need to file your petition.

While the fee for credit counseling is typically set at about $50 for the one-time session, federal law requires these agencies to waive or reduce the fee for those who cannot afford to pay the full amount. The US Trustee Program publishes a list of approved credit counselors for Californians here.

If you are a southern California resident considering filing for bankruptcy, speak with an experienced, knowledgeable attorney about your options to escape crushing consumer debt by contacting the Ventura bankruptcy lawyers at Rounds & Sutter for a consultation, at 805-650-7100.