The Pre-Bankruptcy Credit Counseling Requirement

Learn about the bankruptcy credit counseling course, including how to get free pre-bankruptcy filing credit counseling in Chapter 7.

By , Attorney · University of the Pacific McGeorge School of Law

Most people must take a course in credit counseling before bankruptcy. It's one of the two educational courses required before receiving a bankruptcy discharge wiping out qualifying debt.

Bankruptcy credit counseling involves consulting a nonprofit credit counseling agency to see whether you can feasibly handle your debt load outside of bankruptcy. You can take the course up to 180 days before filing for Chapter 7 or Chapter 13 bankruptcy,

What Is a Pre-Bankruptcy Credit Counseling Class?

When you file for bankruptcy, you must fulfill several requirements. For instance, you must:

  • disclose all aspects of your financial situation by filling out official bankruptcy forms
  • show that you received credit counseling from an agency approved by the U.S Trustee's office within the 180-day period before you filed your bankruptcy, and
  • pay a filing fee, request a fee waiver, or pay the fee in installments.

Filing the Bankruptcy Certificate of Credit Counseling

You'll prove that you've taken the credit counseling course by filing the certificate of completion with your bankruptcy paperwork or no later than 15 days after your bankruptcy filing date. You'll also receive a copy of any repayment plan you may have worked out with the agency.

Why You Must Take Pre-Bankruptcy Credit Counseling for Bankruptcy

Credit counseling lets you know whether you need to file for bankruptcy or whether an informal repayment plan would get you back on your economic feet. Counseling is required even if it's obvious that a repayment plan isn't feasible (that is, your debts are too high, and your income is too low) or you are facing debts that you find unfair and don't want to pay.

The counseling agency usually prepares a budget based on your income and expenses and reviews your options for repaying the debt. In most cases, the agency confirms that you don't have any feasible options for dealing with the debt other than filing for bankruptcy.

Bankruptcy law requires only that you participate in the counseling, not that you go along with whatever the agency proposes. Even if a repayment plan is feasible, you aren't required to agree. However, if the agency does come up with a plan, you must file it along with your other bankruptcy documents.

When the Court Agrees With the Agency's Plan

If it's clear from the documents you file that you could complete the repayment plan proposed by the agency, the court might use this to question your Chapter 7 filing and try to push you into a Chapter 13 repayment plan. If that happens, you'll have an opportunity to explain why you shouldn't have to repay all of your debts.

How to Find Credit Counseling Agencies and the Expected Costs

Your bankruptcy jurisdiction must approve the particular course that you take. You can find an approved provider by visiting the U.S. Trustee's website. Click on the "Credit Counseling & Debtor Education" link and "List of Approved Credit Counseling Agencies." After the list populates, scroll down until you find your court's jurisdiction. You'll want to choose a provider in that section to ensure you get credit for the course.

Free Pre-Bankruptcy Filing Credit Counseling

Credit counseling agencies can charge a reasonable fee for their services. However, if a debtor cannot afford the fee, the counseling agency must provide services free or at reduced rates by offering a sliding fee scale, as well as a fee waiver for people below a certain income level (150% of the poverty level for a family of equal size). The Office of the U.S. Trustee—the law enforcement agency that oversees credit counseling agencies—previously stated that a "reasonable" fee might range from free to $50, depending on the circumstances.

The Second Course: Post-Bankruptcy Debtor Education

Bankruptcy filers must take a second course—called debtor education—after filing for bankruptcy. The debtor education course provides the filer with financial management tools, such as tips for creating a budget and rebuilding credit after bankruptcy.

You'll prove that you've completed the course by filing the certificate of completion with the court (or the provider might do so for you). The certificate must be filed within 60 days of the date first set for the meeting of creditors—the one court appearance all filers must attend—or the court will dismiss the case.

Learn more about credit counseling and debtor education requirements, and other procedural bankruptcy requirements.

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