In this article, we’ll cover the pre-bankruptcy credit counseling and pre-discharge education requirements that are mandatory when you’re seeking bankruptcy protection. We’ll also discuss where to find companies that are allowed to issue bankruptcy certificates for both credit counseling and the education requirement. Finally, we’ll explore what you should look for in a bankruptcy counselor.
Definition and Examples of a Bankruptcy Certificate
Bankruptcy is a legal process that can give you a fresh start when you’re overwhelmed by debt. But before you can seek personal bankruptcy protection, you’re required to undergo credit counseling. You also must complete a debtor education course before a court will discharge, or release you from liability for, your debt. Both are mandated by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The requirements are the same for Chapter 7 liquidation and Chapter 13 reorganization, which are the two main types of personal bankruptcy. You won’t be able to complete both counseling and the debtor education course at the same time. Credit counseling happens pre-filing, while the debtor education course for a second certificate is scheduled post-filing.
How Bankruptcy Certificates Work
Only credit counseling companies and debtor education courses that are approved by the U.S. Trustee Program are allowed to issue bankruptcy certificates. The exception is if you live in Alabama or North Carolina, because the U.S. Trustee Program doesn’t operate in these states. If you live in Alabama or North Carolina, you’ll need to find a credit counseling service and debtor education course approved by the bankruptcy administrator in your judicial district.
What Happens During Credit Counseling?
When you meet with a credit counseling service, your counselor will help you evaluate your financial situation and whether bankruptcy is right for you. The service must address the specifics of your financial situation and the factors that led up to it. They’re also required to provide you a plan for handling your finances that won’t drive you deeper into debt. After you complete credit counseling, you’ll receive your certificate, which is valid for 180 days. If you opt to file bankruptcy, you’ll include the certificate in your petition.
What Happens During the Debtor Education Course?
After you’ve filed for bankruptcy, you’ll have to complete the debtor education course. The course will cover budgeting, money management, and how to use credit wisely. Upon completion, you’ll receive a bankruptcy certificate that must be filed with the bankruptcy court to have your debts discharged. Your course provider can file the certificate with the court on your behalf, but it isn’t required to do so. If it doesn’t send it directly to the court, you’ll need to file it with the court yourself.
Requirements for Bankruptcy Certificates
A credit counseling session typically lasts 60 to 90 minutes. It can be completed in person, by phone, or online. The typical fee for credit counseling is around $50. A debtor education course takes about two hours to complete, and you also can complete it in person, by phone, or online. Typically, the cost is $50 to $100. All fees related to credit counseling service and the debt course must be disclosed upfront. Neither provider can charge you for a bankruptcy certificate unless it notified you about the fee prior to the service. If you can’t afford the cost of either service, ask for a waiver. Typically, you’ll qualify if your household income is less than 150% of the federal poverty level. Agencies are required to provide the service for free if you’re unable to pay.
What to Look for in a Bankruptcy Counselor
If you’ve met with an attorney and are certain you’re going to file, the counseling session will probably just be a formality. But if you’re weighing your options, ask a potential counselor whether their organization offers other services, such as a debt management plan. Also, ask what credentials counselors have and how they’ll keep your personal and financial information secure. It’s essential that you find a counseling service that’s approved by the U.S. Trustee Program or your local bankruptcy administrator to obtain your bankruptcy certificate. You can find a list of approved credit counseling services and debtor education course providers on the U.S. Department of Justice website.
