Credit and Budget Counseling Requirements of the
New Bankruptcy Law
One of the most publicized components of the new bankruptcy law has to do with the two new counseling requirements for debtors.
Under the new law, a debtor may not file for bankruptcy unless he has undergone a pre-bankruptcy credit briefing. The intent of this credit counseling requirement is to encourage debtors to pursue non-bankruptcy alternatives.
In reality, pre-bankruptcy credit counseling has had almost no impact on the likelihood that a debtor will file - in other words, the credit counseling requirement is a formality of limited use that will cost you $35 to $50 per person.
A recent study by the National Association of Consumer Bankruptcy Attorneys confirmed what most bankruptcy attorneys already know - in most cases, by the time a person begins to think about bankruptcy, there are rarely any non-bankruptcy alternatives that could work. Aggressive collection practices by the credit card industry often leave harassed debtors with no real option other than bankruptcy.
Before you can file bankruptcy, therefore, you must attend a pre-bankruptcy credit briefing and bring me your certificate of completion. You can either attend the credit briefing in person, over the phone or over the Internet. This certificate must be filed with your petition.
The pre-bankruptcy credit briefing is rarely an issue except in those cases where a debtor desires to file for bankruptcy protection to stop a foreclosure. In the pre-foreclosure rush, many credit counseling agencies cannot meet the demand of potential filers. Although the law does have a provision that permits filing without a credit counseling certificate in situations where counseling is not available, the few cases that have come down put the burden on the debtor to get the counseling and the certificate. I have personally witnessed one of our bankruptcy judges dismiss a case because of the absence of a certificate, even though the debtor was old and bedridden and could not afford the $50 credit counseling fee. Here, too, you are much better off not waiting until the last minute to get your briefing.
Click on the link to read more about the credit counseling requirements and to see a list of approved counseling vendors that I have posted.
The new law also requires debtors to obtain post-filing budget counseling before they can get a discharge. This is a second counseling session that will cost you $50 and may or may not help you.
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