If you are considering filing for bankruptcy in the near future, you must comply with the bankruptcy law’s credit counseling requirements and complete two separate education requirements.
The Bankruptcy Code’s education requirements went into effect in 2005 and provides that every Chapter 7 or Chapter 13 debtor must complete two separate and distinct credit counseling sessions: one before filing for bankruptcy and one after filing for bankruptcy.
Bankruptcy filers sometimes become confused about the need to finish two separate courses. However, both courses are mandatory and must be completed if you wish to obtain relief under the federal Bankruptcy Code. These credit counseling requirements apply not only to cases filed in Georgia, but in every state.
Pre-Bankruptcy Counseling
The pre-bankruptcy credit counseling session must be completed prior to filing. When you take the pre-filing course, your certification is valid for 6 months. If you do not file within this 6 month window, you will have to take the pre-filing course again.
Remember, as well that pre-filing credit counseling vendors are private companies and if you wait until the last minute, you may have difficulty finding a course vendor who can accommodate you. Thus, if you are considering filing for bankruptcy within the next several months, you should go ahead and complete the pre-filing course, obtain the course completion certificate and forward this proof of completion to your lawyer.
A list of approved course vendors may be found here: approved debtor education vendors
What to Expect:
A typical credit counseling session lasts about 90 minutes. You may choose to conduct the session in person at a trustee-approved counseling organization, on the phone, or even online. Rest assured, you will not be tested nor will you have to complete any post-counseling session assignments. Rather, your counseling session will most likely entail an evaluation of your personal financial situation, a discussion of alternatives to bankruptcy, and a personal budget plan.
How Much Does It Cost?
A counseling session typically costs $35-$50, depending on your particular circumstances (types of services received, location, etc.). All government-approved counseling centers will inform you of any fees before the start of the session and a fee waiver is available for those who cannot afford the counseling fee.
What Should I Do with the Certificate of Completion?
Once you complete the mandatory counseling session, you will receive a certificate of completion. It is imperative that you save this certificate as it will serve as proof that you have taken and completed the course. When your attorney files your case, he will include the credit counseling certificate in his filings. Except for a few very rare circumstances, if you file a Chapter 7 or Chapter 13 case without a credit counseling certificate, your case will be dismissed and you will lose your filing fee.
Post-Bankruptcy Financial Management Course
The second counseling provision of the Bankruptcy Code requires the debtor (you) to attend a Financial Management course. Before you can receive your discharge in bankruptcy, you must complete this educational requirement. Like the pre-bankruptcy credit counseling course, the post-filing bankruptcy counseling session can be completed in person, on the phone, or online with an approved provider. Similarly, the debtor education course charges a small fee ($20-$50) and a fee waiver is available to those who cannot afford the course.
Finally, as in the pre-bankruptcy counseling course, you must receive a certificate following the completion of your debtor education class and that certificate must be filed by your lawyer with the Clerk of Court. If your case is closed without a certificate being filed, you will not receive a bankruptcy discharge. If you want a discharge you will have to pay an extra filing fee and pay your lawyer to reopen your case to file the pre-discharge certificate.
What will you learn in these courses?
Both the pre-filing credit counseling course and the pre-discharge financial management course are designed to help you understand more about creating and following a household budget. Congress mandated a pre-filing course with the hope that a meaningful percentage of possible bankruptcy filers would be able to avoid bankruptcy completely. The post-bankruptcy course is designed to help bankruptcy filers avoid bad spending and savings habits that may have led them into bankruptcy.
Statistically, the pre-filing course has had very little impact on the number of consumer bankruptcy filings and we are not aware of any study which has shown that pre-bankruptcy counseling has dissuaded more than a handful of debtors from filing. Perhaps this is because by the time a potential bankruptcy filer learns about the pre-filing educational requirement, he has already exhausted all non-bankruptcy remedies.
Some of the credit counseling vendors have commissioned their own studies to evaluate the benefits of pre-discharge education. Not surprisingly, according to most of these surveys participating debtors self report that their ability to manage finances has improved.
Regardless of the effectiveness of credit counseling, this requirement remains a required part of Chapter 7 and Chapter 13 filings. Your participation is mandatory.