If you want to file for bankruptcy, federal law requires you go through credit counseling and debtor education. These are two separate counseling sessions, one before filing and one after filing but before your debts are discharged. These requirements are the same whether you want to file for Chapter 7 or Chapter 13 bankruptcy. You must take both sessions with approved counseling agencies, but you can't take them both at the same time.
Your first step toward bankruptcy is a credit counseling session. You must take it within 180 days before filing for bankruptcy. It is usually a relatively short session, about 60 to 90 minutes long, in which you and your counselor go over your finances and discuss your options. This session may cover: - The bankruptcy process and what it can do for you - Advantages and disadvantages of filing - An analysis of your current financial situation and budget - Setting up a workable repayment plan - Discussions about how you got into financial trouble
Sometimes this session may be able to help you avoid filing bankruptcy, if you can negotiate your repayment plan with your creditors on your own. You have the option of taking this counseling in person, online or by phone. After the session, you will get a certificate of completion to include with your bankruptcy filing to prove you took the class. Agencies do charge a fee for this service, and these fees can vary by agency. But they have to tell you all the fees they charge before starting your session. They are also required to offer you reduced-fee or free services if you can't afford the regular fee. You do have to ask for this before beginning your session or you may have to pay the full fee.
Bankruptcy can help you get a fresh financial start, but if you got into trouble because you made poor financial decisions, you're more likely to end up back in the same boat again. Debtor education can help you learn to manage your money and credit better to make that less likely. You can learn: - How to rebuild your finances and then keep them in order - How to create a budget and stick to it - How to use credit wisely
This class is usually a little longer than the credit counseling session. It can also be done online, in person or over the phone. You must take it within 60 days after your first meeting of creditors (for Chapter 7) or before your last plan payment (Chapter 13). There is also a fee for these sessions, but just like credit counseling, the agency must disclose all fees upfront and you may qualify for a reduced fee or fee waiver. You will get another certificate of completion after this course. You will have to file it with the bankruptcy court before your bankruptcy can be finalized.
You can't get these counseling sessions just anywhere. You have to use an approved provider. In most states, this will be one approved by the U.S. Trustee Program. The program publishes lists of approved providers for both credit counseling and debtor education. Some agencies are approved for both types of counseling. If so, you may use the same agency for both, but remember: You can't take both classes in the same session. In Alabama and North Carolina, you must use providers approved by the district bankruptcy court's Bankruptcy Administrator. Just because a provider is approved doesn't mean it's the right one for you. Although you might be tempted to just pick one and get it over with, it's always a good idea to ask questions. After all, your financial future is at stake. To make an informed decision, talk to several agencies and get some information first: - Make sure you understand exactly what services they offer. - Make sure they will help you put together a plan to stay out of debt in the future. - Ask what they charge. And ask about a fee reduction or waiver if you can't afford their fees. - Ask about their counselors' training and qualifications. Are they certified?
Also make sure they have procedures in place to keep your confidential information secure. If they don't, they could be putting you at risk of identify theft and even bigger financial problems down the road. These counseling sessions are legally required, and you might be tempted to skate through them with as little effort as possible so you can get your bankruptcy approved. But it's to your advantage to take them seriously. They really can help you learn how to avoid financial problems and the stress it causes in the future.
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