Bankruptcy: Credit Counseling Before Filing

In most cases, you must get credit counseling within 180 days before filing for bankruptcy protection. Additionally, you must complete an educational course on debt management before you are eligible to have your debts discharged. The bankruptcy counseling and debtor education requirements were enacted to ensure that consumers have exhausted all other options and reduce the likelihood of a second visit to the bankruptcy court.

The U.S. government must approve counseling organizations to qualify. The U.S. Trustee Program responsible for approving credit counseling organizations does not operate in North Carolina or Alabama, so bankruptcy administrators approve such organizations.

This article focuses on the requirement to seek credit counseling services before becoming eligible for bankruptcy. See Consumer Credit and Debt Counseling for related information.

Pre-Bankruptcy Counseling and Education Requirements

Credit counseling and debtor education may not be provided at the same time to meet bankruptcy filing requirements. Credit counseling must be completed before filing, while debtor education must take place after filing (but before debts are discharged). Upon completing your U.S. Trustee-approved counseling and education programs, you will be issued an authenticated certificate to file with the court.

Before Filing: Credit Counseling

Pre-bankruptcy counseling with an approved provider should, at the very least, include the following:

• A thorough review of your personal finances
• Discussion of bankruptcy alternatives
• Personal budget plan

Credit counseling sessions usually last roughly an hour or so and may be done online, over the telephone, or in person. If you can't afford to pay for its services, you may request a fee waiver before the session starts (approved counseling organizations are required to provide free services to those who can't afford them). Depending on where you live and other factors, a counseling session may cost roughly $50.

After completing the credit counseling requirement, the organization will supply you with a certificate (which you will use as proof when you file for bankruptcy). By law, there is no extra charge for the certificate.

See the DOJ's list of approved credit counseling agencies to find one near you.

After Filing: Debtor Education

Before you have your debts discharged, but after you file for bankruptcy, you are required to complete an approved course on consumer debt. They may also be referred to as "providers or personal financial management instructional courses." These courses usually cover the following topics:

• Developing a budget
• Using credit responsibly
• Managing money

As with pre-bankruptcy credit counseling, you may attend debtor education courses in person, over the telephone, or online. These classes usually take about two hours to complete and cost between $50 and $100, but the fee may be waived if you can't afford it. Also, as with pre-bankruptcy counseling, you will receive a certificate to use as proof.

See the DOJ's list of approved debtor education providers to find one near you.

What to Ask Before Choosing a Credit Counselor

Countless organizations offer a variety of credit- and debt-related services, but make sure you do your homework before choosing one. If you are specifically seeking a counseling service to meet your bankruptcy filing requirements (or would like to keep that option open), make sure you choose an approved provider. Additionally, you may want to ask prospective credit counselors the following questions:

• What is your complete list of services?
• Do you also help develop a plan for avoiding heavy debt in the future?
• How much do you charge for your services?
• I can't afford your fees. Can you waive them?
• Can you describe the training and certification requirements of your counselors?
• How do I know you're keeping my personally identifiable information (Social Security Number, birth date, etc.) confidential?
• Are your employees paid a commission or otherwise have any incentive to sell me additional services?