The Credit Counseling and Debtor Education Requirements in Bankruptcy

What Is Required? When Must You Complete the Programs?

After losing your job, suffering injury or illness, or going through a divorce, you might find it difficult or impossible to meet your financial obligations. A Chapter 7 or Chapter 13 bankruptcy can help you get a fresh start. One of the goals of American bankruptcy law, though, is to help debtors develop better habits with respect to money and spending. For that reason, all persons filing a bankruptcy petition, whether for the discharge of debts through Chapter 7 or the reorganization of debts under Chapter 13, must complete both credit counseling and a debtor education program to qualify for protection. Credit counseling must be completed before you file your petition. The debtor education requirement must be completed after filing but before debts are discharged.

What Is the Pre-Bankruptcy Credit Counseling Requirement?

To be eligible to file for bankruptcy protection, you must complete a credit counseling session with a credit counseling agency that has been approved by the United States Department of Justice. The program must be completed within six months (180 days) prior to the filing date of your bankruptcy petition.

To complete the credit counseling program, you will need to gather information regarding your current income and financial obligations. You’ll meet with an approved credit counselor (this may be done in person or online), who will thoroughly review your personal financial situation, help you put together a proposed budget to address your financial concerns, and talk to you about the potential alternatives to bankruptcy that may be available to you.

As a general rule, the credit counseling session lasts a couple of hours. When you are done, the credit counselor will make recommendations regarding your best course of action. Their recommendation may or may not be filing for bankruptcy. The credit counseling agency will also provide you with a certificate of completion, which you will have to provide to the bankruptcy court when you file your Chapter 7 or Chapter 13 petition.

There is no requirement, however, that you follow the recommendations of the credit counselor. You are free to file for bankruptcy protection even if the counseling agency proposes other options. The law only requires that you participate—it does not require that you follow the steps recommended by the counselor.

Once you receive the certificate of completion, you must file it with the bankruptcy court within 15 days of the date of your bankruptcy filing.

Are There Exceptions to the Credit Counseling Requirement?

In the following limited situations, you do not have to complete the pre-petition credit counseling in order to file a bankruptcy petition:

• The U.S. bankruptcy trustee certifies that there is no approved agency in the district where you will file. (This exception is unlikely, as you can obtain credit counseling either by phone or online.)
• You had to file for bankruptcy immediately, as you were facing foreclosure, repossession, or wage garnishment.
• You requested credit counseling but were unable to obtain it within five days of your request.

What Is the Debtor Education Requirement in Bankruptcy?

Whereas the credit counseling requirement occurs prior to the filing of your bankruptcy petition, the debtor education requirement occurs after filing but before you can have any of your debts discharged. You will only be allowed to discharge debts after you file a certificate of completing the debtor education course.

The debtor education course focuses on tools that you can use to develop new and better habits with regard to debt and money. In the debtor education program, you’ll learn how to effectively budget and how to better manage your money after bankruptcy. You’ll typically learn how to set realistic financial goals and minimize expenses.

The debtor education program must be taken from an agency or organization approved by the bankruptcy trustee. If you are unable to afford the full cost of the debtor education program, you may pay whatever you can. The course may be taken in person, by telephone, or online. Typical topics discussed in the debtor education program include:

• How to establish short-term and long-term financial goals
• Identifying fixed and variable monthly expenses
• Strategies for keeping good financial records
• How to effectively use credit
• How to save for emergencies
• Understanding the difference between gross and net monthly income

After completing the debtor education course, either you or the debtor education agency must file a form certifying your completion. In a Chapter 7 bankruptcy, you must file the certificate no later than 45 days after the date on which your meeting of creditors was first scheduled. In a Chapter 13 bankruptcy, you must file it no later than the date on which you make your last plan payment.