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Credit Counseling before Bankruptcy

Since the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005, all potential bankruptcy filers have had to complete a session of credit counseling before filing bankruptcy.

The goal of the session is to help potential filers determine whether bankruptcy is the best financial move for them.

The Essentials of Credit Counseling before Bankruptcy

There are a few important things to know about the pre-bankruptcy credit counseling requirement.

  • Filers must plan ahead. Some filers looking to file for bankruptcy to halt or delay foreclosure have found the credit counseling requirement prevents them from filing on time. Anyone considering bankruptcy as a foreclosure-fighting measure should know the planned date of foreclosure and take steps to complete the credit counseling session and submit the bankruptcy petition before that date.
  • The session must be no older than six months. The bankruptcy court has a 180-day limit on the age of the counseling session. That is, filers must complete the credit counseling requirement within 180 days of filing their petition with the court.
  • Filers must submit proof. Attending the credit counseling before bankruptcy is important, but it's just as important to get a document saying you’ve done so. Without this document, the bankruptcy court can dismiss a case.
  • Credit counselors must be approved: The federal government has an online database of approved credit counseling agencies. Filers should make sure the firm they work with has the necessary accreditation; otherwise, their bankruptcy case risks being dismissed.

Why Is Credit Counseling before Bankruptcy Required?

Because bankruptcy offers such sweeping financial protection, regulators aim to make sure that it goes only to those truly in need. During the session, a credit counselor works with a potential bankruptcy filer to see whether other debt management options (like debt settlement, debt negotiation and credit counseling) could work instead of bankruptcy.

But those who worry about not "passing" the credit counseling hurdle should rest assured. The vast majority of people in need of bankruptcy find in this course that bankruptcy is indeed a good fit for their financial needs.

If you'd like to learn more about what the bankruptcy court requires of filers, you can take this opportunity to speak with a bankruptcy attorney practicing in your area. Simply fill out the quick case review form below to arrange a free, no-obligation consultation today

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