In 2005, the Federal Trade Commission made it mandatory that people must go through a government-approved credit counseling program at least 6 months prior to filing for bankruptcy.
Though the counseling can take place over the phone, in person, or online, a certificate of completion will be required by the court where you will be filing for bankruptcy.
Pre-bankruptcy Counseling and Post-bankruptcy Education Requirements
While many credit counseling organizations offer services that can help you deal with financial burdens, only organizations approved by the Department of Justice U.S. Trustee Program can provide you with the certification you need for pre-bankruptcy counseling and post-bankruptcy education, both of which are required by federal law. A listing of the agencies approved by the Department of Justice can be found online by clicking here.
Pre-bankruptcy counseling and post-bankruptcy education cannot be obtained at the same time.
You must complete pre-bankruptcy counseling at least 180 days prior to filing for bankruptcy, and post-bankruptcy education must be obtained after filing for bankruptcy but before your debts are discharged by the court.
You are required to complete credit counseling when filing for chapters 7, 11, 12 or 13 bankruptcy protections.
What is Credit Counseling?
While credit counseling agencies will offer different services, they generally will help you evaluate your financial situation and discuss any bankruptcy alternatives available to you.
Credit counseling offers people a way to learn more about how to budget and manage their finances. The counselors will help you analyze your debts, manage your money, and design a budget that will work for your specific circumstances.
Keep in mind there are fees involved, though government approved agencies must waive the fee if you are not able to pay them. The certificate of completion may also have a fee attached.
Debt Management Plans
Credit counseling agencies may recommend a debt management plan (DMP) to help you achieve your financial goals.
In a DMP, you will deposit money each month to the agency for your creditors. The agency then disburses the money to your creditors per the negotiated agreement, which generally includes a payment amount and scheduled payment and pay off dates.
Having a DMP is not required by the courts to file for bankruptcy; however, if you do have a DMP the court will want a copy included in your filing documents.
What is Post-bankruptcy Education?
After you file for chapter 7 or 13 bankruptcies, federal law requires that you complete debtor education, which is best described as a financial management course that will help you learn how to budget your money and how to best manage your finances after the bankruptcy.
Federal law requires that you complete the debtor education course within 2 months after your initial creditors meeting if filing for chapter 7.
When filing for a chapter 13 bankruptcy, you are required to complete the course prior to the last payment of your debt management plan.
If you fail to take the debtor education course before the deadline, your debts may not be discharged, leaving you responsible for all of them.
Massachusetts Bankruptcy Attorney Gregory Oberhauser
If you have more questions about what is required when you file for bankruptcy contact our office to speak with Attorney Gregory Oberhauser. He has helped many people in Massachusetts find relief from debt helping them move forward in their lives. 978-452-1116