What You Need to Know About Pre Bankruptcy Credit Counseling

Pre-Bankruptcy Credit Counseling – Info About The U.S. Bankruptcy Code

There are many appropriate reasons for borrowing money, including financing your education, starting a business or buying a home. By handling your debt in a timely and responsible manner, you can build your credit rating, which may help you obtain more favorable rates on future loans.

There may come a time, either through poor financial management or due to economic circumstances that are beyond your control such as a job loss or major illness, that you are not able to pay your debts on time. You might even get to the point that you are unable to pay your debts at all. That’s where U.S. bankruptcy laws can help.

Purpose Of The U.S. Bankruptcy Code

The U.S. Bankruptcy Code was designed to help honest but unfortunate debtors obtain a fresh financial start. Unlike Old World bankruptcy laws that could cast you into prison and sell your children to satisfy your indebtedness, contemporary U.S. bankruptcy law provides you with protection against your creditors by implementing an immediate stay against virtually all collection and repossession activities. Once the bankruptcy is discharged, your old debts no longer exist, and your former creditors cannot pursue additional claims against you for them.

There are a number of different types of bankruptcy provided for in the U.S. Bankruptcy Code, but most individual debtors file either a Chapter 7 petition or a Chapter 13 petition. Chapter 7 is sometimes referred to as liquidation bankruptcy because the court will liquidate your assets and use the proceeds to pay off your debts. Chapter 13 is sometimes referred to as the Wage Earner’s Plan because you are allowed to keep your possessions while participating in a court-authorized repayment plan.

Pre Bankruptcy Credit Counseling

Regardless of which type of bankruptcy petition you file, the U.S. Bankruptcy Code requires you to undergo a pre-bankruptcy course of instruction in credit counseling. The course must be provided by a company or organization that is approved by the Department of Justice’s U.S. Trustee Program. You must complete the course within 180 prior to filing your bankruptcy petition. If you are married and filing a joint bankruptcy petition, both you and your spouse will be required to complete this counseling.

Prebankruptcy credit counseling typically includes information to help you evaluate your current financial situation. The counseling service should provide information regarding possible alternatives to bankruptcy, such as debt consolidation programs. They should help you set up a workable household budget. You may be able to complete your pre-bankruptcy credit counseling online, by telephone or in person. You can typically complete the process in less than 1 1/2 hours, according to the Federal Trade Commission.

Pre bankruptcy credit counseling services may charge a fee for their services. The amount of the fee may vary based on the agency providing the instruction and the part of the country where you live, but the Federal Trade Commission estimated the average fee to be around $50 as of November 2006. If you are unable to pay the fee you can request a fee waiver, but you should do this prior to beginning counseling or you may be liable for the fee.

Pre-Bankruptcy Credit Counseling Certificate

Your pre-bankruptcy credit counseling service should provide you with a certificate of completion. You are required to provide this certificate to the bankruptcy court as proof of your compliance with this provision of the Bankruptcy Code. The credit counseling service is not permitted to charge any additional fee for providing the certificate. Only credit counseling services that are approved by the United States Trustee Program are qualified to provide the required counseling. You can obtain a list of approved credit counseling services from the clerk’s office in the district bankruptcy court that has jurisdiction over your area. You can also obtain a list of approved pre-bankruptcy credit counseling services online from the U.S. Department of Justice’s website.

In addition to pre-bankruptcy credit counseling, you will also be required to complete post-filing debtor education. You should not confuse post-filing education with pre-bankruptcy counseling. These are two separate requirements that must be completed on separate occasions. You cannot combine them into a single session unless you get special dispensation from the court to do so.

A Viable Alternative To Going To Bankruptcy Court

Before you go scheduling your credit counseling session, make sure you exhaust all available alternatives before going to hire a Texas or New York bankruptcy attorney to take you to court for example.

It is possible to consolidate your debts through debt settlement and get similar if not better results compared to bankruptcy. You can get credit card debt reduction of up to 50% in as little as 2 years with no upfront fees. Talk to the debt counselors at DebtConsolidation.com for your free debt analysis.

Tagged as: bankruptcy code, bankruptcy court, Pre Bankruptcy Credit Counseling