Before Filing Bankruptcy – Credit Counseling Requirements
The new bankruptcy laws established under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) are not new, but have been in place for four years. The BAPCPA laws require all debtors who are considering filing for either Chapter 7 or Chapter 13 personal bankruptcy receive either “individual or group briefing” from a non-profit credit counseling center within one hundred and eighty days prior to filing for personal bankruptcy. In addition to credit counseling, the new BAPCPA legislation also requires debtors to complete an “instructional course on financial management”.
The goal of the BAPCPA legislation was for individuals to complete a credit counseling course to help them develop a picture or overall view of all of their personal expenses and income prior to filing for personal bankruptcy. After the completion of the credit counseling course, the goal of the legislation was that more consumers would understand their financial situation and have a clearer understanding of all of their financial alternatives for reducing or eliminating their personal debt.
Unfortunately, critics of consumer debt counseling have argued that the credit counseling courses have become nothing more than an obstacle to filing for personal bankruptcy because many people who receive credit counseling are already so desperate for help that filing for personal bankruptcy may be their only option. Others argue that the plans may be unrealistic, unworkable or simply an attempt by certain credit agencies to reduce personal bankruptcy filings.
Proponents of credit counseling services argue, however, that taking a good credit counseling course will help individuals take charge of their financial future by helping them understand their financial situation, put a plan in place to save for future expenses and help them or their families re-establish positive credit with out having to file for personal bankruptcy.
If you are considering filing for personal bankruptcy, including Chapter 7 or Chapter 13 bankruptcy, you will need to take a credit counseling course. For questions about filing personal bankruptcy you need to talk to a local bankruptcy attorney, you can contact a Bankruptcy lawyer near you who can outline the types of bankruptcy you may qualify for as well as the requirements for filing for personal bankruptcy. Most Bankruptcy Lawyers will offer a free evaluation of your financial situation.
What does a Credit Counseling Service do?
1. Most credit counseling services will outline your current financial situation and work with you to develop a personal budget. The budget will outline your expenses and income and help you establish a monthly payment plan to repay your creditors.
2. A credit counseling service may also be able to work with you to negotiate lower interest rates and potentially lower principal debt with all of your current creditors. There may be monthly service fees for managing the debt. It is important to understand all counseling service fees and if you are responsible for paying certain personal debts on your own.
***It is important to understand what the credit counseling service is doing for you and how their services differ from debt consolidation services.***
