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Is credit counseling before filing for bankruptcy necessary?

Federal bankruptcy laws mandate that people who wish to file for bankruptcy must complete an approved credit counseling course within 180 days prior to filing. Additionally, after the bankruptcy is filed and prior to being able to receive a discharge, debtors must also complete a debtors education course.

There are many approved credit counseling and debtor education courses in most locations. Some agencies providing the courses have online availability for convenience. Only those agencies approved by the U.S. Trustee Program are able to provide the required courses, so people should verify if the agency they are considering has the correct approval.

In order to verify that the debtor has completed the pre-filing credit counseling course, bankruptcy courts require a certificate of course completion be filed along with the bankruptcy petition. Courses cost approximately $50, but the agencies are required to waive the fee for debtors who are unable to pay. People in that situation have to request a waiver of the fee when they contact the provider.

Credit counseling courses generally take anywhere from 60 to 90 minutes to complete and include information such as budgeting advice and personal finance information. The information obtained from the course can be helpful to people to keep in mind after they have received their final discharge in bankruptcy. As people devise a budget plan during the course, following it when the person has also received a discharge of debts and a fresh financial start can help people to not get back into a financially dire situation. Some people who receive a Chapter 7 discharge in bankruptcy receive numerous credit offers after the bankruptcy discharge, so adhering to the pre-planned budget can be a very good idea in order to avoid accumulating a lot of new debt after the bankruptcy is final.

Source: The Federal Trade Commission, "Filing for Bankruptcy: What to Know", October 21, 2014

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