Debt Consolidation

The Role Of Credit Counseling While You Are Filing Bankruptcy

The kind of monetary system we all are living in, debt has now become a part of our lives. The financial life of consumers runs on credit. Sometimes, the debts become so overwhelming that people go bankrupt. However, when it comes to filing a petition for bankruptcy, credit counseling plays a very important role. Whether you are filing under chapter 7 or chapter 13, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires you to work with a credit counselor at least 6 months prior to filing your petition. It means if you are now considering filing for bankruptcy, you will first have to let a government-approved counselor review your finances. In most cases, you may have to go through the process of debt counseling even after you have been declared as bankrupt by the court.

Pre-Bankruptcy

The main objective why has been made legally mandatory for everyone who is considering filing bankruptcy is to provide the applicants an opportunity to look into better alternatives. At this stage, the counseling requires one session, where an expert debt management professional does a thorough review of your finances. Based on the review, the counselor may suggest you to try some alternatives, such as debt consolidation or debt settlement. They will educate you on various ways that can help you put your finances back on track. For example, they may work with you hand in hand to create a strict yet balanced budget plan. One such session of debt counseling costs around $50, as per the records provided by the Federal Trade Commission (FTC). It is usually a 60-90 minute session, which you can attend in person, on phone, or even online. At the end of the session, you will be given a certificate, which you will have to submit in the bankruptcy court. The certificate consists of recommendations by the counselor based on the financial review they did.

Post-Bankruptcy

Sometimes, the court also orders the debtors that have become bankrupt to take specific debtor education courses from a credit counseling agency. The objective is to educate them about financial management in a way that should be able to build their finances once again. These courses are also offered through various sessions, where every session is not longer than two hours. It is just that, unlike pre-bankruptcy that requires only one session, these courses may consist of many such sessions. These courses cost somewhere between $50 and $100.

In either case, it is important for you to make sure that the courses and the credit counseling organization must be duly approved by the US trustee program.


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Posted in Credit Counseling, Debt Consolidation | 2 Comments »

2 Responses to “The Role Of Credit Counseling While You Are Filing Bankruptcy”

  1. 9730Rizal@hotmail.com says:

    I’ve learned that waiting to see exactly what I need is a better strategy. Good post.

  2. Jack says:

    Very informative article. I have never heard about such type of credit counseling. It is really good to know about it. Debt has now become a part of our lives. I totally agree with the fact of this article. Today every body has trapped with multiple debts because at present the luxury has become the necessity. Every American has multiple credit cards with a big expenditure habits. This all will lead to multiple debts and when you will find no other option left for getting out of this trap of debts. You will have to go for filing Bankruptcy. But it is quite possible that there may be some option available rather than bankruptcy, so it will be nice to attend a pre bankruptcy counseling session. You should tell the counselor, each and every thing about your financial problem and debts. The Counselor will study the situation thoroughly and then they will try to save you from being bankrupt. They can suggest you some alternatives like debt settlement, debt consolidation etc. If there is any alternative suitable for you, it is better to try that one to avoid bankruptcy. The Counseling can help you to tackle the financial situations brilliantly.

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