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Chapter 7 Bankruptcy

Pre-Bankruptcy Counseling

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The pre-bankruptcy counseling requirement:

No more than 180 days before filing for court protection, you must obtain a certificate showing that you received a "briefing" on credit counseling and budgeting from an approved nonprofit agency.

The agency must be approved by the Department of Justice's U.S. Trustee Program to be able to provide the mandatory credit counseling and debtor education. By law, the U.S. Trustee Program does not operate in Alabama and North Carolina; in these states, court officials called Bankruptcy Administrators approve pre-bankruptcy credit counseling organizations and pre-discharge debtor education course providers.

What happens in counseling:

A pre-bankruptcy counseling session with an approved credit counseling organization:

  • Should include an evaluation of your personal financial situation, a discussion of alternatives to bankruptcy, and a personal budget plan.
  • A typical counseling session should last about 60 to 90 minutes, and can take place in person, on the phone, or online. If you're going to get real value from the session, it is recommended that you do it in person.

Cost -- including when a counseling session is free:

The counseling organization is required to provide the counseling free of charge for those consumers who cannot afford to pay. If you cannot afford to pay a fee for credit counseling, you should request a fee waiver from the counseling organization before the session begins. Otherwise, you may be charged a fee for the counseling, which will generally be about $50, depending on where you live, the types of services you receive, and other factors. The counseling organization is required to discuss any fees with you before starting the counseling session.

Certificate showing you received pre-bankruptcy counseling:

Once you have completed the required counseling, you must get a certificate as proof. Credit counseling organizations may not charge an extra fee for the certificate.

Keep the certificate in a safe, accessible place.

How To Locate A Credit Counseling Agency

Approved counseling agencies are listed on the U.S.Trustee's web site at: www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm offsite link or ask at the Bankruptcy Clerk's office in your district.

How To Choose A Credit Counseling Agency

It's up to you to choose which credit counseling agency to use. Read our article on Credit Counseling Services for tips on choosing the best service for you. The right service could lead to a debt management program approved by creditors. If this happens, you will be able to avoid bankruptcy. Such a situation would be better for your credit rating than bankruptcy.

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