Credit counseling: Required before bankruptcy

The bankruptcy laws and courts give bankruptcy petitioners a fresh start, with a partial or full discharge of certain debts and financial obligations. They also require individuals filing for bankruptcy to attend a credit-counseling course and obtain a certificate of acknowledgement to file with the court before it accepts a petition for Chapter 7 or Chapter 13 bankruptcy. There are many reasons individuals file for bankruptcy protection. The automatic stay provision of the bankruptcy court stops all creditor collection activity, including wage garnishments, when an individual files a bankruptcy petition. In some cases, waivers are available under certain circumstances.

What’s the purpose and what should I expect?

The purpose of the credit-counseling requirement is to educate individuals about their options, and help them consider whether they need to file for bankruptcy or could solve their financial problems with a debt repayment plan or other means. Many credit-counseling agencies help you prepare a budget for your income and expenses, and if it is clear that you lack the income to pay the debts, the agency will confirm you as qualified for bankruptcy. Despite the credit-counseling agency offering you a repayment plan option, you are not obligated to accept anything but will be required file the proposed plan with the bankruptcy court.

Selecting a qualified credit counseling agency

Qualified nonprofit credit counseling agencies are approved by the U.S. Trustee’s office. The credit counseling must take place within 180 days of the filing of the petition for bankruptcy. Once you select a qualified credit-counseling agency and complete the program, you will receive and need to file with the bankruptcy court, a certificate of completion of your credit-counseling course.

Many of the credit-counseling providers offer online courses, some for $25, and they are available in both English and Spanish. The U.S. Department of Justice publishes a list of Illinois Approved Credit Counseling Agencies. It is important to make sure the credit counseling agency you select is approved by the Trustee’s office to ensure the court will accept their certificate of completion.

Do I qualify for an exception to the credit-counseling requirement?

There are a few exceptions to the requirement to attend credit counseling before filing for bankruptcy. Where an individual needs to file for bankruptcy to stop a wage garnishment, the court may accept a certified application to waive the requirement. If you have a mental or physical incapacity, or are in active military duty, you may be able to obtain a waiver of the credit-counseling requirement before filing bankruptcy.

Joseph Wrobel, Ltd., works with clients on consumer issues including bankruptcy and they can offer additional information about credit counseling courses.

Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start.

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