Bankruptcy, Credit Counseling, and Debtor Education

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 launched a new era. With limited exceptions, people who file for bankruptcy protection must get credit counseling from a government-approved group within six months before they file. They must complete a debtor education course to have their debts discharged.

The Department of Justice’s U.S. Trustee Program authorizes organizations to provide the mandatory credit counseling and debtor education. Only the counselors and educators that appear on the U.S. Trustee Program’s lists can advertise that they are approved to provide the required 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.

As a rule, pre-bankruptcy credit counseling and pre-discharge debtor education may not be supplied at the same time. Credit counseling must take place before you file for bankruptcy; debtor education must take place after you file. In general, you must file a certificate of credit counseling completion when you file for bankruptcy, and proof of completion of debtor education must be presented after bankruptcy is filed.

Only credit counseling organizations and debtor education course providers that have been approved by the U.S. Trustee Program may issue these certificates. To protect against fraud, the certificates are produced through a central automated system and are numbered.

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 an hour or so, and can take place in person, on the phone, or online. 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.

Once you have completed the required counseling, you must get a certificate as proof. Check the U.S. Trustee’s website to be sure that you receive the certificate from a counseling organization that is approved in the judicial district where you are filing bankruptcy. Credit counseling organizations can not charge an extra fee for the certificate.

A debtor education course by an approved provider should include information on developing a budget, managing money, using credit wisely, and other resources. The debtor education session might last longer than the pre-filing counseling – about two hours – and the typical fee is between $50 and $100. As with pre-filing counseling, if you are unable to pay the session fee, you should seek a fee waiver from the debtor education provider. Check the list of approved debtor education providers at www.usdoj.gov/ust/eo/bapcpa/ccde/de_approved.htm or at the bankruptcy clerk’s office in your district.

Once you have completed the required debtor education course, you should receive a certificate as proof. This certificate is separate from the certificate you received after completing your pre-filing counseling. Debtor education providers can not charge an extra fee for the certificate.

It’s wise to do some research when choosing a credit counseling organization. If you are in search of credit counseling to fulfill the bankruptcy law requirements, make sure you receive services only from approved providers for your judicial district. Check the list at www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm or at the bankruptcy clerk’s Office for the district where you will file. Once you have the list of approved organizations in your judicial district, call several to gather information before you make your choice.

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