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What about Pre-Bankruptcy Credit Counseling?

Since Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005, debtors opting for bankruptcy face a new prerequisite—180 days prior to filing bankruptcy, they must complete a credit counseling session as an eligibility requirement.

What does credit counseling involve?

During credit counseling, you participate in a counseling session where the counselor reviews and evaluates your personal finances.  Counseling sessions typically take an hour to an hour and a half.  Sessions may be completed face-to-face, over the phone, or online.  The agencies providing the counseling services must be qualified by the United States Trustee’s office.  In order to be a qualified provider, the counseling organization must be a non-profit organization and its counseling services must meet the requirements of the US Trustee to provide education and help in sorting out your financial problems.

When you cannot afford the counseling, ask for a fee waiver.  Keep in mind, the credit counseling organization should discuss fees before providing the session.  If you cannot afford to pay for the counseling, then the agency must provide it for free.

How do you choose a credit counseling agency?

The Department of Justice U.S. Trustee Program ( approves credit counseling agencies and provides a list of approved agencies for consumers to choose to meet pre-bankruptcy filing requirements.

When filing a bankruptcy petition, you must also submit your certificate that shows you complied with the credit counseling requirement.  Credit counseling agencies not approved by the trustee program may not issue certificates.

How can credit counseling help?

Credit counseling may help you resolve financial problems, especially when you are behind on payments.  You may be able to avoid filing bankruptcy.  A counselor can help you work out a budget or create a repayment plan that is acceptable to creditors.  While credit counseling does not necessarily protect your credit score and some businesses may decide not to offer you credit subsequent to credit counseling, some creditors are more likely to turn you away after filing bankruptcy than after credit counseling.

Since you have to complete credit counseling for bankruptcy eligibility anyway, it is to your advantage to see if credit counseling can resolve your debt problems.

Negotiating lower interest rates with creditors, transferring balances to lower interest cards, or taking out a consolidation loan may be other options to consider before filing bankruptcy.

A skilled bankruptcy lawyer can look out for your best interests and guide you in the right direction.  It is always a good idea to seek legal advice when considering bankruptcy and benefit from the attorney’s knowledge and experience.

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