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What is the credit counseling requirement in bankruptcy?

On Behalf of | Dec 11, 2014 | Bankruptcy, Credit Counseling, Firm News

Prior to filing for bankruptcy relief, a consumer debtor must complete an accredited course, and obtain a certificate, showing that they entered certain information with a third-party outfit. This is one of the more ludicrous provisions of the 2005 overhaul of the bankruptcy code. In fact, I was featured in a Star Tribune article a few years back, about how silly all of this is.

There are two parts to this; a pre-filing, and a post-filing. The pre-filing is supposed to be a diversionary step, as creditors convinced Congress that bankruptcy lawyers are persuading people who don’t belong in bankruptcy, to file bankruptcy anyway. The fact is, scrupulous bankruptcy attorneys do not put people into bankruptcy if they don’t need to be there, and nobody to the best of my knowledge gets diverted by the credit counseling. The certificate must be no more than 180 days old, and even though there are some exceptions which apply in extremely rare circumstances, it is more work to try to get an exception approved than it is to just go ahead and do the credit counseling anyway.

The second part is a debtor educational course. This must be done after filing, and within 45 days after the creditor meeting. Preferably, it should be done prior to the creditor meeting. It takes about 2 to 3 hours. If you fail to do the second part, your case may get closed without discharge, in which case you may be able to bring a motion to reopen your case so that you can complete the debtor education. We have one of the cheapest outfits in town that takes care of this, and it is all done online, and the fees are all part of what you pay our office.