Bankruptcy Credit Counseling

For many consumers struggling with credit card debt and property mortgages, bankruptcy is the only option they have left. Bankruptcy is a federal court process put in place to help people and companies who find themselves in such situations to partially or completely eliminate their debts. Bankruptcy, however, should be pursued as a last-resort measure. Before resorting to bankruptcy, it is advised that consumers first seek out professional debt management services to see if they can find a way to consolidate their credit card debt.

Bankruptcy results in a crippling blow to the one’s credit score, from which it can take years to recover. It should be undertaken only after other possibilities are exhausted.

There are two different types of bankruptcies: liquidations and reorganizations. Chapter 7 bankruptcy involves asset liquidation. If you own a house, for example, unless it is otherwise protected by state law, it may be repossessed and sold to pay back at least a portion of your outstanding debt.

For consumers, Chapter 13 bankruptcy is the most common type of reorganization bankruptcy. You keep all or most of your property, but are required to make monthly payments over the next three to five years to offset a portion of your debt. Both kinds of bankruptcies have various rules and regulatory guidelines. Not everyone qualifies for one or the other.

In 2005, the State approved the Bankruptcy Abuse Prevention and Consumer Protection Act, which states that individuals who are planning to file for bankruptcy must receive credit counseling from a government approved credit counseling company within 180 days prior to the date they file for bankruptcy. Additionally, they are required to take a debtor education course before their debts are discharged.

Requirements
Pre-bankruptcy counseling, as the name implies takes place before you are allowed to file for bankruptcy. Debtor education takes place after the filing has been done. You must provide, at the respective times, evidence that you have completed both the credit counseling and the debtor education process. Only after all this is done are your outstanding credit debts dismissed. Only U.S. Trustee Program approved organizations may issue certificates for the completion of credit counseling and debtor education.

Pre-Bankruptcy Counseling
A bankruptcy credit counseling session is an opportunity for you receive professional credit debt help. Assess your current financial state and learn how to improve your chances of staying on a good financial track and avoiding bankruptcy. The session includes a professional evaluation of your personal finances and a discussion of possible alternatives to filing bankruptcy, such as consolidating credit card debt. Your bankruptcy credit counselor should also help you come up with an individualized budget plan.

A pre-bankruptcy counseling session usually lasts between an hour and an hour-and-a-half. It used to be available only in person or via phone, but now you have the option of conducting the session online. Fees for a counseling session vary, depending on where you live and what company you are using. Before you sign up for one, make sure to ask about fees, and, if you cannot afford the fee, ask to fill out a fee waiver. A legitimate counseling organization should disclose any fee requirements before engaging in the counseling session. Once you have completed the process, you should get a certificate of proof.

Debtor Education
The post-filing debtor education requirement is in place to help consumers rebuild their credit after they have gone through personal bankruptcy. It helps you develop a personal budget, and teaches you techniques for managing money and using credit wisely. This session lasts longer than the pre-bankruptcy counseling session (about two hours on average), and the fees for it will vary depending on the company you use. If you can’t pay the fee you can also request a fee waiver. Like the pre-bankruptcy session, you can take the debtor education session online, as well as in person or over the phone.