Why do I have to attend Credit Counseling?
First, it is required by law. In accordance with Title 11 US Code Section 109(h)1, in order to be a debtor and file a Bankruptcy Petition a person must have in the 180 days before filing the petition completed received a certificate of compliance that they have completed pre-filing counseling with an approved agency. A debtor is also required to complete pre-discharge debtor education after you file. Both are required before the filer’s debts can be discharged however the pre-filing counseling must be completed before filing.
Second, avoid filing. Only credit counseling organizations and debtor education course providers that have been approved by the U.S. Trustee Program can provide these Certificates of Completion. Not all programs are the same. Many are just a rubber stamp to move you along to the filing however this provision was made a part of the law for a very important reason that people miss. If you attend credit counseling from a good program, they may be able to help you and you will NOT have to file for bankruptcy at all. Credit counseling agencies are designed to try to work with creditors to consolidate your debt. If you fit as a candidate for a credit counseling program, you will make one monthly payment and the credit counseling agency will pay something to each of your creditors until they are paid off. They will also work to try to stop the bleeding of the interest accumulation. Credit counseling agencies do a thorough budget process to find out if you have any disposable income to be part of the debt program. If not, you may need to resort to a Chapter 7 or Chapter 13 however many people do fit the program.
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Third, financial health. Although, being part of a debt consolidation program does appear on your credit report, it is not considered to have the same negative effects as filing a bankruptcy. If you are not a candidate for a credit counseling program and you do need to file a Bankruptcy petition, the hope is with completion of these programs you will be able to avoid being in these situations again. If you qualify for a Chapter 7 and you discharge all your debts, the worst thing that can happen is to be right back in the same spot a few years later. The pre-discharge debtor education helps people identify the reasons that they ended up in this spot. It gives great tips for financial health and budgeting processes that can help individuals stay on track. All of this information, if strongly considered, can get you going and staying on the right path.
Bottomline don’t discount the reasons why the law made this a requirement. If you want to find out more information about what would be considered a good credit counseling program as well as more information about Bankruptcy in general, make an appointment to talk to one of our attorneys.