The new Bankruptcy Law, known as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, now requires all consumers to pay for private credit counseling prior to filing for bankruptcy. This credit counseling session is designed to inform consumers of their options in dealing with their debts. Your bankruptcy attorney will ask you if you have completed the credit counseling session and obtained the required certificate so let’s prepare you.
The requirements of this class are as follows:
- Credit Agency must be “approved”. A list of agencies that satisfy this requirement can be found here. The course must be at least 90 minutes in length.
- The course cannot cost more than $50 and accredited agencies cannot turn anyone away who cannot afford the fee.
- The course must be taken and completed no more than 6 months prior to filing for bankruptcy.
- The course can be taken in person, in a group setting, over the phone, or on the internet.
- On completion of the course you must obtain a certificate of completion as proof for the bankruptcy court. Make sure the certificate is the correct one for the bankruptcy court in which you plan to file.
Opponents of this new requirement think this class is simply another hoop to jump through and will not provide the much needed help that consumers are seeking. REMEMBER: The consumer credit counseling industry was founded by companies and banks issuing credit cards and they still receive most of their funding from that industry. AND THEY REALLY WANT THEIR MONEY!
Not all credit counseling agencies are created equal. Although the U.S. Trustee is in charge of screening approved agencies, some are clearly better than others. To assist you in making the best choice you may want to follow some of these tips:
- Don’t sign up with the first agency you find. Do some shopping and contact two or three before making your final decision.
- Look for an agency that offers a wide variety of services such as fact-to-face budget counseling in addition to the debt management classes.
- Find out the fees before making you decision.
- Don’t be afraid to ask about the counselors credentials. You will want someone who has more experience than just a one week training class.
So what are you in store for? Topics covered in your credit counseling session will most likely include examining the underlying causes of your financial problems, assistance in understanding the debt-to-income ratio and the examination of your budget in terms of income and expenses.
And if you are looking forward to this session you will be exited to know that you are also required to take a two-hour personal financial management education class before your bankruptcy can be completed and debts discharged. A fee will also be required for this class although a maximum fee has yet to be determined. Does this madness ever end?
By Lisa Zanassi
