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Required Credit Counseling Prior to Filing for Bankruptcy


Choosing whether or not to file for bankruptcy is a major decision. Before deciding whether bankruptcy is the right move for you, you’ll want to gather as much information as possible on alternatives to bankruptcy, as well as the future consequences of a bankruptcy filing. In order to ensure that all those who file for personal bankruptcy have explored alternatives, the federal government makes it mandatory to participate in credit counseling prior to filing for bankruptcy. Read on to learn more about what to expect from this credit counseling session.

The credit counseling process

Within 180 days (six months) of filing for bankruptcy, petitioners are required to complete a credit counseling session. These sessions are designed to provide you with a potential alternative to filing for bankruptcy. The counselor will review your finances, create a budget for you based on your debts and income, and present you with possible alternatives to repay your debt without filing for bankruptcy. If it seems feasible, the credit counselor will generate a payment plan that they think you could afford to pay. This counseling session will last between 60 and 90 minutes, and can be held in-person, online, or over the phone. Within 15 days of completing this counseling session, you will need to file a copy of your certificate of completion of the counseling session, along with a copy of any repayment plan your counselor has created. In the event that the bankruptcy judge believes the repayment plan is a reasonable alternative to bankruptcy, the judge may try to coerce you into a restructuring bankruptcy under Chapter 13, rather than a debt elimination bankruptcy under Chapter 7. However, most people who qualify as Chapter 7 petitioners under the means test will not have sufficient assets or income for this to be an issue.

Finding an approved counselor

Credit counseling may only be completed with a counseling agency approved of by the US Trustee Program. You can find a list of approved counselors here. Fees for this counseling are capped by the Trustee Program at a maximum of $50. That said, sliding-scale fees are available for those who cannot afford to pay the full amount. For those whose annual salaries are at or under 150% of the federal poverty level, the fee can be waived altogether.

If you are considering whether or not filing for personal bankruptcy is the right move for you and your family, contact the knowledgeable and experienced Hudson Valley bankruptcy attorneys at Rusk, Wadlin, Heppner & Martuscello, LLP for a consultation, at 845-331-4100 (Kingston), or 845-236-4411 (Marlboro).

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