Archive for Chapter 7 Bankruptcy

Bankruptcy Pre-filing and Post-Filing Credit Counseling Requirements

By Jon Brooks

Among the new requirements introduced by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, were the requirements that every debtor seeking to file for bankruptcy protection complete the pre-filing bankruptcy debtor credit counseling course offered by numerous new US Trustee-approved course providers.

The new requirements mandate that consumer debtors must complete one of these US Trustee approved programs of “Credit Counseling” prior to filing either Chapter 7 or Chapter 13 bankruptcy. Your bankruptcy attorney must receive a copy of the course completion certificate prior to filing your bankruptcy and file this certificate along with your Chapter 7 or Chapter 13 bankruptcy petition to the US Bankruptcy Court or face a motion to dismiss your case for failure to file such a pre-filing bankruptcy credit counseling certificate.

In addition, prior to obtaining a bankruptcy discharge, the debtor must also complete a subsequent course of “Debtor Education” purportedly aimed at teaching the average consumer how to handle consumer credit and debt. Whether such debtor education will curb future bankruptcies is of course subject to debate.

Just as with the pre-filing credit counseling, prior to obtaining a bankruptcy discharge, one must file a pre-discharge “debtor education” certificate filings in order to obtain the discharge and complete the bankruptcy filing.

For a detailed explanation of both pre-filing and pre-discharge counseling and debtor education course requirements please visit our website which includes links to the US Trustee approved course providers.

Always seek the advice of a licensed and experience bankruptcy lawyer when considering whether to file for bankruptcy protection.

Jon G. Brooks is a San Jose Bankruptcy Lawyer who practices Chapter 7 and Chapter 13 Bankruptcies.

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What do I do if Credit Counseling Doesn’t Work?

For many Americans, credit counseling (or if you are in Canada, credit counselling), is a great strategy for dealing with overwhelming debt.  Credit counseling is a great solution for dealing with credit card and other high interest debt, because in most cases your credit counselor will negotiate a repayment plan with little or no interest.

But what can you do if you can’t repay your debt through credit counseling, even with little or no interest?

A debt consolidation loan is an option, but that probably only makes sense if you can consolidate your debt over a period of many years, since with a debt consolidation loan you will be paying interest (with credit counseling you pay little or no interest).

If credit counseling and debt consolidation are not possible, you may need to file a Chapter 13 Wage Earner Plan (if you are an American), or a consumer proposal (if you are a Canadian).   These plans are a way to repay some of your debt, while avoiding personal bankruptcy.  (For more information, Canadians should research personal bankruptcy, which for Americans is called Chapter 7 bankruptcy).

There are other alternatives to bankruptcy.  For example, here’s a report on How to Get Out of Debt Fast Without Filing Bankruptcy that offers practical tips on dealing with debt.  You do have options, so begin researching your options today.

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Mandatory Credit Counseling – The First Year

In a press release issued today, the the National Foundation for Credit Counseling (NFCC) commented on the first year of mandatory credit counseling before filing bankruptcy as a result of Bankruptcy Reform legislation passed in 2005 that requires all debtors to receive credit counseling before they file for bankruptcy.

Some of their key findings:

— Through the first 11 months of the new law, NFCC members delivered 563,494 bankruptcy counseling and education sessions and issued 630,422 certificates.

— Consumers filing for bankruptcy were “upside-down” financially, with average unsecured debt being $11,599 greater than average annual income and the unsecured debt to income ratio has deteriorated since the April NFCC report.

— Mortgage delinquency was more prevalent for consumers filing for bankruptcy than for those receiving non-bankruptcy counseling.

— Phone and Internet counseling continue to be the predominant choice for services.

The full press release can be read here. Clearly the cost of providing the mandatory credit counseling is more expensive than originally anticipated, so further changes to the rules are possible. Stay tuned to this credit counseling Blog for updates as they become available.

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What do I need to know about the mandatory credit counseling sessions before filing personal bankruptcy?

If you live in the United States, you must attend a credit counseling session no earlier than 180 days before you file personal bankruptcy. Mandatory credit counseling before filing bankruptcy became law in October, 2005.

You must complete your credit counseling session, and have a certificate proving that you have completed your credit counseling session, or else the court will dismiss your bankruptcy case, and you will not receive protection from your creditors.

This credit counseling session must be completed by an approved credit counselor. If you are considering filing bankruptcy, either under Chapter 7 or Chapter 13, we suggest you contact a qualified bankruptcy attorney or credit counselor to explain to you the process in detail, so that you meet all of the requirements and understand all of your obligations before you go to court.

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