Archive for Mandatory Credit Counseling

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 Exactly is Consumer Credit Counseling?

There are many different meanings for the term consumer credit counseling.

In it’s simplest form, credit counselling is the process where you meet with a credit counselor and they give you advice on managing your money. They will help you deal with credit card debt, and they will explain how to improve your credit score on your credit report.

In addition, if you are planning to file for personal bankruptcy in the United States, they will conduct the mandatory credit counseling before filing bankruptcy, and the post bankruptcy filing credit counseling session. In Canada, the credit counsellor will conduct the credit counselling during the bankruptcy process.

Finally, a credit counselor will actually negotiate with your creditors on your behalf through a Debt Management Program where you make one payment each month to deal with your debts.

For more information, consult a local credit counselor.

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Credit Counseling for Home Buyers?

Reader’s of this credit counseling blog know about consumer credit counseling as a way to deal with your debts, and most people now understand that you must have mandatory credit counseling before filing bankruptcy.

Many people may not realize, however, that since September 1, 2006 residents of certain areas of Chicago, Illinois are required to have credit counseling before they are allowed to purchase a house. The law, called the Illinois Predatory Lending Database, is intended to curb predatory lending by educating borrowers before they enter into a mortgage agreement.

Before buying a home, credit counseling must be obtained from federal Department of Housing and Urban Development-certified counselors for people looking to buy homes in 10 Chicago ZIP codes who have low credit scores or whose income meets other criteria. The law only applies in certain zip codes that the state says have a high proportion of “predatory loans” and higher than average foreclosure rates.

Since most would agree that credit education is sorely lacking in North America, it could be argued that everyone should be forced to attend credit counseling sessions. However, a lawsuit is now underway, arguing that this law unfairly targets minorities. You can read more about it in today’s edition of the Chicago Tribune.

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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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