Credit Counseling and Financial Management Courses
In October, 2005, Congress enacted a new bankruptcy law, entitled the “Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”). One of BAPCPA’s requirements is the need for individual debtors to complete a credit counseling course prior to the filing of a Chapter 7 or Chapter 13 case. Individual debtors are also required to take a financial management course following the bankruptcy filing. The financial management course is needed for the debtor to obtain a “Discharge Order”. Each course must be taken from an approved credit counseling agency.
The new law specifically states that a debtor has to receive an “individual or group briefing” from a nonprofit budget and credit counseling agency within 180 days prior to the bankruptcy filing. The briefing can be by telephone or by using the Internet. The law states that the briefing must outline all of the opportunities for available credit counseling, and help the debtor perform a related budget analysis. If the counseling results in the development of a debt management plan, it has to be filed with the bankruptcy court.
A similar briefing is also needed to complete the post-petition Financial Management Course.
Credit Counseling Exceptions
There are a few situations in which the counseling requirement is waived. One exception occurs when the debtor is incapacitated by mental illness or deficiency, is physically impaired such that he or she is unable to participate with reasonable effort, or is on active military duty in a combat zone. A debtor may also be excused by the court if there are “exigent circumstances” and the debtor requested counseling that an agency was unable to provide within 5 days of the filing date. Another situation when counseling may not be required is when a proper legal official has determined that no approved credit counseling agency is available.
Check out our Bankruptcy Guide for more information.
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