One of the requirements for filing Chapter 7 and Chapter 13 bankruptcy is the need to take a credit counseling course before and after filing. The credit counseling requirement was added in 2005 and is a silly and generally useless expenditure of time, but it’s not something to be feared. It can be done on a computer or over the phone and usually takes no more than 2-3 hours of time total for both courses. The cost for both courses combined is less than $30. No matter what, the requirement shouldn’t prevent anyone from filing bankruptcy.
The credit counseling requirement was created because some members of Congress had the mistaken belief that filing bankruptcy was the result of a debtor’s poor financial decisions. They thought forcing debtors to spend time with a credit counselor would somehow improve their handling of finances. Lobbyists from the credit card industry hoped the requirement would reduce the number of people filing bankruptcy. The reality is that most people file bankruptcy because of circumstances beyond their control– loss of a job or reduction of income, medical issues, divorce or a global pandemic. A one hour credit counseling briefing will do little to help people prepare for these events. The credit counseling requirement has therefore become just a slightly expensive nuisance for people needing to file bankruptcy. It should never become the thing that prevents someone from filing.
The pre-filing credit counseling briefing reviews a debtor’s income and expenses and the counselor is supposed to review various options for how the debtor can deal with the debt owed. Debtors will need to give the counselors a general idea of their income, living expenses and amount of debt. In almost all cases the counselor agrees that the debtor’s best option is to file bankruptcy.
Before completion of a Chapter 7 or Chapter 13 bankruptcy the debtor must take a personal financial management course. Again, this can be done on a computer or over the phone, takes about two hours and often costs less than $15. This course is only slightly more useful than the credit counseling course and covers developing a budget, money management and use of credit. Debtors who fail to take this second course won’t receive a discharge of their debts.
The bottom line is that if you’re considering filing bankruptcy, don’t let the credit counseling requirements stop you. They add only a small amount to the cost of filing and take a little bit of time but they’re not a barrier to getting the fresh start you need.