Bankruptcy Guide to Credit Counseling and Debtor Education Requirements

Before you may file for bankruptcy, you must receive credit counseling.  Later, before your case can conclude, you must also receive debtor education.  How do these two important bookends work, and what can you expect at each stage?

What is Credit Counseling?

Debtors cannot spontaneously launch into consumer bankruptcy at will.  Before you can qualify, you must be able to prove that you’ve completed a credit counseling.  For obvious reasons, that means you’ll need to receive credit counseling.

But what is it?  Where do you go? Do you have to pay any fees?  In a nutshell, a credit counselor will review your financial affairs, including income and the debts you owe to your creditors.  The point is to determine whether you really need a bankruptcy, or if you can address your financial problems in some other way.

You cannot receive credit counseling from just any organization — it must come from an agency which has been approved by the United States Trustee’s Office.  You can browse the official list of approved agencies here.

Credit counseling typically comes with a small fee, usually within the range of $10 to $50.  However, there are a few rare instances in which credit counseling may not be required.  The counseling requirement may be dropped if a debtor:

• Is on active military duty.
• Must file immediately.
• Has a mental or physical disability which interferes with counseling.

What is Debtor Education for Bankruptcy Filing?

Just as a debtor must receive credit counseling before bankruptcy can begin, he or she must also receive debtor education before receiving a discharge.  Under 11 U.S.C. §1328(g)(1):

“The court shall not grant a discharge under this section to a debtor unless after filing a petition the debtor has completed an instructional course concerning personal financial management described in section 111.”

The purpose of debtor education is to equip debtors with the skills they need in order to avoid excessive debt and addition bankruptcies in the future.  You could think of it as your “exit interview” for bankruptcy.

In terms of the timeline involved, you must receive debtor education within 45 days of your 341 Meeting (also known as the Meeting of Creditors).

As with credit counseling, debtor education agencies generally charge a minimal fee for their services.  And — as with credit counseling — the agency you select must come from a federally approved list.  You can peruse the acceptable agencies here.

Courses must include at least two hours at minimum.  It may take longer for some debtors to complete the requirement.  However, you do not necessarily have to travel to a physical setting: you may receive debtor education via telephone, or on the internet.

In terms of proof, you’ll need to complete and file Form 23: Debtor’s Certification of Completion of Instructional Course Concerning Financial Management.

There are several scenarios which might rule out the need for debtor education, including:

• Being on active military duty.
• Inability to understand a course due to language barriers.  (The course is not available in a language you are fluent in.)

Call Our Pennsylvania Bankruptcy Lawyers Today

If you or someone you love is thinking about filing for Chapter 7 or Chapter 13 in Pennsylvania, call our experienced Philadelphia bankruptcy lawyers of Young, Marr, Mallis & Associates at (215) 701-6519 in Pennsylvania, or contact us online.  Your consultations will always be private, and the first one is free.