How financial education fits into the bankruptcy process

April 10, 2017 Mark

On behalf of Gregersen Law posted in bankruptcy on Monday, April 10, 2017.

For many individuals, bankruptcy can provide the opportunity for a fresh financial start. But how do you know bankruptcy is the right way to address your financial difficulties? And if you do file for bankruptcy, will you know how to prevent financial problems in the future?

Luckily, some of the answers to these questions are built right into the federal bankruptcy process. Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, in order to file for individual bankruptcy:

  1. You must complete credit counseling before you can file.
  2. You must complete a debtor education course before you can finish the process and have your debts discharged.

Both programs must be taken from organizations approved by the U.S. Department of Justice and may be done in person, online or over the phone. If you can't afford the fees (usually around $50 for credit counseling and up to $100 for a debtor education course), you can ask for a waiver. Here's what to expect from each:

Pre-bankruptcy credit counseling usually takes about an hour, according to the Justice Department. You'll typically discuss your financial situation and budget as well as alternatives to bankruptcy.

Post-filing debtor education takes a little longer (around two hours) and will give you guidance on budgeting and managing money and credit.

Your bankruptcy attorney can make sure you obtain the counseling and education you need to fulfill all the requirements for the bankruptcy process - and to be prepared to make the most of your financial fresh start.