Choosing to file for bankruptcy is never a simple decision. It typically comes after exhausting all other options to manage one’s finances. Before you can officially file, you must complete pre-bankruptcy credit counseling. This requirement ensures you understand the implications of filing for bankruptcy and helps you develop better financial habits moving forward.
But what does pre-bankruptcy credit counseling entail? What should you expect from the process? Let’s explore these questions in detail.
The Purpose of Credit Counseling
Pre-bankruptcy credit counseling helps individuals on the path to filing for bankruptcy better understand the road ahead. It provides an exhaustive overview of your current financial situation and helps determine if bankruptcy is the right solution for your financial future.
The requirement to complete pre-bankruptcy credit counseling was established in 2005 by the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). This act aimed to prevent bankruptcy fraud by implementing stricter filing requirements.
Choosing an Approved Agency
Now that you understand the purpose of pre-bankruptcy credit counseling, you may wonder how to find a credit counselor. Many credit counseling services are available in every state, but not all are approved for performing pre-bankruptcy counseling.
To meet the requirement, you must complete the pre-bankruptcy credit counseling process 180 days before filing, and the agency must be approved by the U.S. Trustee Program.
Approved agencies have been vetted to meet stringent standards and offer reliable and unbiased advice. They maintain a high level of professionalism and expertise in handling pre-bankruptcy counseling.
What to Bring to Your Session
To get the most out of your bankruptcy credit counseling, it’s crucial to have all vital information gathered and ready. Here are some items you will want to bring to your credit counseling appointment:
- A list of all your debts. This includes credit cards, loans, medical bills, and other obligations.
- Your monthly income and expenses. This includes housing, utilities, groceries, transportation, and other living costs.
- Any documentation related to your financial situation, such as bank statements, pay stubs, and tax returns.
The Counseling Process
Here is what the pre-bankruptcy credit counseling process typically entails:
Financial Analysis
The credit counselor will look over your financial situation, including your income, expenses, debts, and assets. This analysis helps the counselor understand your overall financial health.
Budget Development
The counselor will also help you create a budget, outlining your monthly income and expenses. This budget aims to give you a clear picture of where your money is going and identify areas where you might cut costs.
Bankruptcy Overview
If bankruptcy appears to be the best option after a thorough financial review, the counselor will explain the different types of individual bankruptcy (Chapter 7 and Chapter 13), the process involved, and how filing can impact and benefit you.
Receiving Your Certificate
If your credit counselor determines that filing for bankruptcy is the best option for your financial situation, you will receive a certificate once the counseling concludes. This certificate is valid for 180 days and must be filed with your bankruptcy petition.
How Much Does Pre-Bankruptcy Credit Counseling Cost?
Pre-bankruptcy credit counseling fees are generally reasonable, typically ranging from $25 to $50. If you cannot afford the fee, a waiver is available upon request based on your financial situation.
Navigate Bankruptcy with Ease
From pre-bankruptcy credit counseling to court proceedings, navigating bankruptcy can feel daunting. However, you don’t have to let those feelings get in the way of your peaceful financial future. With the help of bankruptcy lawyer Adam M. Freiman, you can navigate bankruptcy with ease!
Adam M. Freiman has been practicing law for over 25 years and is the founder of one of Baltimore’s most prestigious law firms. He knows that bigger doesn’t mean better, which is why he now runs his own firm, where he represents all his clients personally. When you choose to work with Adam Freiman, P.C., you are hiring Adam himself.
