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Introduction to filing for bankruptcy


Understanding The Bankruptcy Process

The newest bankruptcy bill has placed certain restrictions on consumers before they are allowed to file for bankruptcy. If you're considering filing for bankruptcy you need to understand how these changes are going to impact you.

Credit Counseling

Within one hundred and eighty days (180 days) of filing for bankruptcy you must have received credit counseling instruction. This new requirement was part of the Bankruptcy Act of 2005 and is now mandatory. These sessions are designed to do the following:

  • review your financial situation
  • decide if there are alternatives to bankruptcy
  • develop a personal budget plan

You must file with the courts when you make an application for bankruptcy proof that you have attended this session. These sessions are offered in person, by phone and online as well. Some organizations may charge a fee which can be waived if you request it and if the agency agrees. Be sure that you ascertain that any counseling firm is approved by the US Bankruptcy court before you enroll.

After Filing For Bankruptcy

Once you have filed for bankruptcy (in addition to adhering to the plan that the court has laid down for you) before your debts can be fully discharged you will also have to take a Debtor Education Course. This course is typically a couple of hours long and should cost you about $50 - $100.

These courses must be from approved providers and should include information that will help you:

  • develop a budget
  • manage your money
  • using credit wisely

Once you've completed the course you will receive a certificate of proof. This certificate is not the same as the one you received "pre-bankruptcy" and is required to be filed in the court before your debts can be expunged by the court. It's important to note that unless they have clearly explained before you took the course that the certificate has an additional fee the company is not allowed to charge you for the certificate of completion.

Bankruptcy Next Exit
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Credit Counselors - What You Need To Know

Make sure you carefully research any credit counseling services before you agree on one. If you're looking for a credit counselor that is approved by the bankruptcy courts you can find a list of Approved Providers online or you can ask at the clerk's office where you filed your bankruptcy. Be sure you understand up front the following:

  • what services are provided
  • what fees are charged
  • what their privacy policy is
  • how they get their fees

For additional information, you can read more about the requirements for pre-bankruptcy education courses as well as post-bankruptcy debtor education in the FTC's booklet Information about Credit Counseling and Debtor Education.

Knowing the requirements before you file for bankruptcy will help you understand all of your rights and obligations.

Related topics: Types of Bankruptcy, New Bankruptcy Laws, Life After Bankruptcy, What Bankruptcy Cannot Do




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