Deciding to file for bankruptcy is rarely easy for those in Memphis and throughout Tennessee. Though it can provide much-needed financial relief for those struggling to repay debts, it can also heavily impact your credit score. Additionally, filers must complete a considerable amount of paperwork and take credit counseling courses before their bankruptcy case.
Not sure who needs to take these credit counseling courses or when? This guide covers the essentials and explains why consulting a Memphis, TN consumer bankruptcy lawyer is recommended.
What Is Credit Counseling for Bankruptcy?
In 2005, additional steps were implemented with the signing of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). This is the law that added the bankruptcy means test, making it more difficult for debtors to have their unsecured debts forgiven, as they must file Chapter 13, depending on their income. Similarly, this act increased the time between filings.
Another step that was implemented under this act was mandatory participation and completion of a credit counseling course prior to filing for bankruptcy. This course allows those looking to file for bankruptcy the opportunity to explore alternatives to filing, like debt management or negotiations with creditors. Additionally, the counseling session creates a thorough budget plan, which helps filers get a better understanding of their current financial situation.
Who Has to Take This Course?
It’s important to understand that everyone must go through this process, even if your income is below the median for your state and your debt is significant, meaning bankruptcy is the most logical option.
When Must the Course Be Completed?
Additionally, this act required those filing for bankruptcy to participate in a credit counseling course within 180 days before filing in accordance with 11 U.S.C. § 109(h). Once completed, you will submit the certification with your petition, or within fourteen days after filing, though timely submission of this document is recommended. Spouses who are filing jointly must each complete counseling before filing.
Find an Approved Agency
Most agencies offer online or phone sessions, though you may also choose to attend in-person if there is a course available near you. This allows you to participate if there are no approved in-person courses in your area, so long as you ensure the virtual course is with an approved counseling agency.
What Happens During Credit Counseling?
As mentioned, credit counseling will examine your current financial situation. Sessions are typically 90 minutes long, and you must provide documentation about your income, debts, and creditors. Understanding what to expect can help you make the most of this course:
- Budget review
- Options review
- Debt management plan proposal
- Certificate issuance
It is critical to note that if you are offered a debt management plan, you are under no legal obligation to pursue this option, though you must include the proposed plan when filing. You may still pursue bankruptcy even if you are provided a feasible plan.
Are There Any Exceptions?
In some cases, there are exceptional circumstances under which a filer could be exempt from undergoing credit counseling:
- If there is an immediate need to file for bankruptcy to avoid considerable harm
- If the filer has a mental or physical disability preventing them from participating with reasonable effort
- If there aren’t enough approved agencies in your area
Exemptions must be approved by the court and are rare.
What About the Debtor Education Course?
You should also understand that you are required to complete an approved debtor education course prior to the discharge of your case. Like the pre-filing credit counseling course, debtor education will walk you through:
- Setting a realistic post-bankruptcy budget
- Rebuilding credit
- Setting financial goals
The primary purpose of this is to help filers avoid subsequent bankruptcy filings in the future. This course must be completed within 60 days of the 341 meeting of creditors for Chapter 7 filers or before your final payment if you are on a Chapter 13 repayment plan.
Unfortunately, bankruptcy can be incredibly overwhelming and complex if you are unsure where to start or how to proceed. As such, it’s in your best interest to connect with an experienced attorney with the Arnold Law Firm to explore your circumstances and determine the best course of action for your needs. Our dedicated bankruptcy team is here to help. Contact us today if you are considering bankruptcy to learn how we can guide you through this process.
