As part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), Congress made consumer credit counseling mandatory as part of the bankruptcy filing process. A debtor must file a certification that states the debtor completed consumer credit counseling within 180 days of the filing of the bankruptcy case unless the debtor is exempt from the requirement to take the course. Exemptions are extremely limited and only apply in a very small percentage of cases.
What is Consumer Credit Counseling?
A credit counseling course is designed to assist the debtor in determine if he or she needs to file a bankruptcy or if there is an alternative for dealing with your debt problem other than filing a bankruptcy case. Even if it is obvious that a bankruptcy filing is the only feasible way to resolve your debt problem, you are still required to complete a consumer credit counseling course before you file bankruptcy.
Many companies offer consumer credit counseling courses in Minnesota but a company must be approved by the U. S. Trustee’s office in order for your certificate to be valid (the UST’s office does not recommend any specific company – it only provides a list of the approved companies). Companies charge different rates for these courses; therefore, you should check with several companies to find the lowest fee because all courses must include the same information mandated by the UST’s office in order to be approved. If a debtor meets certain income requirements, the company must offer the course free of charge.
What is Included in a Consumer Credit Counseling Course?
As discussed above, each consumer credit counseling course must be approved by the U. S. Trustee. The course must provide certain information and cover certain topics to be approved. Courses may be taken in person, by telephone, or online. Most courses are between 60 and 90 minutes in length and include the following:
Evaluation of your financial situation
During your consumer credit counseling course, you will review your current financial situation including your income, debt, and assets. It is helpful to have a current paystub and a list of your current monthly bills before beginning the course.
Personal budget plan
As part of the course, you will create a monthly budget. You will enter each of your monthly bills using expense categories. After entering your personal budget, the counselor will evaluate the budget to determine whether you are spending too much money in any one category. The course discusses how you can save money and reduce expenses in various categories. Most courses provide tips and suggestions about how you can improve your financial situation by adjusting your budget.
Discussion of bankruptcy alternatives
There will be a discussion of what is involved in filing a bankruptcy. In addition to explaining bankruptcy, the course discusses bankruptcy alternatives that may be available to certain debtors including a debt management program.
Evaluation of a repayment plan
In most cases, the counselor will determine that you do not have any feasible alternatives other than bankruptcy to resolve your debt problems. However, in a few cases, the counselor may suggest a repayment plan. The law does not require you to participate in any repayment plan that the credit counseling company proposes; however, you must file a copy of any repayment plan with your credit counseling certificate.
Is Credit Counseling Helpful?
Credit counseling can be beneficial because it helps you see how you are spending your money each month. The detailed personal budget created during credit counseling includes an analysis showing the percentage of income paid toward each monthly expense. You can use this analysis to determine where to reduce expenses after your bankruptcy case is filed to save money. Furthermore, the course will give you tips and suggestions on how to improve your financial situation.
If you are struggling with bills you cannot pay, sign up for a free bankruptcy consultation with Kain & Scott, P.A. to determine if filing bankruptcy is the best way to resolve your debt problems. We will discuss all available consumer debt solutions to help you reach a decision that is in your best interest. For more information about what to expect during your bankruptcy consultation, download a copy of our free Bankruptcy Consultation eBook.
