Financial Counseling Requirement before Bankruptcy Discharge ...

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In a previous article called The Credit Counseling Requirement before Filing for Bankruptcy, it was pointed out that as of 2005, the new federal guidelines regarding bankruptcy petitions state that any individual who is considering filing either a Chapter 7 or a Chapter 13 must go through credit counseling using a government-sanctioned credit counseling agency. As mentioned, there are two primary goals that govern this new regulation. One is to eliminate the chances of anyone attempting to file any type of fraudulent claim of bankruptcy, and the second is to evaluate whether or not the individual can feasibly handle their financial affairs and debt responsibilities without filing a petition, and without adding to their existing debt burdens as well.

This article is meant to draw attention to an additional stipulation in the bankruptcy laws that require every individual to take a financial management or counseling course from an agency approved by the court before their discharge is issued in either a Chapter 7 or Chapter 13 bankruptcy. This course is also referred to as pre-discharge counseling or budget counseling.

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Pre-Bankruptcy Credit Counseling as opposed to Pre-Discharge Financial Counseling

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This court-mandated financial counseling course obligation is unlike the credit counseling that every individual must undergo before filing their bankruptcy petition. In this case, the individual is required to take the financial counseling course after they have filed their petition for bankruptcy. However, and most importantly, it must be completed before a discharge is issued by the bankruptcy court.

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Court-Approved Agencies that provide the Financial Counseling Course

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Just like the credit counseling course, each individual is required to take this financial counseling course from an organization that is pre-approved by the Office of the U.S. Trustee. These courses are regulated to go on for at least two hours and encompass a specified program of study. The agencies endorsed by the U.S. Trustee for the pre-bankruptcy credit counseling course were non-profit organizations. By contrast, those that provide the financial counseling courses are not required to be a nonprofit entity. Nevertheless, these organizations are set up to provide, to any individual who needs it, a sliding scale fee if they cannot manage to pay the full cost of the program. For maximum convenience, the financial counseling course can also be taken either in person, on-line, or through the mail. Listings of the sanctioned counseling agencies can be found by going to the U.S. Trustee?s website at www.justice.gov/ust. From there, find the ?Consumer Information? menu, and follow that to the ?Credit Counseling & Debtor Education.?

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Filing the Course Completion Certificate

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After the financial counseling course has been completed, it must followed up by filing the Official Form 23 with the bankruptcy court, which certifies that each individual has in fact taken the required financial counseling course. In addition, a certificate of completion from the counseling agency must also be filed as well.

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The Financial Counseling Timeline

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Within the Chapter 7 bankruptcy regulations, each individual is required to file the Form 23 and their certificate of completion with forty-five days after the specific date their 341 hearing (the meeting of the creditors) was first placed on the court docket. It is very important that this cut-off date is strictly adhered to. If this filing date is missed, the bankruptcy court could close the bankruptcy case, without a discharge or final determination. Should this dilemma occur, the individual would have to file a motion to request that their case be re-opened, which will add a substantial expense to the petition process, along with the costs incurred by their bankruptcy attorney.

In the Chapter 13 bankruptcy guidelines, each individual must file the Form 23 and their certificate of completion any time before their final payment is made within their repayment schedule. In general, anyone is permitted to take the financial counseling course within the timeframe of the Chapter 13 repayment schedule, and it is usually recommended simply because information taught in the course assists each individual with designing and maintaining their budget and completing their repayment plan successfully.

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Exceptions to the Pre-Discharge Financial Counseling Course Requirement

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There are, however, a limited number exceptions to this requirement, even though most bankruptcy petitioners seldom qualify for them. An individual is not required to take the course if there are no financial counseling courses where they live. However, this particular exception hardly ever comes into play simply because every judicial district usually has counseling agencies that provide the necessary financial counseling courses either through internet access or over the telephone.

Another possible exception is if an individual has a disability or incapacity that renders them unable to take the course, but again, due to the fact that the courses are accessible either over the telephone or through the internet, bankruptcy courts rarely consent to this exception. Nevertheless, if an individual does happen to possess some form of mental impairment that inhibits them from comprehending the information given during the course, this requirement could in fact be put aside. In addition, if there are no financial counseling courses accessible in a language the individual can understand, or the organizations in their judicial district do not offer counseling in that language, it may be possible to be excused from this requirement. And finally, any individual who happens to be serving on active duty status in a military zone is also excused from taking this course prior to receiving their discharge.

If you are currently considering the benefits and protections offered under the bankruptcy laws, or would like your specific questions or concerns regarding these counseling course requirements answered, please contact our office to speak with any one of our highly qualified bankruptcy attorneys for complete details and counseling agency locations and contact information.

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Source: http://topofutahlaw.com/the-financial-counseling-requirement-before-the-discharge-in-bankruptcy/

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