As many New Yorkers with excessive debts come to realize, there's much more to the bankruptcy procedure than simply filing paperwork or appearing before a judge. Before your debts are discharged or reduced, federal law requires you to first assess other options prior to taking this drastic move, and then also take a course on money management. Here's what you need to know ahead of time.
Credit Counseling Isn't Optional During Bankruptcy
A credit counseling session must be taken whether you end up filing Chapter 7, which discharges most debts, or Chapter 13, which instead lowers your debts but still requires you to pay back a reduced amount over time. This prerequisite remains in place regardless of your personal financial circumstances.
Even if your reason for declaring bankruptcy isn't relevant to the courses, such as unexpected and unavoidable devastating medical debt that could have happened to anyone, you are still legally required to take the class.
There Will Be a Second Course Before Debts Are Wiped Clean
In addition to the initial credit counseling that must be completed before filing for bankruptcy at all, a second debtor education course is also necessary. That secondary class has to be finished before any of your debts are actually discharged by the court. The education course critically cannot be undertaken at the same time as the previous credit counseling session and must be split up to meet the basic legal conditions of bankruptcy.
The Courses Must Be Approved
Unfortunately, you can't simply find any random online financial counseling course and call it a day. Instead, anyone filing for bankruptcy has to use a course that's been granted approval through the U.S. Trustee Program by the Department of Justice. An attorney can help you locate the right approved courses to fit your needs, whether those are in-person, online, or over the phone.
If you are married and file for bankruptcy jointly, you and your spouse will have to take and complete both sets of courses. While the two of you must receive your own individual certificates stating you completed the lessons, married couples aren't required to take different courses at different times. You can attend the sessions together for both the pre-filing credit counseling and then later the post-filing education class.
Going Through Credit Counseling and Debtor Education
Both of these courses will cost money, which can be a burden when you are already dealing with a financial emergency. However, in some cases, counseling must be provided either free, at a reduced cost, or have a payment plan option available. Discuss the possibility of a waiver with your attorney before signing up for any classes. Once the issue of payment is dealt with, the pre-bankruptcy credit counseling typically covers:
- An assessment of your current finances
- Budgeting and financial planning for your current income situation
- Explanations of potential alternatives to filing Chapter 7 or Chapter 13
After filing for bankruptcy and showing the judge that you took the counseling session, the post-filing debt education program then usually includes:
- Money management tips
- Strategies for using credit in the future to avoid needing bankruptcy a second time
There aren't any legal obligations to follow the advice on alternatives to filing bankruptcy or use the specific budget provided by either course. However, you must produce proof you finished the credit counseling sessions when filing for bankruptcy and then again furnish proof of completing the debtor education program before the process is finished.
You Need to Talk to an Attorney Before Taking Any Sessions
These strict specifications on credit counseling services are just one of the important reasons you should consult an experienced bankruptcy attorney if you are considering hitting the reset button on your finances. A skilled lawyer can help ensure you utilize all the exemptions you qualify for to protect as much of your hard-earned assets as possible while meeting all the legal requirements.
While your current circumstances may seem dark, there's light at the end of the tunnel if you plan for bankruptcy properly and use all the available tools at your disposal. Don't wait to begin preparing for your financial recovery. If you are currently considering bankruptcy, or have already started the process but aren't sure what to do next, contact the Alatsas Law Firm today.
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