Except for a handful of exceptions, anyone wishing to file for either Chapter 7 or 13 bankruptcy must take a credit counseling course within 180 days prior to filing for bankruptcy. This new bankruptcy requirement came into effect with a number of new bankruptcy laws in October of 2005. The main purpose of bankruptcy counseling is to ensure that you have exhausted all other options to bankruptcy before filing. For example you may take the Credit Counseling course and discover that a debt consolidation program may be faster and less expensive than filing for bankruptcy. Secondly, the course was enacted to reduce the likelihood of returning to bankruptcy court for a second time.
Your Sacramento bankruptcy attorney can usually recommend a local credit counseling course to you. The benefit of getting a bankruptcy lawyer’s referral for a credit counseling course is that the course will have a higher probability of being reputable, and will most likely be on the Federal Department of Justice’s list of approved credit counseling agencies. If you choose to attend a Credit Counseling course that is not approved by the DOJ, you risk the bankruptcy judge or bankruptcy trustee not accepting the course certificate and having your bankruptcy case dismissed costing you unnecessary time, money, and frustration.
Most pre-filing bankruptcy credit counseling courses in California will likely cost anywhere from $20 to $50, although if your income is less than 150% of your state’s federal poverty guidelines, it is possible to obtain a fee waiver or reduced fee. Most credit counseling agencies will give you a limited amount of time to take your course after being notified of approval of a waiver, so if you do get one, use it as soon as you possibly can. In a credit counseling session, you’ll want to bring all information pertinent to your financial situation including your income documentation, information about your mortgage and other expenses, and a list of the debts that you owe. Make sure your debt information includes:
- The amount owed
- Interest Rate
- Monthly Payment
- Account Number
- Whether it’s a Joint Account
Once you are all signed up for a credit counseling course, you will first meet with a credit counselor either in person, on the phone, or online, who will review your finances and ask about your financial goals and issues. Working with your credit counselor, you’ll come up with a budget for your financial goals. You’ll then review and put your financial plan into action utilizing an action plan to help guide you along with your credit counselor’s recommendations and strategies. The typical counseling actually takes around an hour and after you have completed the counseling program you will be awarded a certificate via email, US mail, or by being emailed to your bankruptcy attorney. You will then include this in your bankruptcy filing paperwork.