Prepetition credit counseling requirement is a counseling session mandated by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Before filing a Chapter 7 bankruptcy or Chapter 13 bankruptcy petition, all persons or entities seeking bankruptcy relief are required to participate in a credit counseling session with an authorized credit counseling agency within a stipulated period.
BAPCPA mandates two sessions to be attended by a bankruptcy petitioner before getting a bankruptcy petition discharged. The first session should be teken before filing a bankruptcy petition to qualify to file for bankruptcy and the second session should be taken after filing and before discharge to qualify for bankruptcy discharge.
The prepetition credit briefing condition is contained in Title 11 Section 109 of the United States Code (11 U.S.C. § 109). Pursuant to bankruptcy code, a debtor is entitled for relief from a bankruptcy court only if the debtor has obtained within 180 days before filing the petition, a credit briefing, from an authorized non-profit budget and credit counseling agency. The credit counseling agency summarizes the opportunities for credit counseling and will help the debtor with a budget analysis.
Under exceptional circumstances a debtor may waive prepetition credit briefing by permission of the bankruptcy court. The court allows waiver of a prepetition credit briefing when there are exigent conditions that merit a waiver of the briefing. There are certain exceptions to the prepetition credit briefing requirement. The exceptions include:
- incapacity of the bankruptcy petitioner. Incapacity occurs when a bankruptcy petitioner is impaired due to metal deficiency or mental illness and is incapable of making rational decisions about financial responsibilities;
- disability of the bankruptcy petitioner. The term disability refers to the physical impairment of the petitioner to be unable after reasonable effort to participate in briefing;
- unavailability of petitioner due to active military duty in a combat zone;
- unavailability of authorized credit counseling agencies in the petitioner’s district.
Many courts have decided that the prepetition credit briefing requirement is jurisdictional and mandatory. Thus, a failure to fulfill with the prepetition credit briefing requisites automatically results in a bankruptcy petition dismissal.