The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 amended the Federal Bankruptcy Code to require bankruptcy petitioners:
- to receive budget and credit counseling from an approved provider before filing a petition for bankruptcy; and
- to complete a debtor education (an instructional course on personal financial management) from an approved provider in order to have their debts discharged.
As a result, individuals who wish to file for bankruptcy must complete a credit counseling program before they are allowed to file a bankruptcy petition. The individual must also complete a debtor education course after filing for bankruptcy and before having their debts discharged. The credit counseling program and debtor education course must be obtained from a government-approved organization. A certificate of credit counseling completion should be included when filing for bankruptcy and evidence of completion of debtor education after filing for bankruptcy but before the debts are discharged.
The Department of Justice’s U.S. Trustee Program approves organizations to provide the mandatory credit counseling and debtor education. Only the counselors and educators that appear on the U.S. Trustee Program’s lists can provide the required counseling and debtor education. Similarly, only credit counseling organizations and debtor education course providers that have been approved by the U.S. Trustee Program may issue certificates.
A credit counseling session should include an evaluation of the bankruptcy filer’s personal financial situation, a discussion of alternatives to bankruptcy, and a personal budget plan. A counseling session usually takes about 60 to 90 minutes, and can take place either in person, on the phone, or online. The counseling organization is required to provide the counseling free of charge for those individuals who cannot afford to pay. The counseling organization is required to discuss any fees with the individual before starting the counseling session. Upon completion, a certificate stating that the individual received credit counseling will be issued.
A debtor education course should include information on topics such as developing a budget, managing money, using credit wisely, and other resources. Debtor education may be provided in person, on the phone, or online. The debtor education session usually takes about two to three hours, and is usually priced between $50 and $100. Individuals unable to pay a fee should seek a fee waiver from the debtor education provider. Once the debtor education course is complete, the individual receives a certificate as proof.