Consumer Credit Counseling

If you plan to file for bankruptcy, you are required to participate in consumer credit counseling from a government approved agency within 180 days of the filing.

Pre-bankruptcy counseling is designated to ensure that the debtor is an appropriate candidate for bankruptcy.  The counseling session should include an evaluation of the debtor’s personal financial situation, a discussion of bankruptcy alternatives, and a personal budget plan.  The session can take place in person, over the phone or online and should last around 60 to 90 minutes.  If the debtor cannot afford to pay for the service, the organization is required to give the debtor a fee waiver if the debtor requests one before the session begins.  Otherwise, the session runs around $50 depending on the location and the types of services the debtor will receive.  Consumer credit counselors’ services may include budget counseling, savings and debt management classes, debt management planning, and providing educational material.

After the session, the debtor must obtain a certificate as proof of completion.  Credit counseling organizations may not charge a fee for the certificate.  The debtor can consult the U.S. Trustee website to ensure that the debtor receives a certificate from an organization approved by the judicial district where the debtor is filing for bankruptcy.

Pre-discharge debtor education must take place after the debtor files for bankruptcy.  This education session should include information on developing a budget, managing money, and using credit wisely. Similar to pre-bankruptcy filing, pre-discharge education can occur in person, over the phone or online, but it may last up to two hours.  The fee is also higher than the pre-bankruptcy counseling fee, running anywhere from $50-$100.  A debtor can also request a fee waiver for the pre-discharge education if unable to pay the fee.  The debtor must obtain a certificate for the pre-discharge education just like the pre-bankruptcy counseling.

There are various consumer credit counseling agencies.  Some credit counseling agencies are legitimate.  Many are non-profit organizations that genuinely want to work with you to help you improve your financial situations.  However, not all non-profit credit-counseling agencies are legitimate.  Some charge high hidden fees.  Some agencies also encourage or pressure debtors to make voluntary contributions to the organization, which only puts the debtor further in debt.

To avoid credit counseling scams, ask the agency what services they offer, whether they offer free educational materials, what their fees are and get a price quote in writing, what the consequences are if you cannot afford to pay their fees, assurance that your personal information will be kept confidential, and whether they are licensed to offer service in your state.  

To ensure you fulfill the legal bankruptcy filing requirements it is best to check the list of approved credit counseling providers on the U.S. Department of Justice website.

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