Declaring bankruptcy is not a decision you should make without careful consideration. There are many factors to consider, and it isn’t an easy decision. There are several types available for individuals including chapter 7 and chapter 13 which are the most popular bankruptcies filed by individuals. If you have exhausted all your other avenues however, and you opt for this type of financial relief, you need to be aware of the stipulations required to discharge your bankruptcy.
Discharging a bankruptcy releases the debtor from most types of debts; the bottom line, once your bankruptcy is discharged, you won’t be forced to pay those debts. The discharge is a permanent legally binding order that stops any further actions on the part of lenders and collection agents.
Getting to that part is the entire point of a chapter 7 bankruptcy (a chapter 13 bankruptcy can discharge some debts, but many others won’t be, instead all or part of these will be part of a repayment plan. There can be a discharge, but only after the terms of the repayment plan are met).
The timing of a discharge is usually 4-6 months are the bankruptcy petition is filed.
No matter what you chapter you filed, all individual bankruptcy filers must complete mandatory credit counseling and debtor education before discharge. Only credit counseling organizations and debtor education course providers approved by the U.S. Trustee program can issue the completion certificates required by the court.
The credit counseling and debtor education are designed to help you make better financial decisions in the future. Here are some things to know about this process and how it can benefit you.
Credit Counseling Requirement
When you decide to file for bankruptcy, the federal government requires you to meet a set of standards before you are eligible for discharge of your debts. A huge part of these requirements include that you complete your credit counseling and debtor education. As mentioned, the mandatory credit counseling needs to be done before you file, and the debtor education before your bankruptcy is discharged.
No matter whether you file Chapter 7, Chapter 11 or Chapter 13 bankruptcy, you are required to take a credit counseling course, which must be completed within six months prior to filing for bankruptcy. This pre-bankruptcy counseling session must be done through an approved organization. It should include an evaluation of your personal financial situation and a discussion of bankruptcy alternatives as well as a personal financial plan. These sessions normally last an hour and can be done in person, over the phone or online. They also should cost less than $50 and for those who cannot afford it, the fee can be waived.
Once this counseling session has been completed, you must get a certificate as proof you took the course.
The reason that the government requires credit counseling prior to a bankruptcy filing is that it acts as a last resort. It will determine whether other options exist that could relieve your financial distress.
Because bankruptcy has some consequences for your future ability to obtain things on credit, a counseling course may open up your options and present you with other alternatives. Credit counseling classes not only involve a comprehensive review of your finances and a review what options you may have to avoid bankruptcy, but it may help teach you the importance of establishing a budget plan.
Once you pick an approved organization, the FTC recommends you ask the following questions:
• What services do you offer?
• Will you help me develop a plan for avoiding problems in the future?
• What are your fees?
• What if I can’t afford your fees?
• What qualifications do your counselors have? Are they accredited or certified by an outside organization? What training do they receive?
• How do you keep information about me (including my address, phone number, and financial information) confidential and secure?
• How are your employees paid? Are they paid more if I sign up for certain services, if I pay a fee, or if I make a contribution to your organization?
Although credit counseling is mandatory, the government makes exceptions for factors such as mental illness, physical disability or claimants who are serving on active duty in the military.
Once you have completed the credit-counseling course and receive a certificate confirming your participation, you must submit it as proof when you file for bankruptcy.
Debtor Education
Debtor education is a mandatory requirement that you must complete after you have filed for bankruptcy. Without completing this process, the government will not discharge your bankruptcy. As in the case of the credit counseling, the debtor education course must be through providers approved by the court. The debtor education course will give you information about how to develop a budget, manage your money, and use credit wisely. Just as with the credit counseling, the debtor education can happen on the phone, in person, or online.
Unlike credit counseling, debtor education is more focused on what you need to do after your bankruptcy is discharged so you can avoid putting yourself in the same financial situation in the future.
As with credit counseling, you will receive a certificate confirming your participation.
Remember, with both credit counseling and debtor education, you must choose an approved agency on the Department of Justice website. And if you cannot afford the fees related to these services, you can petition for a fee reduction or a fee waiver.
Helping You Through Tough Financial Times
If you are considering declaring bankruptcy, you are probably learning that this can be a complex and challenging process that should require the services of a reputable bankruptcy attorney. An affordable bankruptcy lawyer can be your invaluable partner through the entire process helping you to understand what happens when you file for bankruptcy in Florida.
At the Badgley Law Group, we have earned a top AVVO Rating in several practice areas, including bankruptcy, which means that we can offer you outstanding service in all aspects of your bankruptcy process. We have years of experience as well as an extensive knowledge of filing a bankruptcy in Florida and dealing with the bankruptcy court here in Orlando.
Please contact us today at 407-781-0420 for a free legal consultation.