Requirements for Bankruptcy - Credit Counseling
Since October 17, 2005 the law requires that any consumer who plans to file bankruptcy must participate in a government approved credit counseling program at least six months before he or she files. These counseling sessions are used to determine if a bankruptcy is actually in the consumer's best interest.
This counseling session, by law, must last for at least 90 minutes. Consumers must pay for the session, although the amount of the fee depends on the debt relief agency. If a consumer can prove that they are unable to pay the fee, it is possible to have it waived. During this session, the counselor will determine if the consumer's debt issues can be resolved through budgeting. If so, the counselor may recommend that the consumer enroll in a debt reduction or debt management plan (DMP). Once enrolled in a DMP, the consumer will agree to pay a set monthly amount to the debt relief company, which will then be passed on to the consumer's creditors.
The plan will include monthly payments over a set amount of time that will require the full debt amount, plus interest, be paid back. While enrolling in a DMP is not required in order to file for bankruptcy, it can be a good alternative depending on each unique situation. If a consumer decides, after counseling, that filing for bankruptcy is his or her best option, they must obtain a credit counseling certificate to prove that they completed the session before filing.