Credit Counseling and Debtor Education Courses Legally Required for Bankruptcy

If you are pursuing bankruptcy as an individual, regardless of which chapter you choose, you will need to submit proof that you have taken a credit counseling course and a debtor education course. If you are filing for bankruptcy as a business, you do not need to meet this requirement. However, you need to meet this requirement if you are filing as an individual based primarily on debts accumulated by your business.

If you are filing a joint petition with your spouse, each of you will need to meet the credit counseling and debtor education requirement separately. There are a few exemptions from this requirement, but they are narrow. For example, a member of the armed forces might be able to get a waiver, as might someone who is filing an emergency bankruptcy petition.

The Credit Counseling Course

Bankruptcy is a drastic step to take, and sometimes people decide to file for bankruptcy without understanding its full impact or thoroughly investigating alternatives. You can lose a substantial portion of your income and significant assets, and your credit rating may suffer severe and lasting damage. The purpose of the credit counseling course is to help a debtor review their finances and make sure that bankruptcy is the appropriate path for them to take. You will receive a certificate at the end of the course. Assuming that you decide to move forward with the bankruptcy filing, you will need to submit this certificate with your bankruptcy petition and other paperwork when you file. The course usually lasts for only two hours or so and can be completed online.

Approved Agencies and Providers

The federal government maintains a list of approved credit counseling agencies and debtor education providers.

The Debtor Education Course

While you need to complete the credit counseling course before your initial filing, you do not need to take the debtor education course until after you file for bankruptcy. The purpose of this course is to help a debtor develop better strategies for managing their finances once they emerge from the bankruptcy so that they do not need to file again. If you are filing under a chapter other than Chapter 7, you can submit your certificate of completing this course at any time before making your final payment on the repayment plan. If you are filing under Chapter 7, which does not involve a repayment plan, the deadline for submitting the certificate depends on the date of the Section 341 meeting of creditors. You will need to submit the certificate within 60 days of the date set for this meeting.

Filing the Certificate of Completion

Form 423, certifying completion of the debtor education course, along with a certificate of completion from the agency, must be filed within 60 days after the date when the first meeting of creditors was scheduled in Chapter 7 bankruptcy, or before the date of the last plan payment in Chapter 13 bankruptcy.

This requirement may seem less important than other parts of the bankruptcy process, but you should try to complete it efficiently. The court will remind a Chapter 7 debtor about the requirement through a specific notice, but debtors filing under other chapters will not receive a notice. Failing to file the certificate on time can have harsher consequences than you might expect. You will not be able to obtain a discharge of your debts without completing it, so you will need to reopen the case. This involves paying an additional filing fee and potentially filing a specific motion with the court to ask it to accept the late certificate. Once the judge grants the motion, you might need to file another motion to obtain a discharge of your debts.

Bankruptcy Law Center Contents   

Related Areas