Pre-Bankruptcy Credit Counseling – Info About The U.S. Bankruptcy Code
There are several reasons to justify borrowing money. This includes financing your education, starting a business, or buying a home. By handling your debt in a timely and responsible manner, you can also build your credit rating. This is important if you want to obtain more favorable rates on future loans.
While debt can clearly help you, there are times when it goes beyond your control. This may be caused by poor financial management or uncontrollable economic circumstances like job loss or a major illness. When that happens, paying off your debt may become harder than it once did. You might even get to the point that you are unable to pay your debts at all. That’s where U.S. bankruptcy laws can help.
Purpose Of The U.S. Bankruptcy Code
The U.S. Bankruptcy Code was designed to help honest but unfortunate debtors obtain a fresh financial start from burdensome debts. This is according to the United States Court. In the Old World bankruptcy laws failing to pay debt can land you in prison. It can even result in the selling of your children as payment. This is no longer a danger to you. The U.S. bankruptcy law provides you with protection against your creditors by implementing an immediate stay against virtually all collection and repossession activities. Once the bankruptcy is discharged, your old debts no longer exist. Not only that, your former creditors cannot pursue additional claims against you for them.
There are a number of different types of bankruptcy provided for in the U.S. Bankruptcy Code. However, most individual debtors file either a Chapter 7 petition or a Chapter 13 petition.
Chapter 7 is sometimes referred to as liquidation bankruptcy. That is because the court will liquidate your assets and use the proceeds to pay off your debts. Chapter 13 is sometimes referred to as the Wage Earner’s Plan because you are allowed to keep your possessions. However, you will be required to complete a court-authorized repayment plan.
Pre Bankruptcy Credit Counseling
Regardless of which type of bankruptcy petition you file, the U.S. Bankruptcy Code requires you to undergo a pre-bankruptcy course of instruction. This is known as credit counseling. The company providing the course should be approved by the Department of Justice’s U.S. Trustee Program. You must complete the course within 180 prior to filing your bankruptcy petition. If you are married and filing a joint bankruptcy petition, both you and your spouse will be required to complete this program.
Prebankruptcy credit counseling will help evaluate your current financial situation. The counseling service should provide information regarding possible alternatives to bankruptcy, such as debt consolidation programs. They should help you set up a workable household budget. There are three ways to complete your pre-bankruptcy credit counseling: online, by telephone or in person. You can complete the process in less than 1 1/2 hours, according to the Federal Trade Commission.
Pre bankruptcy credit counseling services may charge a fee for their services according to Justice Gov site. The amount of the fee depends on the agency providing the instruction and the state you live in. The Federal Trade Commission estimated the average fee to be around $50 as of November 2006. If you are unable to pay the fee you can request a fee waiver, but you should do this prior to beginning counseling or you may be liable for the fee.
Pre-Bankruptcy Credit Counseling Certificate
Your pre-bankruptcy credit counseling service should provide you with a certificate of completion. You should submit this to the bankruptcy court. This is proof of your compliance with the provision of the Bankruptcy Code. The credit counseling service cannot charge additional fees for providing the certificate. Only credit counseling services approved by the United States Trustee Program are qualified to provide the required counseling. You can obtain a list of approved credit counseling services from the clerk’s office in the district bankruptcy court that has jurisdiction over your area. You can also obtain a list of approved pre-bankruptcy credit counseling services online from the U.S. Department of Justice’s website.
You will also be required to complete post-filing debtor education after pre-bankruptcy credit counseling. You should not confuse post-filing education with pre-bankruptcy counseling. These are two separate requirements that must be completed on separate occasions. You cannot combine them into a single session unless you get special dispensation from the court to do so.
A Viable Alternative To Going To Bankruptcy Court
Before you go scheduling your credit counseling session, make sure you exhaust all available alternatives before going to hire a Texas or New York bankruptcy attorney to take you to court for example.
It is possible to consolidate your debts through debt settlement and get similar if not better results compared to bankruptcy. You can get credit card debt reduction of up to 50% in as little as 2 years with no upfront fees. Talk to the debt counselors now for your free debt analysis.