Three Credit Counseling Traps to Avoid For Your Mandatory Pre-Bankruptcy Credit Counseling


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The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made it mandatory for all debtors to receive credit counseling before they will be allowed to file bankruptcy. This credit counseling was made mandatory to ensure that all debtors understood their options before going bankrupt.

While it can be argued that credit counseling is a good thing, there are also three dangerous credit counseling traps to be aware of if you are considering filing bankruptcy.

First, and most importantly, your pre-bankruptcy credit counseling session must be completed within the 180 days prior to your bankruptcy filing. If you go to bankruptcy court to file bankruptcy, and you have not completed your credit counseling, you will not be permitted to go bankrupt. Your bankruptcy petition will be dismissed.

Having your case dismissed means that you will not get relief from your creditors. Obviously the purpose of going bankrupt is to prevent your creditors from taking any further legal or collection action against you, so having your case dismissed, simply because you did not attend a one hour counseling session, is a very serious trap.

Second, your credit counseling session must be completed by an approved credit counselor. Credit counseling services are approved by the Department of Justice's U. S. Trustee Program, except in Alabama and North Carolina where court officials (known as Bankruptcy Administrators) approve pre-bankruptcy credit counseling services.

Before you agree to credit counseling, check the Department of Justice's web site to make sure that your counselor is on the approved list. There is little point in completing the counseling if the credit counselor is not an approved credit counselor.

The third and final trap is that you must have proof of completion of your credit counseling for the court. Within 24 hours of the completion of your credit counseling you will receive a certificate of completion. Only credit counseling organizations that have been approved by the U. S. Trustee Program may issue these certificates. As a fraud prevention measure, these certificates are sequentially numbered, and produced through a central automated processing system.

If you don't have the certificate of completion when you appear at your bankruptcy hearing, your case will be dismissed.

The bankruptcy process was already complicated, and the credit counseling requirement adds another level of complexity, so either do your own research, or hire a competent bankruptcy attorney to represent you, so that you don't fall into one of these credit counseling traps.

Thomas Gibson is an expert on consumer credit counseling, and is a contributor to . He has written many articles on mandatory credit counseling before bankruptcy , and consumer credit counseling


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