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Credit Counseling Requirement

Before you can obtain a full discharge in Chapter 7, you must first obtain a Certificate of Credit Counseling which is completed in two phases, namely by obtaining your Certificate of Credit Counseling and your Certificate of Financial Education.

Here is a list of the approved credit counseling agencies for the district of Connecticut.

You must obtain a Certificate of Credit Counseling before you can file your bankruptcy petition.

Points to be aware of regarding the credit counseling requirement:

  1. it’s considered an obstacle to obtaining a fresh start
  2. it increases the cost of filing for bankruptcy by paying the credit counseling industry a fee for the certificate
  3. it attempts to divert you away from filing for bankruptcy

There are important considerations you have to be aware of before you try obtain your certificate so you don’t become confused. Your attorney can advise and warn you about these considerations.

Remember, only an attorney has an obligation to represent your best interests. The Credit Counseling service has no obligation to represent you or duty to you. Please remember this.

Once you have obtained your Certificate of Credit Counseling, your attorney can file your Chapter 7 petition. When your case is filed with the Bankruptcy Court, a Trustee is appointed to examine you, your petition and other related documents.

Obtaining a certificate of credit counseling

You can find the list of approved credit counseling agencies by going to the U.S.Trustee’s website and visit their ‘Credit Counseling and Debtor Education‘ page.

Only a credit counseling agency from the approved list can issue you a certificate of credit counseling which will allow you to file a consumer bankruptcy petition.

If you are on social security, or are unemployed, or have some hardship, you definitely should inquire about asking the agency to waive any fee.

You should comparison shop for an agency. Therefore, visit their websites and ask what their fees are.

Many of the agencies are charging $50 per household. So if a husband and wife file for bankruptcy, the total fee is $50 versus $50 per person which would be $100.

Also, some people prefer not to have to use a computer and answer questions, and you can conduct the session over the phone but you have to check on how they deliver their services.

The credit counseling session is suppose to last 2 hours but many of the providers simply have you enter your information on their website and then you call them and within a very short time, they issue your Certificate of Credit Counseling.

Before you use an Agency, you must check on their method of payment. They want to be paid more than they are really interested in providing you with real counseling. Some will accept a debit card or a deduction directly from your checking or savings account. If you have to mail the payment to them, the mail gets lost and it take time to post and clear the money and if you are desperate to file because you are in foreclosure and you want to stop the foreclosure, I advise not to mail them the payment but find some means to pay via electronic debit or wire the money through Western Union because can be of the essence.

Note of Caution: You should thoroughly prepare your budget information before you obtain your credit counseling. Why? If you have had budget counseling, you have to file your Certificate of Counseling along with your Credit Counseling Budget with the Court. Then on your bankruptcy petition, you have to complete the same information. What happens if your credit counseling budget information is substantially different than the information in your bankruptcy petition? Potential problems could arise. This has not happened yet that I have seen but the possibility is there. And then you could be thrown into an adversarial tornado with the Bankruptcy Court because you didn’t spend the time to thoroughly review your information.

This is a real potential trap for the unwary. And I know how consumers can be so careless in writing out their budgets that I have had many clients submit to me there budgets and I can easily tell how they haven’t been budgeting and consequently, they present without know it that they have substantial excess income at the end of the month. And when I ask them, ‘Do you have $500 left over at the end of every month?’ , they shake their heads and say, ‘No way. I wouldn’t be here in your office if I had that much money left over every month.’ And then, I say to the client, ‘Well, let’s look at what you stated were your expenses. And do you see where you stated that you had $500 excess income every month?’ And the client looks at me with a puzzled look, ‘Did I put that there. Oh, no, I guess I made a mistake. I don’t have that kind of money. No way Jose.’

Now I want to make it clear that I am only advising you to be accurate and correct and truthful. I am not advising anything else. Further, the Trustee will see all your pay stubs for the last 180 days and has national guidelines to judge your expenses. And the Trustee will have guidelines for the ‘means test’.

But if you are careless in reporting your income and expenses to the credit counseling agency, this can come back to bite you.

Obtaining a certificate of financial education

After you file your bankruptcy petition, you will not receive a Discharge of your Debts unless you complete a course entitled, ‘Financial Education’.

Before you can obtain a Discharge of Your Debts, you must first obtain a Certificate of Consumer Education.

You can find the list of approved Educational Courses by going to the U.S.Trustee’s website and visit their ‘Credit Counseling and Debtor Education‘ page.

Only a credit counseling agency from the approved list can issue you a certificate of Financial Management or Financial Education which will allow you to obtain a Discharge of your Debts.

If you are on social security, or are unemployed, or have some hardship, you definitely should inquire about asking the agency to waive any fee.

You should comparison shop for an agency. Therefore, visit their websites and ask what their fees are. Check on their prices. Some offer the Education Course for $30 per household. You don’t have to use the same agency for both the First Certificate of Credit Counseling and the Second Certificate of Education. You can use any agency on the approved list. So taking the time to comparison shop will save you money.

Many of the agencies are charging $50 per household. So if a husband and wife file for bankruptcy, the total fee is $50 versus $50 per person which would be $100.

Also, some people prefer not to have to use a computer and answer questions, and you can conduct the session over the phone but you have to check on how they deliver their services.

The Educational Course is suppose to last 2 hours but many of the providers simply have you enter your information on their website and then you call them and within a very short time, they issue your Certificate of Education. This Certificate has to be filed with the Court before you can obtain a Discharge of Your Debts. Failure to file this Certificate of Education will result in your case being Dismissed and all your work will be for nothing.

Before you use an Agency, you must check on their method of payment. They want to be paid more than they are really interested in providing you with real education. Some will accept a debit card or a deduction directly from your checking or savings account. If you have to mail the payment to them, the mail gets lost and it take time to post and clear the money. Try not to mail the payment to them. They won’t release the Certificate until they have been paid. You will judge for yourself how much they really care about you receiving any real education. There courses have some educational value but really almost no real practical value post-bankruptcy because they are suppose to teach you in 2 hours all you need to know and practice for consumer financial information.

I maintain that it’s impossible to teach such a course in 2 hours but don’t tell that to President Bush who enacted this legislation. And the net result of Bush’s Bankruptcy Certificate of Credit Counseling and Consumer Education has been to simply add an additional cost to file for bankruptcy of approximately $100. The jury is out as to whether or not this ‘decision’ of President Bush is going to result in any improvement in bankruptcy. Based on my experience so far, it’s simply another colossal failure of the Bush Presidency which isn’t reported in the Press.