Every individual seeking bankruptcy relief must complete two educational courses: The credit counseling course is completed before the bankruptcy petition is filed with the court. The second course, on the other hand, can’t be completed until after the case has been filed. Without completing both courses, a bankruptcy filer cannot get their bankruptcy discharge. Here are 3 things you should know about the personal financial management course, including how it's different from credit counseling.
If you are considering bankruptcy, you are required to complete two educational courses, one before filing and one after. The first of the two is a credit counseling course. The truth is, taking this course would be in your best interest even if it wasn’t a requirement. Through credit counseling, you will learn about the many debt relief options available, and which one is best for your unique situation. It might be bankruptcy, it might not. Your second requirement, the debtor education course, occurs only after you’ve filed. Therefore, if you choose another path of debt relief, the second course won’t be necessary.
What is the purpose of the credit counseling course?
Before the bankruptcy petition has even been filed with the court, the credit counseling course must be completed. Offered for free through nonprofit agencies, credit counseling is a valuable tool for any debtor. Your credit counselor will assess your financial situation and goals, provide you with an overview of the different forms of debt relief, and help you determine which solution is right for you.
Bankruptcy credit counseling courses rarely take longer than 90 minutes. During the session, you will provide your counselor with some basic information, including your current income, living expenses, and any debts. With this information in mind, your counselor will then ask about your short and long-term goals. For example, is your main goal to improve your credit so you can buy a home, pay off high-interest credit card debt, or wipe away debt you can no longer pay and begin rebuilding your financial future?
Depending on your financial situation and goals, bankruptcy may not be the best solution. Other forms of debt relief include debt settlement, debt management, and debt consolidation. If the financial hardship is expected to be long-term, or the amount of debt is an insurmountable burden, however, bankruptcy may be the only viable option.
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What is the purpose of the debtor education course?
If you decide to file Chapter 7 or Chapter 13 bankruptcy, you will be required to take one more course in financial management, after you have filed. The debtor education course, also known as the personal financial management course, is essentially an instructional course on how to more effectively budget and manage your finances. Even if your bankruptcy was not due to poor financial management, the course is required. You will not be able to receive a bankruptcy discharge until this requirement has been met.
The debtor education course is fairly basic, but it does provide some very useful information and tools for money management and wise utilization of credit. Although courses vary somewhat from district to district and state to state, most typically cover the following topics:
How to prepare and manage a budget;
General money management;
How to use credit wisely;
Consumer protection laws;
How to prepare for and handle an unexpected financial crisis.
You will likely learn at least a few useful tips from the course to help you repair and rebuild your personal finances. But, as with the credit counseling course, debtor education courses occur in one sitting, and they are relatively short, with most taking no more than two hours to complete.
When can I take the debtor education course? Is there a deadline?
While the credit counseling course must be completed before filing bankruptcy, the debtor education course can only be done once your bankruptcy case has been filed and you’ve been given a case number. It can, however, be completed before the meeting of creditors, also known as the 341 meeting. Although you can complete the personal financial management course before or after the 341 meeting, it must be done within 60 days of the meeting, or the court will not enter a discharge in your bankruptcy case. It should also be noted that purposely avoiding the course is not an effective way to get the case dismissed to prevent the trustee from taking nonexempt assets. The trustee can still take those assets.
Once you have completed your debtor education course, you must submit the certificate of completion to the bankruptcy court. This is not automatic. In Chapter 13 bankruptcy, the certificate of completion should be filed before you have made your final plan payment, so there is no delay in getting your Chapter 13 discharge.
What if I forgot to take the course, do I have to start over?
If you were unaware of the requirement to complete this required personal finance course post-filing and within the allotted time frame, or you simply forgot to do so, you can file a motion requesting that the court reopen your case. If the court grants this request, you will first pay a fee to have your case reopened, then you will file the certificate and obtain your discharge.
Where can I take a personal financial management course to satisfy this requirement?
Every state has a list of approved debtor education providers, categorized by district. You must take a course through an approved provider, otherwise it will not be accepted by the court and you will have to take it a second time. If you live in North Carolina or Alabama, the Bankruptcy Administrator for your district approves the course providers.
If you live in a remote location, have a disability, or do not have reliable transportation, you can generally take the debtor education requirement as an online course or over the phone, as well as in person. As long as the servicer is an approved provider, your physical location when taking the course is irrelevant.
Taking the credit counseling course before filing Chapter 7 or Chapter 13 bankruptcy and taking the personal financial management course within the allotted time frame after filing is an essential part of the process. If you fail to complete either of these bankruptcy course requirements, you will not receive your bankruptcy discharge. Although these course requirements may seem like just another massive inconvenience, they can actually help you gain control of your personal finance situation and improve your financial literacy.
Take advantage of these free opportunities by learning as much as possible during your sessions. And don’t wait until the last minute to find approved providers, take the courses, and report when you’ve completed the debtor education requirement. If after your credit counseling course, you decide to file Chapter 7 bankruptcy, Upsolve offers an easy-to-use app to file Chapter 7 for free. If, however, you decide that Chapter 13 is the best solution for your financial situation, it is in your best interest to consult with an experienced bankruptcy attorney as soon as possible.