On October 17, 2005 the United States Bankruptcy Code underwent massive revisions. One of the changes concerned the new requirement of having to take two (2) courses as part of any bankruptcy filing.
Section 109(h) of the United States Bankruptcy Code makes one ineligible to file for bankruptcy unless within the 180 days prior to filing for bankruptcy the individual(s) takes and receives a credit counseling class from a non-profit credit counseling agency that has been approved by the United States Trustee. The lists of such approved agencies vary from state to state. This first course, which we refer to as the “credit counseling course”, can be completed either by phone or online. Most agencies are open at least six (6) days per week.
The first class will generally take between forty-five (45) and sixty (60) minutes to complete. Usually within thirty (30) minutes of completing the first class, a certification will be created. Most agencies will mail and/or email the certification to both the individual taking the course and their attorney. The purpose of this first course is for the agency to try and help the individual reign in or adjust their monthly budget. The certification must be filed along with the individual’s bankruptcy petition. Failure to do so will lead to a dismissal of the bankruptcy petition by the court.
A second course must also be taken. I refer to this as the “Personal Financial Management Course.” This second course must be completed after the time of filing but before the bankruptcy case closes. Bankruptcy code sections 727(a) and 1328(g) are what mandates the completion of this second course. The purpose of the second course is to help the individual strengthen their future budgeting and planning skills. It is meant to help people avoid future financial problems due to issues with operating within a household budget. Failure to complete this course will mean that a discharge will not be granted. This would cause any of your debts that were not paid within the bankruptcy to remain your legal obligation to pay.
The Personal Financial Management course is taken after the time of filing but prior to the bankruptcy case closing. A Chapter 7 bankruptcy will usually remain open for no more than four (4) months. A Chapter 13 bankruptcy, however, can remain open for between three (3) and five (5) years. In both types of cases, I strongly urge the client to complete the second (2nd) course within the first month or two of filing. This way, there is no concern with the client receiving his/her discharge at the conclusion of the case. A discharge is a document which means one is no longer legally responsible to pay certain debts. The primary reason most people file for bankruptcy is to obtain relief for some or even all of their underlying debts.
Many law firms briefly address these two (2) classes and don’t explain the importance and nuances of each. At the firm of Reinheimer & Reinheimer we take the time to go over and explain the importance of each class requirement and what can be expected with each.