How has Filing Chapter 7 Bankruptcy changed since 2005?

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 changed requirements for filing for chapter 7 by making it a step-by-step process. Before 2005, people filing for chapter 7, which allows them to expunge their debts, could do so with restrictions. However, one major requirement under the Act now makes individuals undergo credit counseling before filing for chapter 7 bankruptcy. In fact, people must provide the U.S. Bankruptcy Court with proof of credit counseling with a certificate before their bankruptcy cases begin or end.

Chapter 7 Bankruptcy Cases Are Dismissed Without Credit Counseling

Under the Act, people are required—within 180 days of filing chapter 7—to participate in credit counseling. The credit counseling isn’t like counseling offered for people trying to work on paying their debts. Pre-bankruptcy counseling consists of one session which lasts 60 to 90 minutes. During the session, credit counselors reviews people financial situation and discuss any alternatives to filing chapter 7. Typically, pre-bankruptcy counseling session cost $50.

Chapter 7 Bankruptcy Cases Can’t Be Discharged With Credit Counseling

Individuals are required to take Post-filing Debtor Education before their bankruptcy cases can be discharged or successfully completed. The credit counseling, like the pre-bankruptcy counseling, is one session. However, it can last up to 120 minutes. In the session, people learn how to create budgets and management money better. The fee for the post-filing debtor education session is anywhere from $50 to 100.

The Credit Counseling Organizations Must Be on an Approved List

The U.S. Bankruptcy Court requires people to use the approved credit counseling organizations on its list. However, the credit counseling sessions can be taken over the phone, in person or online.  

If People Can’t Afford Credit Counseling They Do Have an Option

According to the U.S. Federal Trade Commission (FTC), credit counseling organizations are required to provide services free of charge for people who can’t afford them. However, before sessions begin individuals must complete a fee waiver.

Seek Help from an Experienced Bankruptcy Lawyer about Credit Counseling

An experienced bankruptcy lawyer can help people find the correct credit counseling organization. In addition to being approved by the U.S. Bankruptcy Court, the organizations must be approved in the particular judicial district where people live. An experienced bankruptcy lawyer will also file the required bankruptcy paperwork.