If you’ve been struggling with financial difficulties, you may find that bankruptcy is your best option. Bankruptcy comes with quite a few rules and regulations, one of which is mandatory credit counseling. If you understand the purpose of this type of counseling and know what to expect, your bankruptcy – and the financial recovery period thereafter – is likely to go more smoothly.
The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act made it mandatory for bankruptcy filers to get credit counseling and participate in a financial education class within 180 days before filing. The purpose of this law is to prepare people for the bankruptcy process and to go over their personal finances.
What happens during credit counseling/financial education?
As part of credit counseling services, each filer will have his or her finances evaluated in order to get a clear picture of their current debts and assets and to determine whether bankruptcy is indeed the best, or only, option. Part of this phase of the bankruptcy process is to help filers understand bankruptcy alternatives, which is why it is offered prior to the actual filing.
Credit counseling also offers valuable information on creating and following a budget. This information can be useful to just about anyone, but especially for those who have struggled with credit and financial problems. There is a fee for this counseling but it can be waived if the filer cannot afford to pay it.
After the bankruptcy papers are in, the filer needs to participate in debtor financial education classes. These classes expand on the topics of budgeting and may delve further into proper financial management.
While not everyone starts off excited about participating in the credit counseling and financial management portion of the bankruptcy process, many end up appreciating the useful things they learn and finding that it helps them face their financial future with a better sense of control and confidence.