Bankruptcy Counseling

When a person is bankrupt he is teetering on the brink of disaster with his debt about to push him over the edge. One ray of hope comes in the form of bankruptcy counseling, helping him bail himself out of the throes of financial trouble and offering the debtor the opportunity to start afresh.

What is Bankruptcy?

Bankruptcy is a legal procedure in which a defaulter makes it known publicly that he lacks the funds to repay any dues. A court order sought for and released by the debtor, the purpose of bankruptcy is to gain time to repay his debts or even get a reprieve from some of the dues. Filing for bankruptcy must be done only in consultation with an attorney, as it has can have detrimental effects on your credit score and reputation. A bankruptcy claim is a black mark on an individual’s credit report, lasting for ten years. In this tenure, the individual can no longer seek any credit from other sources. Bankruptcy claims make it difficult to buy a car, rent a house, or do any financial planning, as he has become a risky proposition by creditors.

Bankruptcy Counseling:

Bankruptcy counseling involves receiving advice and guidance from debt counselors on the consequences of filing for bankruptcy. Before deciding to take this drastic step, one must first understand the following:

  • What does filing for bankruptcy entail?
  • What are the consequences of filing for bankruptcy?
  • What are any alternatives to filing for bankruptcy?
  • What type of bankruptcy should one file for? (which chapter in the US, or which segment in any other country)

Facts About Bankruptcy Counseling:

The following should be noted about bankruptcy counseling:

  • A bankruptcy counseling session is taken prior to filing for bankruptcy.
  • Counseling may take place over the phone, online, or face- to-face.
  • A session can last up to 90 minutes
  • Bankruptcy counseling can be undertaken from federal agencies like the National Foundation for Credit Counseling or from private sources.
  • A bankruptcy counseling session from an authority offers a certificate of completion for the course. This certificate is to be included along with the bankruptcy petition upon filing for bankruptcy.
  • Bankruptcy counseling sessions are mandatory as part of the pre-filing process.
  • The agency providing the bankruptcy counseling session must be approved by the Executive Office for US Trustees.
  • Agencies in North Carolina or Alabama must be approved by the local banking administrator.
  • For individuals filing for bankruptcy under chapters 7 or 13, participation in a counseling session is mandatory within 6 months of filing the petition.

What Is Involved in a Bankruptcy Counseling Session?

Included in a bankruptcy counseling session should be:

  • An overview of the process of Bankruptcy filing.
  • A discussion regarding the advantages and disadvantages of filing for Bankruptcy.
  • A look into the alternatives that can be sought instead of filing for bankruptcy.
  • An analysis of the circumstances leading to the debtor’s situation.
  • A personalized budget plan for the debtor.
  • Guidance on measures to help address the bankruptcy situation.

By making it mandatory, bankruptcy counseling has become a timely intervention on the part of the federal government to help individuals facing this devastating financial situation. Bankruptcy counseling can be a blessing for debtors, providing an opportunity for them start afresh financially.