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Credit Counseling Requirement In Bankruptcy

In 2005, Congress passed and President George W. Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), a bankruptcy reform law. One of the requirements BAPCPA imposes on a bankruptcy debtor is to receive credit counseling from an approved credit counseling agency before the bankruptcy filing.

Credit Counseling Briefing

Specifically, BAPCPA requires that a debtor must receive an “individual or group briefing” from a nonprofit budget and credit counseling agency within 180 days before filing for bankruptcy.

The briefing can be in person, by telephone or via the Internet, but it must “[outline] the opportunities for available credit counseling and [assist] such individual in performing a related budget analysis.” If a debt management plan is developed in the course of the required counseling, it must be filed with the bankruptcy court once the bankruptcy proceeding has begun.

Approved Credit Counseling Agencies

Either the U.S. trustee or bankruptcy administrator in each state maintains a list of approved credit counseling agencies for use in the state’s courts. The list of approved agencies is also available on the U.S. courts website. Approval can be revoked at any time, and interested persons can ask the court to review the approval of any agency.

To obtain approval, an agency must:

  • Have qualified, experienced counselors who provide adequate counseling and have no financial interest in the counseling outcome
  • Handle client funds securely
  • Maintain an independent board of directors
  • Charge reasonable and sliding scale fees
  • Make certain disclosures
  • Possess financial security to oversee repayment plans of clients
  • Maintain “quality, effectiveness, and financial security of the services it provides”

Exceptions To The Credit Counseling Requirement

There are some exceptions to the counseling requirement for certain debtors in particular situations. First, the court may waive the counseling requirement if there are “exigent circumstances” and the debtor made a request for counseling that an agency was unable to provide within five days. Second, a debtor is excused from the requirement if incapacitated by mental illness or deficiency, if physically impaired such that he or she is unable to participate with reasonable effort, or if on active military duty in a combat zone. Third, counseling is not required if the trustee or administrator in a particular court district determines there are not enough approved credit counseling agencies available.

How To Contact Us

The consumer and bankruptcy law attorneys at Jimmy E. McElroy & Associates in Memphis, Tennessee, can provide much-needed information about credit counseling and bankruptcy filings. Call us at 901-881-8730 or complete the online form. We offer free initial consultations with a knowledgeable bankruptcy attorney.

DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.

* We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.