A previous post here examined the basics of the “debtor education course” that all Chapter 7 bankruptcy filers must complete before receiving a discharge of their debts. At that time, we mentioned the fact that the course should not be conflated with “credit counseling,” which is also mandatory, but is a different requirement entirely. Our readers need to know about credit counseling as it is under a Chapter 7 bankruptcy.
The first major difference between debtor education and credit counseling is timing. In almost all cases, the debtor will need to complete the credit counseling course prior to filing of the Chapter 7 petition. In fact, this requirement must be completed within the six months prior to the bankruptcy filing date. The course must be through an approved credit counseling agency, and can be done in-person, by phone or online. In order to avoid having a Chapter 7 bankruptcy petition dismissed, the debtor will have to file the certificate of completion provided by the credit counseling agency.
It is possible to complete the credit counseling after the filing of the petition, but only in very limited circumstances. To do so, the debtor must request written permission from the bankruptcy court, by showing that he or she tried to obtain counseling by making a request for it but was not able to receive it within one week. However, the debtor in such a case will have to also provide some explanation of the exigent circumstances that warrant permission to complete the counseling with 30 days of the petition’s filing. In general, the mere fact that a foreclosure is pending will not be sufficient to meet this standard.
The purpose of credit counseling, and the reason it is required to be completed before the bankruptcy filing, is to try to prevent the bankruptcy if it can be helped. The credit counseling agency may go over the potential filer’s finances and draw up a debt repayment plan for the individual that may help him or her avoid filing altogether. If the debtor wishes to go ahead with the bankruptcy anyway, he or she will have to file any proposed repayment plan they came up with through a credit counselor for the court to peruse.