Benefits of Bankruptcy Counseling

Going bankrupt is one of the most emotionally and financially devastating events that can take place in an individual’s life.  Although it can feel like an isolating experience, a total of 1,467,221 non-business bankruptcies were filed in US federal courts in between September 2010 and September 2011.  The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 has changed the rules for petitioning for bankruptcy.  The changes aim to provide financially education and support to troubled consumers throughout the bankruptcy and discharge process. The decision to file bankruptcy yourself, or with a bankruptcy lawyer, is a serious consideration with real consequences to juxtapose the benefits.  As such, the new act ensures that consumers do not enter the process without qualified bankruptcy advice.

The education component of the 2005 act is comprised of two parts: pre-bankruptcy counseling and a post-bankruptcy debtor course.  Under the new bankruptcy law, individuals who intend to file for bankruptcy protection must receive credit counseling from a qualified agent. Once the required counseling is completed, a certificate of proof must accompany the Chapter 7 or Chapter 13 filing.  The purpose of mandating a pre-filing counseling session is to enable consumers to fully understand the potential advantages and disadvantages of, and alternatives to, going bankruptbefore action is taken.  Bankrupt individuals must also complete a post-bankruptcy debtor education course before their debts will be discharged.

The benefits of bankruptcy counseling include an in-depth discussion of the circumstances that led you into financial difficulty, an evaluation of your personal financial situation from a qualified credit counselor who will also discuss your alternatives to bankruptcy, and develop a budget or repayment plan specifically for you. The fee is generally in the $50 range, depending on factors such as where you live and the types of services you receive. The counselor will discuss all fees with you before starting the counseling session. If you cannot afford to pay for credit counseling, request a fee waiver before your session begins. The counseling organization is required to provide the counseling free of charge for those consumers who cannot afford to pay.

Your ability to make an informed decision about whether bankruptcy is the best solution for your particular financial situation depends on your full understanding of the repercussions associated with bankruptcies and awareness of feasible alternatives to filing bankruptcy yourself. This education can only come from bankruptcy professionals such as credit counsellors and bankruptcy lawyers.

You are not required to be represented by an attorney, but bankruptcy lawyers are able to provide you with valuable bankruptcy advice.  In light of the recent changes made to bankruptcy law, an attorney will help you understand your rights and the consequences of your bankruptcy case.  If you decide to file a Chapter 7 or Chapter 13 bankruptcy petition, the advice and assistance of an experienced bankruptcy lawyer is generally a worthwhile expense

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