Credit Counseling Requirement Can Prevent Same Day Filings

One of the many changes to the Bankruptcy Code in 2005 was the implementation of two mandatory financial education courses that Chapter 7 bankruptcy and Chapter 13 bankruptcy filers are required to take.

The first course, often referred to as the “Credit Counseling” requirement, must be completed within 180 days beforethe filing of a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. The second course, called the “Debtor Education” or “Financial Management” requirement, must be completed depending on your jurisdiction within 28 days to 60 days after one’s 341 Meeting of the Creditors. Recently, there has been a national trend of rulings amongst bankruptcy judges regarding the former Credit Counseling course and effectively preventing “same-day filings”.

“Same day filings” occur when a with a client hires a bankruptcy attorney the same day that attorney files their Chapter 7 or Chapter 13 bankruptcy case for them. This situation occurs often when a client has an urgent financial matter. Such urgencies typically include pending real-estate foreclosure sales, vehicle repossessions, body attachments, judgments and garnishments. The bankruptcy judges’ ruling that is becoming all-the-more common is the interpretation of the time-frame of when a filer’s Credit Counseling course must be completed.

The Bankruptcy Code states that a filer’s Credit Counseling course must be completed within “180 days before” the filing of their bankruptcy case. More and more bankruptcy judges are now interpreting this language to mean that a filer’s Credit Counseling course must be completed within 180 days literally before the filing of their Chapter 7 or Chapter 13 bankruptcy, and not including the actual day of the bankruptcy filing.

The consequences of filing a case where a Credit Counseling course has been completed on the same day of a bankruptcy filing is in most cases complete dismissal of the filer’s Chapter 7 or Chapter 13 bankruptcy. The bankruptcy filing is void as a matter of law, as if it was never filed. Unfortunately, the only practical course of action for the victims of this situation is the refiling of their bankruptcy and the repaying of the requisite filing fee.

In most situations when a client with an urgent financial matter seeking a same day filing walks into a bankruptcy attorney ‘s office, they have not yet completed their pre-filing Credit Counseling Course because they were unaware they needed to do so. Even with their bankruptcy attorneys’ direction to complete their Credit Counseling Course immediately, the fastest a client in this situation could get their bankruptcy filed would be the next calendar day. Often times this can be one day too late.

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