Chapter 13 bankruptcy is designed for people who have a lot of debt, but who are still earning some money. While the process is different from Chapter 7 bankruptcy in many ways, the two options share one thing in common: both require credit counseling before a person can file and before his or her debts are discharged. If Chapter 13 seems like your best option, it’s important to understand the counseling requirements and to make sure you comply with all the rules.
Credit counseling before you file for Chapter 13 bankruptcy might seem similar to other sorts of credit counseling. You and the counselor will discuss your options, including whether or not filing for bankruptcy is the best choice for you. During the counseling session, the counselor will review your current financial situation, including what you owe and what you earn, and will help you put together a budget. Typically, the counselor uses the information gathered during the session to either recommend bankruptcy or not and to put together a repayment plan for the bankruptcy. The process typically takes between an hour and an hour and a half and can be done over the phone, online or in person.
Once you’ve completed bankruptcy counseling, you have up to 180 days, or about six months, to file for Chapter 13. The counseling agency you worked with will send you a certificate to prove that you went through counseling.
After you file, but before your debts are discharged, you need to go through another round of credit counseling, sometimes called pre-discharge counseling or post-filing debtor education. The program is similar to pre-filing counseling, as you’ll discuss budgeting, but it will also cover topics like how to manage money and how to deal with debt. Post-filing education can take up to two hours and might cost more than pre-filing counseling. At the end of it, you’ll be given Official Form 23 and a certificate of completion.
When filing for Chapter 13 bankruptcy, post-filing debtor education should be completed before you make the final payment on your repayment plan. Once it’s done, you’re supposed to file your certificate and your Form 23 by or on the date you make the last payment. In many cases, early completion of the pre-discharge counseling works in your favor since it provides you with advice and help for budgeting and managing debt-- which you can then use while on the payment plan.
Picking an Approved Counselor
If you want your pre-filing and pre-discharge counseling to count, the company you work with needs to be approved by the US Department of Justice, which maintains a list of all the approved agencies by state. Along with being approved by the DOJ, you’ll want to work with an agency that uses trained and certified counselors and that isn’t out to make a profit off of you.
Credit counseling isn’t necessarily free, so don’t be alarmed by the fee charged by a counseling agency. In most cases, if you qualify and complete a waiver, the agency will remove the fee or charge you on a sliding scale basis.
Filing Chapter 13 bankruptcy can help you get a fresh start financially. Getting the help you need before and after filing will help you avoid the pain of too much debt in the future.
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Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.
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