Bankruptcy law requires that you take two classes before you are done with your bankruptcy.
You must take one class before you start the bankruptcy. It is usually called credit counseling, and you have to file a document when you start your case with bankruptcy court showing that you did the class.
After you start the bankruptcy, you must then take another class usually called a course in personal financial management or debtor education, and you have to file proof that you completed the class.
Both classes are run by private, non-profit companies that are approved by the U.S. Trustee Program (which is part of the Federal Department of Justice). The U.S. Trustee Program has a website that lists the agencies that give the classes. Usually, the classes are either done over the telephone or online. There are agencies that provide the classes in Spanish and other languages, and they are also listed on the U.S. Trustee Program website. This is a link to the website that lists the private companies that are approved to provide the classes.
The cost for the classes vary, but the classes are between $40 to $10, or even less. More importantly, the classes can be free if you qualify. You should ask the agency you are working with to see if they will not charge you a fee for the class. They will have you fill out an application. If you earn less than 150% of the poverty line, you are entitled by law to a reduction of the fee or elimination of the fee. The agency will have to
talk to about the fees, costs and assistance with you before starting the classes.
The pre-filing class (credit counseling) is valid for 180 days, so you have to take the class less than 180 days before you file for bankruptcy for the certificate to be good. If the certificate is older than 180 days, you can take the class again, so the certificate will be good for another 180 days. During the class, you will need basic financial information about yourself, such as your income, your debts, your expenses and your assets. The class lasts around 60 minutes to 90 minutes.
The pre-filing class (credit counseling) also talks about something called a “debt repayment plan” or a “debt management plan.” A debt management plan is an arrangement in which a debtor pays a set amount each month to a credit counseling agency. The credit counseling agency then sends that money to the creditors who have agreed to the plan. These plans last about 36 months to 60 months. They are done outside of court. You do not have to do the debt management plan. Many times, they are not a good idea to do, so talk to a professional, such as an attorney, before you decide to agree to a debt management plan.
The post-filing class (financial management course) takes about 2 hours to complete. It is not the type of course that you can fail if you take the course. The financial management course must be completed within 60 days of the meeting of creditors in a Chapter 7 (called the “341” hearing).
You should also ask the agency that you take the financial management course if they will file the proof that you completed the course on their own. There is a new rule that gives them the ability to file proof directly on your behalf. However, they will need the case number for your case. If they have notified the bankruptcy court that you completed the course, you should not file the form (form 23) certifying that you completed the course.
In some circumstances, a person filing for bankruptcy can ask to be excused from taking the classes. A military person on active duty in a combat zone can be excused from taking the classes. A person that is disabled mentally can be excused if that person cannot make rational decisions about their finances. A person that is physically disabled can be excused if they cannot attend a class on the internet, on the telephone or in person, after a reasonable effort. The bankruptcy court would need to have a hearing to decide if a person should be excused from taking the courses.
A person that has a valid power of attorney can take the classes on behalf of a person, if the power of attorney is valid under the laws of the state that the person filing bankruptcy resides in. The power of attorney must also give the person that has the power of attorney the right to file a bankruptcy for the other person. The certificate of completion of the course should list both debtor and the person that has the power of attorney. An example of someone that this might be useful for is someone in prison.
You can use the same company for both the class before filing the bankruptcy, and the class after you take the bankruptcy.
These classes are not intimidating, and you should not be worried about them. They are one of the easiest parts of filing a bankruptcy.