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What classes do you have to take to finish a bankruptcy?

This entry was posted on Tuesday, January 14th, 2014.

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.

http://www.justice.gov/ust/eo/bapcpa/ccde/de_approved.htm

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.

What kinds of debts cannot be discharged through bankruptcy?

This entry was posted on Monday, December 16th, 2013.

Most debts a person may have are dischargeable. However, there are important exceptions. These are some examples. Most student loans are not dischargeable. Child support and alimony payments are not dischargeable. Criminal fines, costs and restitution are not dischargeable. Most taxes are not dischargeable. Personal injury debts for an accident caused while intoxicated are not dischargeable. Condo or co-op fees may not be dischargeable. There are more debts that are not dischargeable, and these just examples. Always ask if a debt is dischargeable or if there is a way to get a debt discharged.

What kinds of bankruptcy are there?

This entry was posted on Monday, December 16th, 2013.

The most common type of bankruptcy is generally called a “chapter 7” bankruptcy. It is also called “liquidation.” It allows an individual or a company to discharge all of their debts (with some exceptions) at once. It also requires the bankruptcy court to take all available property and sell it to pay the debts that a person owes. However, property that is considered exempt is not sold, but is protected under the law. An example of protected property in a homestead exemption (in Washington State that exemption is $125,000).

The second most common type of bankruptcy for individuals is called a “chapter 13” bankruptcy. This is called sometimes called a “wage-earners” bankruptcy. It essentially requires that a person set up a plan to pay back the people they owe money to over a 3 or 4 year period, but not all the money they owe. In most cases, none of the wage earner’s property is taken, even if it is not exempt.

Most people that have to do a bankruptcy, try to do a “chapter 7” bankruptcy. However, some people that make too much money are not eligible because of something called the “means test.” The “means test” basically means that if you and your household make over the median income for the area that you live in, you cannot file a “chapter 7,” and you must file a “chapter 13.”

What is bankruptcy?

This entry was posted on Monday, December 16th, 2013.

In the U.S., bankruptcy is set of Federal laws and rules that allow individuals and companies to get rid of or “discharge” most types of debts. The laws are found under Title 11 of the U.S. Code.