What Is a Bankruptcy Certificate?
A bankruptcy certificate is a document that proves that you have completed credit counseling and a debtor education course, both of which are required steps in bankruptcy.
You will need a bankruptcy certificate showing that you have completed the credit counseling before applying. After filing for bankruptcy, you will need to enroll in a debtor education course and obtain a different bankruptcy certificate as proof.
In this article, we'll cover the pre-bankruptcy credit counseling and pre-discharge education requirements that are required when seeking bankruptcy protection.
We will also discuss where to find companies that are authorized to issue bankruptcy certificates for credit counseling and education requirements. Finally, we will explore what to look for in a bankruptcy counselor.
Definition and examples of bankruptcy certificate
Bankruptcy is a legal process that can give you a fresh start when you are burdened with debt.
But before applying for personal bankruptcy protection, you should go through a credit counseling.
You must also complete a debtor education course before a court can release you from liability for your debt.
Both are required by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The requirements are the same for Chapter 7 liquidation and Chapter 13 reorganization, which are the two main types of personal bankruptcy.
You will not be able to complete the debtor education and counseling course at the same time. Credit counseling takes place prior to filing, while the debtor's education course for a second certificate is scheduled after filing.
How Bankruptcy Certificates Work
Only credit counseling companies and debtor education courses approved by the US Trustee Program can issue bankruptcy certificates. The exception is if you live in Alabama or North Carolina because the US Trustees Program does not operate in those states.
If you live in Alabama or North Carolina, you will need to find a credit counseling service and a debtor education course approved by your bankruptcy administrator for your judicial district.
What Happens During Credit Counseling?
When you meet with a credit counseling service, your counselor will help you assess your financial situation and whether bankruptcy is right for you. The service must address the details of your financial situation and the factors that led to it. They are also required to provide a plan for managing your finances that will not put you in more debt.
After completing the credit counseling, you will receive your certificate, which is valid for 180 days.2 If you decide to file for bankruptcy, you will include the certificate in your petition.
What happens during the debtor's education course?
After filing for bankruptcy, you will need to complete the debtor education course. The course will cover budgeting, money management, and how to use credit wisely. Upon completion, you will receive a bankruptcy certificate that you must file with the bankruptcy court in order for your debts to be discharged.
The course provider can present the certificate to the court on your behalf, but is not required to do so. If it is not sent directly to court, you must file it yourself with the court.
Requirements for bankruptcy certificates
A credit counseling session typically lasts 60 to 90 minutes. It can be completed in person, over the phone, or online. The typical fee for credit counseling is around $ 50.
A debtor education course takes about two hours to complete, and you can also complete it in person, over the phone, or online. Typically the cost is $ 50 to $ 100.
All fees related to the credit counseling service and the course of debt must be disclosed in advance. No provider can charge you for a bankruptcy certificate unless they have notified you of the fee before the service.
If you cannot afford the cost of any of the services, request a waiver. Generally, you will qualify if your household income is less than 150% of the federal poverty level. Agencies are obligated to provide the service for free if you cannot afford it.
What to Look for in a Bankruptcy Counselor
If you have met with an attorney and are confident that you are going to file a lawsuit, the counseling session is likely just a formality.
But if you are evaluating your options, ask a potential advisor if your organization offers other services, such as a debt management plan.
Also, ask what the advisors' credentials are and how they will keep your personal and financial information safe.
It is essential that you find a counseling service approved by the US Trustees Program or your local bankruptcy trustee to obtain your bankruptcy certificate.
You can find a list of approved credit counseling services and debtor education course providers on the US Department of Justice website.
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