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What Must Be Done To Be Eligible To File Bankruptcy?
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A person must go through budget and credit counseling from an approved credit counseling agency within 180 days
before your bankruptcy case is filed. The agency will review possible options and assist in reviewing a person’s budget. Agencies may provide the counseling in person, by telephone, or even over the internet. If you decide that bankruptcy is necessary, you must have a certificate from the counseling agency showing that you received the counseling before your bankruptcy case was filed.
Most approved agencies charge between $30 $50 for the pre filing counseling. However, the law requires approved agencies to provide bankruptcy counseling and the neces¬sary certificates without considering an individual's ability to pay. If you cannot afford the fee, you should ask the agency to provide the counseling free of charge or at a reduced fee.
If a person elects to go ahead with bankruptcy, he or she should carefully choose an agency for the required counseling. It may be difficult to sort out a good counseling agency from the bad ones because many agencies are legitimate, but many are simply rip offs. Even signing up with an "approved" agency for bankruptcy counseling is no guarantee that the agency is good. It is also important to understand that even a good agency will not be able to help with some financial trouble.
The approved agencies offer debt management plans (called DMPs). A DMP is a plan to repay some or all of your debts. You send the counseling agency a monthly payment and they send it to your creditors. Debt management plans may help for some consumers, but for others they are a terrible idea. The problem is that many counseling agencies will pressure you into a debt manage¬ment plan as a way of avoiding bankruptcy whether it makes sense for you or not. You should not consider a debt management plan if making the monthly plan payment will mean you will not have money to pay your rent, mortgage, utilities, food, prescriptions, and other necessities. Some important points are:
- Bankruptcy is not necessarily to be avoided at all costs. In many cases, bankruptcy may actually be the best choice for you.
- If you sign up for a debt management plan that you can't afford, you may end up in bankruptcy anyway (and a copy of the plan must also be filed in your bankruptcy case).
- There are approved agencies for bankruptcy counseling that do not offer debt management plans.
It is usually a good idea for you to meet with an attorney before you receive the required credit counseling. Unlike a credit counselor that may not give legal advice, an attorney can help determine whether bankruptcy is the best option. If bankruptcy is not helpful, a good attorney will offer a range of other suggestions. The lawyer may also provide a list of approved credit counsel¬ing agencies, or you can check the website for the United States Trustee Program office at
www.usdoj.gov/ust for a list of approved agencies.
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