The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) is considered to be one of the most radical bankruptcy reform laws. Among the sweeping changes ushered in by BAPCPA included a requirement for individual debtors seeking Chapter 7 or Chapter 13 bankruptcy relief to complete both a credit counseling course prior to filing bankruptcy and a personal financial management course post-filing, prior to receiving a discharge.
Section 109 of the Bankruptcy Code provides that “an individual may not be a debtor under this title unless such individual has, during the 180-day period ending on the date of filing of the petition by such individual, received from an approved nonprofit budget and credit counseling agency described in section 111(a) an individual or group briefing (including a briefing conducted by telephone or on the Internet) that outlined the opportunities for available credit counseling and assisted such individual in performing a related budget analysis.” In other words, debtors must complete an approved credit counseling course within the 180-day period prior to filing their case. Pre-bankruptcy credit counseling focuses on a debtor’s income and existing financial obligations. The goal is to provide debtors fair and balanced credit and budget counseling in order to determine whether or not filing for bankruptcy relief is the best alternative. Upon a debtor’s decision to file for bankruptcy, a certificate of completion of the program must be filed with the court to prove satisfaction of the requirement. Failing to complete credit counseling and filing the certificate of completion is grounds for dismissal of the debtor’s bankruptcy case.
After filing, debtors must also satisfy the requirement for completing a debtor education course prior to receiving a Chapter 7 or Chapter 13 bankruptcy discharge. This personal financial management course requirement is separate from and in addition to the credit counseling requirement in bankruptcy. Chapter 7 debtors typically complete the course within 65 days of the first date set for their 341 Meeting of Creditors and Chapter 13 debtors must complete the course prior to making their last Chapter 13 plan payment. In our district, the Eastern District of North Carolina, Chapter 13 debtors are able to satisfy the requirement by attending a financial management course that meets immediately before their 341 Meeting of Creditors. According to Section 111 of the Bankruptcy Code, a debtor education course must “provide adequate counseling with respect to a client’s credit problems that includes an analysis of such client’s current financial condition, factors that caused such financial condition, and how such client can develop a plan to respond to the problems without incurring negative amortization of debt.”Debtors will be educated on how to budget and manage their money and how to use post-bankruptcy discharge credit wisely. Once completed, a certificate of completion must be filed with the court to avoid dismissal.
To successfully receive a Chapter 7 or Chapter 13 discharge, debtors must complete both a pre-bankruptcy filing credit counseling course and a post-filing debtor education course. To view a list of approved credit counseling agencies and financial management courses for the Eastern District of North Carolina, click here. For debtors filing with the Sasser Law Firm, a computer is available at our office for your use in completing both courses. If you have any questions regarding these requirements, please do not hesitate to contact our office.