Credit Counseling

Bankruptcy laws are constantly changing. One of the most recent modifications was made in 2005 by the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). A New York bankruptcy attorney who is familiar with bankruptcy law should be contacted by anyone considering filing for bankruptcy as this new law contains many new requirements. One such requirement imposed by BAPCPA states that any new bankruptcy debtor must receive credit counseling from an approved credit counseling agency before the bankruptcy filing.

Briefing

BAPCPA specifically states that a debtor has to receive an “individual or group briefing” from a nonprofit budget and credit counseling agency within 180 days before filing for bankruptcy. The briefing can be in person, by telephone, or via the Internet. The law states that the briefing must outline all of the opportunities for available credit counseling and help the debtor perform a related budget analysis. If the counseling results in the development of a debt management plan, it has to be filed with the bankruptcy court. 

Approved Agencies

In most states, a list of approved credit counseling agencies for use in state court districts is kept by the United States trustee. The list of approved agencies is also available on the Internet Approved Credit Counseling agencies. At first, an agency is on the list for a six-month probationary period. Approval is then renewed in one-year increments and can be revoked at any time.

An agency must meet several criteria before it can be approved as a credit counselor. Among other things, an agency must:

  • Have qualified, experienced counselors who provide adequate counseling and have no financial interest in the counseling outcome.
  • Handle client funds securely.
  • Maintain an independent board of directors.
  • Charge reasonable and sliding scale fees.
  • Possess financial security to oversee repayment plans of clients.

Exceptions to the Credit Counseling Requirement

There are a few situations in which the counseling requirement is waived. One exception occurs when the debtor is incapacitated by mental illness or deficiency, is physically impaired such that he or she is unable to participate with reasonable effort, or is on active military duty in a combat zone. A debtor may also be excused by the court if there are “exigent circumstances” and the debtor requested counseling that an agency was unable to provide within five days. Another situation when counseling may not be required is when a proper legal official has determined that no approved credit counseling agency is available.

Conclusion

Anyone considering filing for bankruptcy should bear in mind that the required credit counseling must take place before the actual filing. Thus, information about the counseling and about bankruptcy in general should be sought from experienced NY bankruptcy lawyer Michael H. Schwartz, P.C.