A debtor thinking over the possibility of filing for bankruptcy should pay maximum attention to any changes in the bankruptcy law. According to the last important amendment, starting from October 17, 2005, an individual must receive credit counseling from a company approved by the government at least six months before filing for bankruptcy protection.
We strongly suggest you consult a credit counseling bankruptcy lawyer since only a professional is able to make you aware of your legal alternatives and rights.
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Credit counseling organization representatives are able to consult their customers on the following subjects:
-- Managing Debts
-- Managing Money
-- Educational Materials
-- Developing a Budget
-- Workshops
A list of government-approved credit counseling companies, arranged by their location (the state they are working in), is available at the site of the U.S. Trustee Program. This organization operates within the U.S. Department of Justice, which, in its turn, ministers to bankruptcy cases. The U.S. Trustee Program has temporarily forgone the credit counseling requirement for debtors filing for bankruptcy in the Southern District of Mississippi and Louisiana after Hurricane Katrina.
Credit counseling requirements. As a rule, the customers are advised on managing debt and money, and on improving their budget. Generally, a good credit counseling company will provide its clients with free educational information and workshops. According to the new bankruptcy law, the credit counseling can be held personally, online, or on the phone as well. The credit counseling session usually lasts for about 90 minutes - and almost always includes the analysis of the consumer's budget. Fees charged by the credit counseling organizations for their help vary from state to state. They depend on services rendered and the administrative costs of the credit counseling company. In the great majority of cases, the fees for the services of a CCC turn out to be quite reasonable. The amount charged may be up to $50, but can go even higher due to certain peculiarities of the factors stated above. Credit counseling companies named in the U.S. Trustee's list refrain from charging fees to those who cannot afford to pay because of certain financial hardships. As soon as the counseling session is complete, a consumer must get a document proving the fact that he/she really did receive credit counseling assistance. One should check the U.S. Trustee website to make sure he got the right certificate for the bankruptcy court he'll be filing for bankruptcy in. It's also possible that some credit counseling companies will charge additional fees for the certificate given.
Credit counseling companies may also suggest a debt management plan (DMP) and discuss it with their customers. According to a DMP, a client transfers a certain sum of money into the credit counseling company's account monthly. The credit counseling organization, in its turn, uses these deposits to repay the client's credit card bills, unsecured debts, medical bills, student loans, etc according to the schedule that the organization and the creditors agreed upon. Creditors may also reduce interest rates and lower some fees in case the client pays off his/her debts with the help of a DMP. A DMP is not necessary for those debtors who file for bankruptcy. However if they still decide to use a DMP, they will have to provide a copy of it in the bankruptcy court for the judge to use it during the hearing.
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