BAPCPA Part 2: Credit Counseling/Debt Management Counseling

The Bankruptcy Code requires that potential consumer bankruptcy filers take a credit counseling course before filing.  The counseling must be taken with a counselor or counseling agency from an approved list that can be found at the Department of Justice website.  I always suggest checking the DOJ website as the approved counseling agencies vary by state  and the list of approved agencies changes.  The counseling can take place in person, over the phone or online.  The cost can vary from as low as $10 to $50 or more (unless you qualify for a few waiver), and that can largely depend on the method used to complete the counseling.  In person or phone counseling is typically more costly than internet counseling.   Once you have completed counseling, you will receive a certificate which will be valid for 180 days.  This means that you must file bankruptcy within that 180 days or that certification will lapse and you will have to take the counseling course again.  The purpose of credit counseling is to help you assess your financial situation and provide alternatives to a bankruptcy filing.  Debt/Financial management is taken after you file your case and requires that you have case number to provide to the counseling agency.  You can often take the course with the same provider who did your credit counseling and the provider may offer a discount for the debt management course.  Debt management must be completed within sixty days of your first scheduled 341 meeting, but can be taken as soon as your case has been filed and you have a case number.  Financial management counseling can help you create a budget, give you tips about how to use credit responsibly and help you manage your money.

Right after the implementation of BAPCPA in 2005, a number of credit and debt counseling agencies cropped up offering services.  Because this was was a completely unknown and new element of bankruptcy there were a lot of hits and misses.  Some courses were to long.  Others not accessible to folks in rural locations.  Some quickly went out of business.  The number of in-person providers shrunk each year.  More and more clients were being encouraged to use services online.

I am not a fan of credit counseling.  I don't believe it's effective.  I have yet to have a casual consultation about bankruptcy.  By casual, I mean a person ho comes in curious about bankruptcy who has explored no other options first.  Typically, I don't see someone until they have explored every option.  Even thought I'm not a fan, I do suggest that potential clients take credit counseling before retaining an attorney or giving an attorney any money. Credit counselors are there to give alternatives, and I take the position that they should be allowed to do their job.  If they have a workable solution for a client, the client should explore that before filing.  However, I have yet to get a call that a client has decided not to file because credit counseling provided a solution.

While I dislike the credit counseling provision in BAPCPA, I quite like debt management.  In part, because it comes after filing, my clients don't find it to be another stressful thing they have to tick off their list of things to do.  I get mostly positive reviews about debt management.  Clients are provided with tools that will help them moving forward, and information that they didn't know when they first started accumulating debt. 

Regardless of my opinions, both of these courses are requirements to successfully receiving a discharge in Chapter 7 or 13 bankruptcy. It's a few hours total of your time and given the benefits of a bankruptcy discharge it's well worth the time.