Chapter 13: Credit Counseling and Debtor Education Information
In 2005, new bankruptcy laws required potential bankruptcy individuals to be involved in courses educating and informing them of their financial options. Before an individual files for a Chapter 13 or Chapter 7 bankruptcy, he or she must receive credit counseling from an approved agency. In addition, before a bankruptcy is discharged, the individual must attain a personal finance management course known as debtor education.
Credit Counseling Information
The purpose of credit counseling is to assist an individual’s evaluate his or her financial options and to determine if he or she can repay debts through a repayment plan without filing bankruptcy. In credit counseling, the individual will usually provide information regarding his or her income, expenses, and debts. The counselor then evaluates the information and proposes a repayment plan.
Debtor Education Information
Debtor education information is meant to instruct individuals to be responsible with their finances. The education is meant for the individual to learn from his or her mistakes and never be in the postion to file bankruptcy again. A debtor education course will usually provide tips in developing a budget, managing finances, using credit responsibly, and how to deal with financial emergencies.
Credit Counseling and Debtor Education Rules
Below you will find in-depth information from the U.S. government on credit counseling and debtor education requirements for Chapter 13 bankruptcy filers. These requirements came about as a result of changes in bankruptcy laws that took effect in October of 2005. This page will be updated as new information on bankruptcy filing requirements and procedures becomes available.
As part of the new bankruptcy laws, people wishing to file for bankruptcy (under Chapter 7 or Chapter 13) must now complete a credit counseling program before they will be allowed to file a bankruptcy petition. In addition, bankruptcy filers must obtain debt management counseling before being allowed to complete the bankruptcy process. In order to comply with these credit counseling and post-discharge debtor education requirements, filers must work with agencies that have been approved by the U.S. Trustee Program (a branch of the U.S. Department of Justice that is responsible for overseeing bankruptcy cases).
Below are links to information on credit counseling and debtor education, and two lists of agencies that have been approved by the U.S. Trustee Program -- the first a list of agencies that provide pre-filing credit counseling to those wishing to file for bankruptcy, and the second a list of agencies that offer post-discharge debtor education to people who are completing the bankruptcy process. The third link below includes tips on choosing a credit counselor, from the Federal Trade Commission (FTC).
- Credit Counseling and Debtor Education (U.S. Trustee Program)
- Approved Credit Counseling Agencies (U.S. Trustee Program)
- Approved Debtor Education Providers (U.S. Trustee Program)
- Choosing a Credit Counselor (FTC)
On April 15, 2013, the Executive Office for U.S. Trustees (EOUST) announced new policies on credit counseling and debtor education requirements. The list below is some notable new rules.
- Quality - The quality of counseling must be consistent whether the debtor takes the course on the Internet, in person, and over the phone. In addition, the counseling must not be generic but individually specific to the debtor.
- Fees - Credit counseling agencies and debtor education information providers must charge a reasonable fee that is $50 or less. An individual’s income that falls 150% below the poverty line is eligible for a fee waiver.
- Testing – If an individual takes the course over the phone or Internet, they will have to take a test before completion of the course. An instructor must contact the individual if he or she cannot score 70% or higher on the test.