Bankruptcy School and You

When you finally admit to yourself that your debt load is just too overwhelming to deal with, you may decide to declare a chapter 7 bankruptcy. You can, with a single federal filing, make the vast majority of your debt and the harassing phone calls that come with it simply disappear in a matter of months. You might be surprised to find, however, that you must now do some school work before you can have this handy form of debt relief become final. Read on to learn more about the two main educational requirements for a chapter 7 bankruptcy filing.

Why these classes exist

The bankruptcy code underwent a vast adjustment in 2005 in an effort to cut down on the incidences of repeat filers. Many people, it seemed, just never got the hang of handling their finances and continually showed up in bankruptcy court. One of the many changes the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 heralded was a new requirement for filers to take some classes. These two classes are meant to help consumers improve their financial knowledge and adjust some bad habits and as well as prove that they really had a need for a bankruptcy filing in the first place.

The credit counseling class

This is the first of the two required classes, and it is less a class than it is a test. This involves the preparation of a budget based on your actual financial situation at the time of preparation. Here you will list your income and all of your financial obligations in an effort to show, on paper, exactly how dire your financial situation is.

Do not take filling out this form lightly; if your budget makes it appear that you can pay your bills without filing for bankruptcy, you may be barred from a filing. Your budget is submitted to a federally approved bankruptcy credit counseling agency for review and approval, and you must have that approval before your bankruptcy can be finalized. You must take this "class" before you file for bankruptcy, but it may be taken up to 180 days prior to filing.

The personal finance class

This class is meant to educate filers about budgeting and financial matters so that better choices can be made in the future. You will eventually have access to credit again, and it's important that you make better choices about credit, emergency savings, budgeting and more.

To learn more about these educational requirements and other steps of the bankruptcy process, speak with your bankruptcy attorney like Patrick D. Riley.


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