Electing to declare bankruptcy is a big decision that carries long-lasting consequences, but sometimes it is the only way to manage your overwhelming debts. One of the biggest negative impacts of declaring bankruptcy is that it will reduce your credit score, which means that you will have a more difficult time acquiring credit in the future and you will likely be lent money at a higher interest rate because you will be considered to be a higher risk investment than someone who has not declared bankruptcy. But the benefits to filing for bankruptcy might outweigh the disadvantages. Bankruptcy can allow you to wipe out debts, get your finances in order, and can put you on the road to a fiscally responsible plan for dealing with your debt.
Pre-Bankruptcy Counseling Is the First Step
If you are considering filing for bankruptcy, regardless of what type of bankruptcy you seek, the first thing that you must do is that you must participate in a pre-bankruptcy credit counseling session and obtain a bankruptcy certificate, in accordance with 11 U.S.C. Section 109(h). The purpose of the counseling is to help you determine whether bankruptcy is the right course of action for you and to see if there are other ways for you to handle your debt obligations besides bankruptcy. The counseling session must be conducted between yourself and a credit counseling agency that is approved to do pre-bankruptcy credit counseling by the U.S. Trustee Program. It is important to make sure your counseling is with an approved provider.
What To Expect From Pre-Bankruptcy Counseling
Each person’s pre-bankruptcy counseling session is specific to their financial situation, but for the most part all counseling sessions follow the same general format. Sessions can take place in person, over the phone, or over the internet and are generally under two hours long. An approved counselor will work with you to assess your personal financial situation, and will discuss all of the alternatives to bankruptcy that are available to you. Additionally, your counselor will help you develop a budget plan that suits your needs. Under 28 C.F.R Section 58.21(a), fees for credit counseling services must be reasonable, and the cost for your counseling session should be around fifty dollars, but for those who cannot afford to pay, if you meet certain criteria you may be eligible for free services by filing a waiver.
Getting Your Bankruptcy Certificate
You will receive a bankruptcy certificate within one business day of completing your counseling, in accordance with 28 C.F.R Section 58.22(c). The bankruptcy certificate indicates that you have successfully participated and completed your credit counseling and the certificate is valid for 6 months. You will need to file the certificate as part of your bankruptcy filings if you choose to proceed with bankruptcy proceedings. If you lose your certificate, or it is destroyed, you can obtain a replacement by contacting your counseling agency. Additionally, those who are considering filing for bankruptcy jointly may partake in the same counseling session, but each must receive individual counseling and a separate bankruptcy certificate.