Table of Contents
- Credit Counseling 101: What It Is and Why It’s Required
- What Is Credit Counseling?
- Why Is Credit Counseling Required?
- What Happens During the Session?
- What’s a Debt Management Plan (DMP)?
- How to Choose an Approved Provider
- How Much Does It Cost?
- Common Misunderstandings
- Why This Step Matters
- How a Bankruptcy Attorney Near You Helps
- ReferU.AI Connects You with Experts
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In this blog post, we explore the essential role of credit counseling in the bankruptcy process, highlighting its mandatory nature for filers. Understanding what to expect during a credit counseling session can significantly impact your financial future, and a qualified attorney near you can help guide you through this critical step with confidence.
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Learn about credit counseling and its mandatory role in the bankruptcy process. This essential session helps you understand your financial situation and explore alternatives to bankruptcy. Connect with a bankruptcy attorney near you to navigate the requirements smoothly.
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Credit Counseling 101: What It Is and Why It’s Required
If you’re considering filing for bankruptcy, one of the first steps on your journey won’t take place in a courtroom—it starts with a credit counseling session. This isn’t just a helpful resource—it’s a mandatory requirement for most filers under federal bankruptcy law.
In this guide, we’ll explain what credit counseling is, why it’s required, what to expect during the session, and how a bankruptcy attorney near you can help you navigate it smoothly as part of your pre-filing plan.
💡 For every post in this series, scroll down to “Related Posts.”
What Is Credit Counseling?
Credit counseling is a short, educational session provided by an approved non-profit agency. Its purpose is to help you understand:
- Your financial situation
- Debt relief alternatives to bankruptcy
- How bankruptcy works and what it will (and won’t) do
The counseling session typically includes a budget review, a discussion of your income and expenses, and an assessment of whether a debt management plan (DMP) could work as an alternative to bankruptcy.
Why Is Credit Counseling Required?
Under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005, all individuals filing for bankruptcy must complete:
- One pre-filing credit counseling session within 180 days before filing
- One post-filing debtor education course (after your case begins)
This requirement ensures that filers have explored all available options and understand the consequences of bankruptcy before proceeding.
What Happens During the Session?
Most credit counseling sessions are conducted online or by phone, and typically take about 60 to 90 minutes.
Here’s what’s covered:
- Your income and household expenses
- Your debts and creditor obligations
- Budgeting tips and financial planning basics
- Overview of bankruptcy and debt management plans
You’ll receive a certificate of completion, which your attorney must file with your bankruptcy petition. Without it, your case could be dismissed.
What’s a Debt Management Plan (DMP)?
In some cases, the agency may suggest a DMP—an agreement where you make structured payments to repay your creditors over time (often with reduced interest). However, you’re not required to enroll in a DMP to proceed with bankruptcy.
Your counselor must provide a neutral recommendation—some people benefit from DMPs, while others clearly need the legal protections that bankruptcy provides.
How to Choose an Approved Provider
The U.S. Department of Justice maintains a list of approved credit counseling agencies. Not all providers are reputable, so stick with an agency from this official list.
A bankruptcy attorney near you can also recommend trusted local providers they’ve worked with in the past.
How Much Does It Cost?
Credit counseling is relatively affordable—typically $20–$50 depending on the provider. Some agencies may waive the fee if you’re unable to pay, especially if you’re on a low income.
Common Misunderstandings
- “This is just a sales pitch.” No—it’s federally regulated and must be unbiased.
- “I can skip this if I know I’m filing.” No—it’s mandatory before filing.
- “I have to follow their advice.” No—you’re not obligated to accept a DMP or any plan suggested.
Why This Step Matters
While it may feel like a bureaucratic hoop, credit counseling provides important value:
- Helps you take stock of your finances
- Identifies alternatives (even if you don’t use them)
- Ensures your bankruptcy filing meets all legal requirements
It’s a short step that can save you time, confusion, and even case dismissal.
How a Bankruptcy Attorney Near You Helps
A bankruptcy lawyer near you will:
- Explain credit counseling requirements
- Connect you with a reputable provider
- Ensure your certificate is filed correctly
- Answer questions about the content of your counseling session
ReferU.AI Connects You with Experts
ReferU.AI connects you with a bankruptcy attorney near you who understands every step of the process—from counseling and budgeting to final discharge. Don’t risk delays or errors—get expert help and file with confidence.
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