Mandatory Busywork – Required Courses to File Bankruptcy and to Get Your Discharge


Almost exactly ten (10) years ago, the 109th Congress enacted and then-President George W. Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). Bought and paid for by the credit card companies as a means to increase their already lucrative profit margins, BAPCA made significant changes to the United States Bankruptcy Code. Parties to bankruptcy proceedings and the bankruptcy courts themselves are still trying to figure the meaning of certain passages in this ten year old law. This should give you some idea of how poorly drafted and confusing this “reform” really was.

But two things, at least, are very clear. Both before and after filing their bankruptcy petitions, consumers are required to participate in counseling sessions, with very, very limited exceptions. I want to review these requirements for the benefit of anyone who is considering filing for bankruptcy protection under either Chapter 7 or Chapter 13 bankruptcy. (Click here for my article about the difference between the two Chapters).

Prior to filing a bankruptcy, a consumer must complete a briefing session from approved nonprofit budget and credit counseling agency. Otherwise, you are not eligible to file the bankruptcy petition at all. The session must be completed within 180 days before the petition is filed. If the consumer takes the session and does not file their bankruptcy within the next 180 days, they must re-take the class and get a new certificate stating the new completion date. For a list of all of the credit counseling agencies approved by the United States Trustee Program, click here.

The counseling session may be completed over the telephone or over the internet, although your research will lead you to the obvious conclusion that internet-based sessions are much less expensive. If you want to, some agencies will allow you to come to their office for the required briefing. The session is normally conducted in English, but agencies will accommodate virtually any language the consumer desires. Agencies can also waive their fees in cases they deem true hardship cases.

The session is normally sixty (60) minutes in length or less. In an emergency case, the agency can provide the required counseling immediately.

The briefing typically consists of a review of the a budget detailing the consumer’s income and applicable expenses. If there is a viable means of addressing the consumer’s financial difficulties other than filing for bankruptcy protection, such as a debt management plan administered by the agency, then the agency must attach the proposed debt management plan to the certificate of completion.

The only exception to the requirement is when the consumer is incapacitated (so impaired by mental illness as to be incapable of realizing and making rational decisions regarding financial responsibilities), disabled (so physically impaired as to be unable after a reasonable effect to participate in an in-person, telephonic or internet based briefing) or serving in an active military role in a combat zone. The consumer may request a deferred briefing after filing, but this requires a showing that the consumer requested a briefing from an approved agency, but was not able to obtain the certificate of completion within seven (7) days. This is not a wise course of action, as the widespread availability of the credit counseling sessions means this is an uphill battle.

Similarly, but only after the petition was filed with the Court and the bankruptcy case number assigned, the consumer must participate in a second briefing, an authorized education session. The deadline for filing this certification is no later than sixty (60) days after the first date set for the “first meeting of creditors” in a Chapter 7 case. The first meeting of creditors is normally the only court appearance for the consumer, and requires that the consumer answer questions under oath in front of a bankruptcy trustee. For Chapter 13 debtors, the deadline is the date of the last payment made by a debtor as required by the confirmed plan.

Exceptions for this requirement are similarly limited. The disability, incapacity and active military duty exceptions apply. If the debtor has passed away, or is incarcerated with no dial-out phone or internet access, the court may waive the filing of the certificate upon motion.

Course content normally includes budget development, money management, wise use of credit, and available consumer resources for assistance with budgeting. If the certificate of completion is not filed in a timely manner, the Court will close the case with no discharge of debt entered. The consumer can later file a motion to re-open the case, for the purpose of filing the completion certificate, but this requires additional expenses for the filing fee, as well as photocopy charges and postage for notifying all creditors, and attorneys’ fees.

The requirements for both pre- and post- filing certificates are found in section 109(h) of the Bankruptcy Code. While they are mandatory, the author finds them nearly worthless in terms of “preventing” a bankruptcy filing through creating wise consumers. This is because the overwhelming majority of bankruptcy filings are due to uninsured medical costs, divorce of separation, death of a spouse, unemployment and business reversals. Despite Congressional mandates, no amount of “education” can eliminate these basic facts.

You can call me at 216-642-8234 to schedule an appointment to discuss bankruptcy options, and I will make sure that you have all the information you need to complete both the pre- and the post- filing briefing sessions at the lowest possible cost to you (presently less than $10 per session per consumer). In the meantime, you can call your congressional representative and thank them for bowing down to the credit card industry, needlessly adding to the time and expense required for the unfortunate consumer to get their fresh start.

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