TWO COURSES AND NO DESSERT
A consumer bankruptcy filing involves a flood of forms, papers and procedures. To the uninitiated, it can be difficult to understand why each of these components is important, or if they have an actual purpose.
After filing a bankruptcy case your mailbox will have fewer
bills, but you’ll instead get notices about hearings and meetings, objections
to one thing, and notice of requirements to do another thing. Some of these items are from lawyers – either
yours or someone else’s – and others could be from the Trustee or Clerk of the
Bankruptcy Court. The Bankruptcy Court
Clerk will probably send you something called a “NOTICE OF REQUIRMENT TO FILE A
CERTIFICATION ABOUT A PERSONAL FINANCIAL MANAGEMENT COURSE (Official Form
423).” That sounds an awful lot like the
“credit counseling” that you did before you filed your bankruptcy case. You could also get other menacing notices in
the mail that say things like “NOTICE OF FEDERAL REQUIREMENT,” maybe adding the
words “SECOND NOTICE” or “FINAL NOTICE.”
Some of these are just advertisements disguised as official
notices. What is all this about?
Most people who file a bankruptcy case want to do whatever
is needed for the case to be successful, but it can be a challenge to figure
out what is actually required, and how and when to do it. Part of the problem is the “help” that is
offered, which takes the form of multiple notices from various parties, all
worded slightly differently. Are these
notices all about the same thing, or several different things? Figuring out the “Credit counseling” requirements
is often the cause of confusion.
Remember these 13 words about credit counseling: “You
must take two courses: One before you file, one after you file.”
Sadly, neither course includes dessert.
Let’s look separately at each, referring to them as the
First Course and the Second Course.
FIRST COURSE
“Why do I need credit counseling?”: That’s a good question. The credit counseling course requirements
were added to the Bankruptcy Code in 2005.
Making credit counseling available isn’t a bad thing. But the rules now require everyone to take
the course in order to even be eligible to file a bankruptcy case. When you take the First Course, the focus
will be on how you got to this point, and your options for dealing with debt. This “one size fits all” approach means the
First Course is usually an inconvenient speed bump. If you just got your vehicle repossessed or
wages garnished due to a period of illness or unemployment, you already know exactly
how you got to this point, and a bankruptcy filing is often the only real
solution.
“Can I get out of doing this?”: Every individual must
take a credit counseling course and receive a certificate before filing bankruptcy. The only exceptions involve military duty in
a combat zone, or a mental or physical disability so serious that it would not
be reasonably possible to participate.
“How long do I have to wait to file after I finish the
counseling?”: You can file a bankruptcy case immediately after you receive
your credit counseling certificate. You must
file the credit counseling certificate in the bankruptcy case to prove that you
completed the course prior to filing the case.
“How long can I wait a while to file a bankruptcy case
after I do the credit counseling?” There
is no requirement to file a bankruptcy case, or to do anything else, after you
take the course. If you need some time
to consider your options, the credit counseling certificate is good for 180
days.
“If it’s an emergency, can I file a bankruptcy case and
do the credit counseling later?” No! The law is very strict on this. Filing a case without first taking credit counseling
will render you ineligible to file, and your case will almost certainly be
dismissed.
“Where do I go to do the counseling?” If you are filing the case with an attorney, you can probably do the counseling in the attorney’s office. Otherwise, the easiest way for most people will be by telephone or internet. A list of approved counseling providers is maintained here.
“How much does this cost?” Costs vary but should be
disclosed to you before you begin the course.
The going rate seems to be around $20 to $24. Individuals with low income will sometimes qualify
for a waiver of the fee.
“If I’m filing a case with my spouse, do we both have to
do this?” Yes, but you can both take
the counseling at the same time, for one fee.
At the end of the session you will each need to receive a
certificate.
“How long does this take?” An online course usually takes between 90 and
120 minutes. A typical course alternates
between presenting information for you to read, and asking you to provide
information about your assets and debts.
The actual time that it will take you to complete the course depends on
the speed at which you process and enter information, and the complexity of
your finances.
“How do I know when I’m done?” The counseling is not complete until
you have received a certificate. Do not
proceed with filing a bankruptcy case until you are sure that you have a
certificate showing the date and time you finished the credit counseling. The date and time shown on the certificate
must be before the date and time you file your bankruptcy case, but not more
than 180 days before filing.
“Who will see the information I provide to the credit counselor?” The information that you provide in the credit counseling course is not disclosed publicly and does not become part of your bankruptcy case.
SECOND COURSE
“What’s the point of this course?” The Second Course is called a “financial management
instructional course.” The idea is to
provide information to help you develop good spending and budgeting habits as
you exit bankruptcy.
“Can I take it at the same time as the First Course?” No.
The Second Course cannot be completed until after you have filed a
bankruptcy case.
“Do I have to take it before the meeting of creditors?” No. The
Second Course is required before you get a discharge in your case. For Chapter 7 filers that usually means you
have 60 days after the meeting of creditors to take the course. Chapter 13 filers can take three to five
years, depending on the length of the plan, but it is a good idea to get the
Second Course out of the way and not wait until the very end.
“Can I get out of doing this?” As with the First Course, you are only
excused from taking the Second Course if you are on military duty in a combat
zone, suffer from a severe mental or physical disability. If you pass away before you can complete the
course, your attorney and next of kin can ask the Court to waive the requirements,
if it is possible to conclude your bankruptcy case and receive a discharge.
“What happens if I don’t do it?” If you do not complete the second course, the
Clerk of Court can close your case without granting a discharge. That means the debts in your case will not be
wiped out. This can be cured by a motion
to reopen your case, but that can be time-consuming and expensive, and includes
a fee of at least $235.00 to the Clerk of Court for reopening the case.
“How much does it cost?”
As with the First Course, prices vary. At the low range, the course can be completed
for less than $10.00. Providers may
offer you “upgrades” but they’re often not necessary, and you can safely
decline those options. Again, if you are
below a certain income level, you may qualify for a fee waiver.
“How long does this take?” A typical online course takes between 60
and 90 minutes. There is usually a short
test at the end.
“How do I know when I’m done?” Once you have completed the course you
will receive a “Certificate of Debtor Education.” The provider will sometimes file this certificate
with the Court on your behalf. This might
be included in the price you paid for the course, or they may offer the service
at additional cost. Otherwise, you will
need the file the certificate, along with a one-page “Certification About a
Financial Management Course.” Your
attorney should be able to assist you in completing this form; if you represent
yourself, the form is available from the U.S. Courts web site at this link, “Official Form 423.”
“Does the Bankruptcy Court offer credit counseling?” Generally no, though some Courts may make space
available for in-person counseling sessions.
The courses are typically offered by third-party providers.
“Then why am I getting notices from the Court about it?” The Clerk of Court will often send you one
courtesy reminder about the need to take the course.
“I already took both courses but I keep getting
reminders? Should I be concerned?” The Clerk may send you a general notice,
and if you are sure you have taken the course and filed the certificate and
form with the Court, you can disregard it.
If you have any doubt, check with your attorney to see if you have
complied, or call the Clerk of Court if you are representing yourself.
Sometimes the notices that you are
receiving are not from the Court at all.
They can look like official Court notices, including bold warnings like “Notice
of Federal Requirement.” I get lots
of calls from clients about these notices.
They are usually from companies who got your name from a list and would
like to provide you with a service, if you still need to take the course. You can use these services if you like, but always
make sure they are authorized to provide the service in your district, and you
might want to shop around. In my
experience, the providers who send these fliers tend to be more expensive – somebody
has to pay for all of the notices they mail out! I also don’t like the way they advertise
their services: When the first contact is confusingly disguised to look like a legal
document, I question whether they can be clear and candid when providing actual
course information!
The 7thirteen is a blog written by Jeff Narmore, focusing on
consumer bankruptcy issues. Visit my website at narmorelawoffice.com.
Narmore
Law Office LLC is a debt relief agency and helps people file for relief under
the Bankruptcy Code.
Comments
Post a Comment