Bankruptcy Credit Counseling

Bankruptcy credit counseling is a requirement for anyone who is thinking about filing bankruptcy. The U.S. Congress passed the Bankruptcy Abuse Prevention Act in 2005 to help individuals to avoid financial crisis by learning how to budget and set financial goals. Bankruptcy credit counseling may provide the help a person needs to avoid filing. Once a bankruptcy has been discharged it appears on financial history for seven to ten years depending upon the Chapter that has been filed. Counseling helps the consumer to acquire the knowledge necessary to understand why being accountable with finances is so important. Once a person has damaged financial history because of paying late, having property repossessed, and filing bankruptcy it takes a great deal of time and patience to turn the situation around.

Individuals or businesses that do not have a lot of property but do have a great deal of high interest debt often choose to file Chapter 7. Businesses that choose to restructure instead of close down might want to consider filing Chapter 11. Individuals can choose to file Chapter 13 if they own property or want to try to repay their debts. A bankruptcy credit counseling organization can give individuals or business owners advice about their debts, how to make a budget, and what will happen to their credit once the bankruptcy has been completed but for questions on how to file the debtor should seek advice from an attorney.

Agencies that are certified to give debtors professional guidance with finances normally charge a fee to the customer for a pre-filing bankruptcy certificate. The debtor must have this certificate before the legal issues can be taken care of. Bankruptcy credit counseling agencies may waive the fee for special circumstances such as those who have only disability income or are having to use a legal aid office. Professional guidance with finances might make it possible for some debtors to avoid seeking legal discharge of debts. Some agencies work on debt management so they are qualified to help debtors to settle debts and avoid foreclosure, repossessions, and bankruptcy. "Happy is the man that findeth wisdom, and the man that getteth understanding. For the merchandise of it is better than the merchandise of silver, and the gain thereof than fine gold" (Proverbs 3:13-14).

Non-profit organizations that are set up to help consumers with budgeting and debt management will be relatively inexpensive. Some do not charge anything for the consumer who needs guidance on how to live on a budget. However, if the debtor opts to use services that help to repay and settle debts then there is usually a fee that applies. Bankruptcy credit counseling can be very beneficial to the debtor if he or she finds reconciliation of finances is possible without having to seek legal discharge of debts. Creditors who work with organizations on debt repayment may be very glad to receive a proposal on how the consumer is going to repay debts. Not being cooperative could be detrimental to creditors because the debtor who legally files to discharge debts may not end up having to pay creditors anything.

Courses online for bankruptcy credit counseling are generally done within a day or less. The topics that are covered include creating a budget and managing it, how to read a credit report and how to reestablish financial history. Debtors that are having trouble paying their bills each month may have more debts than income. This generally happens because there is no budget or no financial goals. A course that provides professional guidance can help the debtor to learn the importance of having realistic financial goals and why living on a budget is necessary. Online organizations that provide counseling provide a certificate showing that the debtor completed the course. The certificate can be received by email the client can print it out or if the client chooses the certificate can be mailed. Certificates are generally good for at least 180 days.

In choosing professional guidance a debtor should do some research and check the Better Business Bureau to make sure that the agency offering bankruptcy credit counseling is a legitimate company. A person can also check with the state Attorney General's office for a list of any companies that have been suspected of fraud and unfair business practices. Some things to watch out for are companies that charge large fees for their services and require that the debtor makes payments to them instead of their creditors. Some make promises that they can not keep. The promises of being able to settle or negotiate with creditors for half of what is owed should be questioned. Occasionally a creditor may negotiate for less but to expect to settle for half or less of what is owed is not generally accepted with many creditors.

Some companies that offer professional guidance on bankruptcy credit counseling claim that they can remove all negative information from a person's credit report. While credit repair is possible, the negative information that is legitimate should not be removed. However, errors that have a negative impact on financial history should be disputed and corrected. A counseling agency can help individuals to work on repairing or correcting their own financial report but can not do the disputing for them. The best way to reestablish financial information is by paying bills on time, paying off excessive debts, not applying for new credit accounts, and keeping debts to less than 25% of income.

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