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What Is a Bankruptcy Certificate?

Bankruptcy Certificate Explained in Less Than 5 Minutes

A bankruptcy certificate is a document that confirms you finished credit counseling and a debtor education course, both of which are mandatory stages in bankruptcy. You’ll need a bankruptcy certificate confirming you’ve attended credit counseling before you can file. Once you’ve filed for bankruptcy, you’ll need to participate in a debtor education course and acquire a new bankruptcy certificate as evidence.

In this post, we’ll explore the pre-bankruptcy credit counseling and pre-discharge education obligations that are necessary when you’re seeking bankruptcy protection. We’ll also explore where to locate firms that are eligible to offer bankruptcy certificates for both credit counseling and the education requirement. Finally, we’ll cover what you should look for in a bankruptcy counselor.

Definition and Examples of a Bankruptcy Certificate

Bankruptcy is a legal procedure that may provide you a new start when you’re overburdened by debt. But before you can seek personal bankruptcy protection, you’re forced to complete credit counseling. You also must finish a debtor education course before a court may discharge, or free you from duty for, your debt. 

Both are regulated under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The criteria are the same for Chapter 7 liquidation and Chapter 13 reorganization, which are the two basic kinds of personal bankruptcy.

You won’t be able to finish both counseling and the debtor education course at the same time. Credit counseling occurs pre-filing, whereas the debtor education course for a second certificate is planned post-filing. 

How Bankruptcy Certificates Work

Only credit counseling firms and debtor education courses that are certified by the U.S. Trustee Program are permitted to award bankruptcy certificates. The exception is if you reside in Alabama or North Carolina, since the U.S. Trustee Program doesn’t work in these states. If you reside in Alabama or North Carolina, you’ll need to select a credit counseling agency and debtor education course recognized by the bankruptcy administrator in your court district.
Note
If you’re filing a joint bankruptcy petition, both petitioners are permitted to attend the counseling and education sessions together; nevertheless, the provider must give tailored services to each person. Both filers will obtain their own bankruptcy certificate for both credit counseling and the debt course.

What Happens During Credit Counseling?

When you visit with a credit counseling agency, your counselor will help you examine your financial circumstances and if bankruptcy is best for you. The service must address the details of your financial predicament and the causes that lead up to it. They’re also supposed to present you a strategy for controlling your money that won’t push you further into debt.

After you finish credit counseling, you’ll get your certificate, which is good for 180 days. If you elect to file bankruptcy, you’ll submit the certificate in your petition.

What Happens During the Debtor Education Course?

After you’ve filed for bankruptcy, you’ll have to finish the debtor education course. The course will address budgeting, money management, and how to utilize credit sensibly. Upon completion, you’ll obtain a bankruptcy certificate that must be submitted with the bankruptcy court to have your obligations dismissed. 

Your course provider may submit the certificate with the court on your behalf, but it isn’t essential to do so. If it doesn’t transmit it immediately to the court, you’ll need to submit it with the court yourself.
Note
Under the terms of the Fair Credit Reporting Act, a bankruptcy will remain on your credit record for seven to 10 years.

Requirements for Bankruptcy Certificates

A credit counseling session normally lasts 60 to 90 minutes. It may be performed in person, by phone, or online. The usual charge for credit counseling is roughly $50.

A debtor education course takes around two hours to finish, and you also may do it in person, via phone, or online. Typically, the cost is $50 to $100. 

All expenses associated to credit counseling service and the debt course must be stated beforehand. Neither provider may charge you for a bankruptcy certificate unless it alerted you about the price before to the service.

If you can’t afford the fee of either service, ask for a waiver. Typically, you’ll qualify if your family income is less than 150% of the federal poverty line. Agencies are obligated to give the service for free if you’re unable to pay. 

What to Look for in a Bankruptcy Counselor

If you’ve met with an attorney and are convinced you’re going to file, the counseling session will generally simply be a formality. But if you’re contemplating your alternatives, ask a possible counselor if their organization provides additional assistance, such as a debt management plan. Also, ask what qualifications counselors have and how they’ll keep your personal and financial information protected.

It’s crucial that you choose a counseling agency that’s recognized by the U.S. Trustee Program or your local bankruptcy administrator to acquire your bankruptcy certificate. You may discover a list of authorized credit counseling agencies and debtor education course providers on the U.S. Department of Justice website.

Key Takeaways

You’ll earn separate bankruptcy certificates for completing credit counseling before filing for bankruptcy and a debtor education course after you file. Both are required aspects of the bankruptcy procedure.

Only U.S. Trustee Program-approved credit counseling companies and debtor education courses may issue bankruptcy certificates unless you reside in Alabama or North Carolina. If you reside in any of those states, check with the bankruptcy administrator in your state to identify an authorized provider.

Credit counseling and debtor education groups must notify you upfront if they charge an additional price for a bankruptcy certificate.

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