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What are the credit counseling requirements in bankruptcy?

Federal law requires people who are filing for personal bankruptcy, including those in the District of Columbia, to complete credit counseling and file a certificate of completion beforehand. Only an approved organization listed in the U.S. Trustee Program can issue a certificate of completion, which is numbered and created via a central automated system for fraud protection purposes.

During a credit counseling session, the organization evaluates the individual's personal financial standing. The organization also discusses the alternatives that the person has to filing bankruptcy and helps the person plan a budget. The session may occur in person, online or over the phone, and it usually lasts around an hour. After the session is complete, the individual has to get a certificate for proof.

Credit counseling generally costs $50, but the fee varies depending on the services that the individual needs. The fees are discussed before the session starts, but an individual who cannot afford to pay can ask for a fee waiver. The organization has to provide the session for free if it is unaffordable for the individual. Credit counseling organizations may not charge an additional fee for a certificate of completion.

Filers for personal bankruptcy often find themselves in this situation after accumulating credit card or medical debt that has become insurmountable. While these steps may help many individuals, anyone who seeks to file for bankruptcy could receive experienced advice and counsel from a lawyer who has experience in these matters. The lawyer can also help determine whether other forms of debt relief are available or appropriate to the client's particular financial situation.

Source: The Federal Trade Commission, "Filing for Bankruptcy: What to Know", October 12, 2014

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