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What is pre-bankruptcy counseling?

Personal or consumer bankruptcy involves the reorganization or liquidation of a person's assets in order to satisfy his debts. This New York bankruptcy law blog has discussed these methods of bankruptcy, also known as Chapter 13 bankruptcy and Chapter 7 bankruptcy, and steps that occur once the bankruptcy petition is filed. However, there are some requirements that a person must meet before he can submit his bankruptcy paperwork. One of those requirements is pre-bankruptcy counseling, and this post discusses just what it entails.

According to the Federal Trade Commission, people who file for personal bankruptcy have to undergo pre-bankruptcy counseling. Organizations that offer such counseling have to undergo an approval process, and anyone who utilizes a counseling service should make sure that it is authorized to provide bankruptcy guidance. Pre-bankruptcy counseling can cover a variety of topics, including but not limited to budgeting and options other than bankruptcy.

Once a person successfully completes pre-bankruptcy counseling he will receive a certificate. That certificate or proof of counseling completion is generally required to accompany one's paperwork when filing for bankruptcy. It is a precursor to actually getting into bankruptcy court and helps some people get a grip on their financial circumstances before addressing their creditors.

Poor economic health should not be a bar to a person receiving pre-bankruptcy counseling. Organizations that offer the service must offer fee waivers for people whose finances might prevent them from paying for counseling. Additionally, organizations cannot charge individuals in bankruptcy counseling a fee for their completion documents.

The process of filing for bankruptcy starts long before a petition is ever filed with the bankruptcy court. Pre-bankruptcy counseling can be a useful tool for a person to recognize the realities of his personal finances. To learn more about pre-bankruptcy requirements, consider speaking with a legal professional who works in the personal bankruptcy field.

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