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Do I Have To Take The Credit Counselling Course Before I File A Bankruptcy Petition?

Since the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, before a debtor files for bankruptcy relief in Chapter 7 or Chapter 13, they are required to take a credit counseling course. See 11 U.S.C. § 109(h). Without a certificate that shows that the debtor completed the course, their case will be dismissed by the Bankruptcy Court. See In re Ginsberg, 354 B.R. 644 (Bankr. E.D.N.Y. 2006) and In re Seaman, 340 B.R. 698 (Bankr. E.D.N. Y. 2006). While, the Court has discretion as to whether a dismissal is warranted in a particular case, see In re Nichols, 362 B.R. 8 (Bankr. S.D.N.Y. 2007), the remedy of dismissal is “harsh.” See In re Seaman.

The Pre-Filing Credit Counselling Course

The pre-bankruptcy counseling course should include a review of the debtor’s personal finances, a discussion of alternatives to bankruptcy, and an evaluation of their personal budget. The counseling is required even if it is fairy obvious that a repayment plan is not feasible. The course generally takes about one hour. The organization that provides credit counseling services to the debtor must be approved by the Justice Department’s U.S. Trustee Program (except in Alabama and North Carolina). For more information on approved credit counseling organizations please click here: https://www.justice.gov/ust/credit-counseling-debtor-education-information

The course may be taken over the phone, online or in person. Once a debtor takes the course, the certificate they receive is valid for 180 days. Generally, the course provider will send a copy of the debtor’s certificate to their bankruptcy attorney, who will the file the certificate with the Bankruptcy Court at the same time as the debtor’s petition and schedules.

Very Limited Exceptions To 11 U.S.C. § 109(h)

There are very limited situations in which someone who files for bankruptcy relief would not have to complete the pre-filing credit counseling course. The first limited exception is “exigent circumstances” where a waiver of the credit counseling requirement would be justified. See 11 U.S.C. § 109(h)(3)(A). This exemption only lasts for thirty days, but it is extendable for an additional fifteen days if granted by the Bankruptcy Court for cause. 11 U.S.C. 109(h)(3)(B). The second exception is “because of incapacity, disability, or active military duty in a military combat zone.” See 11 U.S.C. § 109(h)(4). Please note that the Bankruptcy provides specific definitions for incapacity and disability that are less inclusive than the general definition of those terms. Incapacity is defined as having the inability to make “rational decisions with respect to [one’s] financial responsibilities”. Disability is defined as “so physically impaired as to be unable, after reasonable effort, to participate in an in person, telephone, or Internet briefing [as] required.” Ibid. The drafters of the Bankruptcy Code were seeking to restrict the number of debtors who would be able to get an exemption from the rule with a broad reading of those terms.

If you have any questions about filing for bankruptcy in New York, please do not hesitate to contact the Law Offices of David I. Pankin, P.C. at 888-529-9600, or by using our easy online contact form.