“Credit counseling” has a couple different meanings and common uses, and it can be very confusing for anyone considering bankruptcy in New York. So I thought I would to take a moment to clarify.
One meaning is the credit counseling requirement under the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (aka BAPCPA). All individual debtors are required to participate in a credit counseling course before they can file for bankruptcy.
Credit counseling is also often used to refer to companies that provide “credit counseling services.” These companies are usually non-profit entities (though don’t believe for a second that they don’t make a profit). They are a non-bankruptcy alternative and are typically only able to help individuals in a limited way by consolidating their credit card debt. As I explained in a previous post–“Don’t believe the hype: Credit counseling services and debt settlement companies“–they are generally not a good option for individuals. They charge an up-front fee. They are not necessarily reliable. There are very few checks and balances on their activities. And they are, in effect, collection agencies for the credit card companies.
So there are two potential meanings to credit counseling. One a legal requirement, and the other a service best avoided.
The confusion doesn’t entirely end there, however. In order to fulfill the credit counseling requirement before you file for bankruptcy, you must participate in a credit counseling course. The credit counseling course can be administered by any entity that gets licensed to provide the course. That entity can be a lawyer or law firm. It can also be a credit counseling agency (i.e., the kind I just described that wants to “help” you with your debt). Or it could be any other company or entity that obtained the license to administer the course.
It’s helpful to know that you can take the one-time course over the phone or even by internet, and you can complete it pretty much any time day or night. It takes about 2 hours and costs about $50 (though that fee can be waived for people who genuinely cannot afford it). Your lawyer can always provide you with a list of accredited providers. There is also a list of accredited providers of the required credit counseling course on-line at the website of the Office of the U.S. Trustee. (Note that it is organized by court district, i.e., Eastern District of New York, Northern District of New York, Southern District of New York, Western District of New York.)
It’s worth being aware that, if you’re married, you and your spouse must both take the course. However, you only need to pay the course fee once.
Also, you should be aware that, from the date you take the course, your bankruptcy filing must be done within 6 months. If not, then you have to take the course again.
Whether the required credit counseling course will actually be helpful to you is a whole separate issue. For now, however, the main point is that it is required. On the other hand, a credit counseling agency is definitely not a requirement.
For more information on filing for bankruptcy attorney Brooklyn NY–whether in Manhattan, Brooklyn, Queens, The Bronx, Staten Island or Suffolk County, Long Island–please contact us for a free initial consultation to get all of your questions answered and make sure you know all of your options.