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Credit Counseling Requirement

Individuals are not eligible for relief under any chapter of the bankruptcy code unless they obtain “an individual or group briefing” from an approved nonprofit credit counseling agency before the case if filed.

1. Agencies Must Be Approved. The credit counseling agency must be approved by the United States trustee. Go to the U.S. Trustee website for a list of the approved credit counseling agencies.

2. 6 Months Before Case Is Filed. The counseling session must occur within 180 days (6 months) before they file for bankruptcy. A counseling session more than 6 months before the case does not count as a valid session.

3. Certificate Required. The Debtor must obtain a certificate which proves that the counseling session took place. The certificate must be filed with the bankruptcy pe­tition.

4. Method (in Person, Telephone or Internet). The required briefing may take place in person, by telephone or on the internet. Currently, most approved agencies provide the briefings in person and by telephone. Although most of the approved agencies advertise the ability to complete the session on the internet, none of them will complete the session only via internet. The internet component usually involves filing out some of the required information on the internet, and then completing the session on the telephone with a counselor.

5. Fee. The law states that the agency must provide the counseling session without regard to the debtor’s ability to pay a fee. However, there are no published standards to determine the income level at which a person can be said to have an ability to pay. Most approved agencies charge a fee between $9.95 and $60 for the session.

6. Exceptions. There are very limited exceptions to the credit counseling requirement. The only exceptions are for:

a. Adequate Counseling Not Available. Districts in which adequate counseling services are determined by the U.S. trustee or bankruptcy administrator not to be available. This exception does not apply to case filed in the Southern District of Texas.

b. Incapacity, Disability or Military Duty. Debtors who are incapacitated, disabled, or on active military duty in a combat zone. A person is considered “incapacitated” only if he has a mental illness or mental deficiency such that he is incapable of realizing and making rational decisions with respect to his financial responsibilities. A “disability” means that the debtor is so physically impaired as to be unable, after reasonable effort, to participate in an in-person, telephone, or in­ternet briefing.

c. Exigent Circumstances. The exception relied upon most is for situations involving exigent circumstances. Exigent circumstances means that the debtor was required to immediately file the case without completing the counseling session. To qualify, the debtor must:

  • file a written certification with the court;

  • describe exigent circumstances that merit a waiver of the counseling requirement;

  • state that the debtor requested credit counseling from an approved agency before the case was filed;

  • state that the counseling was unable to obtain the services during the 5-day period beginning on the date on which the debtor made that request.

The court cases that have interpreted this exception have been very strict in enforcing it. A debtor will almost never be able to come to a lawyer within the last few days before a foreclosure sale and file a case without completing the credit counseling session. The debtor will never be able to excuse a failure to at least try to obtain credit counseling before filing the case by obtaining counseling on the day after (or even one minute after) the case is filed. The court simply has no discretion to allow the debtor to obtain the counseling after the case is filed if he did not even try to obtain the counseling services before the case was filed.

In most cases, the debtor will need to seek counseling at least a full 5 days before the case is filed unless the counselor indicates that they can provide the counseling session for a full 5 days (a very rare possibility).

As a result of these difficulties, a debtor that comes to a lawyer within 5 days before a foreclosure sale will almost always need to complete the counseling before the case is filed. The exigent circumstances exception will almost never apply.

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