The latest bankruptcy laws changed both the counseling and documentation requirements for individuals filing for bankruptcy. Understanding and following these changes is vital to a successful bankruptcy case. Whether you choose to file on your own or with the help of an attorney, you should familiarize yourself with these conditions.
First, bankruptcy law requires you to attend counseling prior to filing for bankruptcy. This is typically a brief period of counseling which usually takes between 60 and 90 minutes to complete. The goal is to help the individual understand alternatives to bankruptcy and other ways to deal with debt. It can be done online, over the phone, and at a face-to-face meeting with a counselor. The only caveat is that the counselor or counseling agency needs to be approved by the bankruptcy courts.
There is typically a fee for the counseling service. Whoever, those who cannot pay may be able to have the fee waived. The counselor will send the debtor a certificate of completion once the counseling session is over. This is valid for 180 days, and the bankruptcy courts require it to be submitted when you file for bankruptcy. There may be exceptions to this, but in general those who do not complete a program cannot file for Chapter 7 or Chapter 13 bankruptcy protection.
Once an individual has filed, the courts usually require a Personal Financial Management Instructional Education Course, also attained through an approved credit counselor. The courts usually require the certificate from this program before they will issue a discharge of debts.
A second change to the bankruptcy code involved requiring more documentation for individuals who are filing bankruptcy. The paperwork, both for the attorney if one is used and the individual, has greatly increased in amount. The main goal is believed to be to prove the individual’s declaration of his or her financial affairs and prevent bankruptcy fraud.
Types of documentation that may be require include up to four years of income taxes, six months of earnings statements, and other documents as requested by the courts to prove the debtor’s eligibility to file for a particular type of bankruptcy. The new laws may require credit reports to be obtained to verify the creditors claimed by the individual, as well as title searches to look into the individual’s real estate assets and debts. Debtors and their attorneys must use the latest bankruptcy forms to report income, assets, and debts to the bankruptcy court in a timely fashion after the required counseling programs have been completed.
So what are the goals of these changes? Many believe that the goal is to prevent those who really do not qualify for bankruptcy to be prevented from running away from their debts through bankruptcy protection. It also is believed to provide some with access to education about alternatives available to them that they might not know about without the bankruptcy court-required counseling programs. Most honest people who legitimately need a way out of debt can still qualify to file for bankruptcy under the new codes.
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