Why do you need to attend credit counseling before bankruptcy?
If you lose your job, suffer an illness or endure a costly legal matter like a divorce, you might run into a financial crisis. Fortunately, personal bankruptcy can help get a fresh start by either discharging or restructuring your debts.
One of the goals of the U.S. bankruptcy laws, however, is to help individuals acquire better money management skills. For this reason, any person declaring bankruptcy (Chapter 7 or Chapter 13), must sign up for a pre-bankruptcy credit counseling and debt education program before their petition can be approved.
Requirement for pre-bankruptcy credit counseling
As the name indicates, you are required to sign up for credit counseling with an agency approved by the U.S. State Department of Justice before kick-starting the bankruptcy process. This program takes six months to complete upon which you will be issued a certificate that you must submit to the bankruptcy court within 15 days of filing for bankruptcy.
There are instances when you may skip credit counseling, however. One of these is when you have to file for bankruptcy immediately to avoid a foreclosure, wage garnishment or repossession
Requirement for debtor education
Debtor education is meant to equip you with the tools and resources necessary to better manage your finances after bankruptcy. You will basically learn how to set realistic financial goals and minimize unnecessary expenses.
While credit counseling happens before formally filing for bankruptcy, debtor education happens after filing but before your debts can be discharged. In other words, your debts will only be discharged after proving that you have completed a debt education course.
Personal bankruptcy can be a welcome relief when you are drowning in debt. Learning more about Tennessee bankruptcy laws can help you safeguard your rights and interests during and after the bankruptcy process.