Filing bankruptcy is a stressful process that will have consequences on your life for many years. For this reason, in 2005 the United States government passed a law requiring everyone who files for bankruptcy to seek credit counseling during the several months before they file. This required counseling will help you understand the steps that are involved in filing for bankruptcy, and will also help you figure out if you even need to file for bankruptcy or help you take steps to avoid bankruptcy if you are headed down that path. These courses are available in person, on line or over the phone. Make sure you choose an approved counselor. You can contact your local government or a bankruptcy lawyer for a list of approved counseling options. So what can you expect when you go for pre bankruptcy credit counseling?
Do not get overwhelmed or ashamed when you go to counseling. It is a required step and its purpose is to make sure you know what you are getting into and to help you and your family cut back and see if you can to avoid having to file for bankruptcy at all. It is important to pay attention to the advice and try to take the steps advised in order to minimize your spending. Your counselor cannot help you if they do not know all of your financial details, so it is vital that you are open and honest about your financial situation. Do not worry, they have heard it all. If you file for bankruptcy, the court is going to want to see if you have taken steps to make your payments, particularly if you are filing for a restructuring bankruptcy. Make sure you have all of your financial paperwork together so you get the most out of your counseling session. Here are a few questions you should be prepared to answer.
How much do you owe and to who?
How much income do you currently earn?
Where does the income come from (for example: does your income include annuities or child support)?
Have you stopped paying any of your creditors and when did you stop making payments?
What is your budget? Meaning what do you spend on rent or mortgage, groceries, electricity, cable, etc
Are you having any particular difficulties with any of your creditors?
Have you reached a debt consolidation or debt reduction agreement with any of your lenders?
While your counselor might discuss bankruptcy credit reporting and how filing bankruptcy will affect your credit, you will not get into after bankruptcy credit. At this step in the process you are still trying to avoid filing, or make sure you know what bankruptcy will entail if you do file. You are required to attend a pre-discharge counseling session which will occur before the bankruptcy is finalized. At that point, you can discuss your credit after bankruptcy.