Debtor Education

In 2005 bankruptcy legislation was passed by the U.S. Congress requiring debtors who are filing Chapter 7 and Chapter 13 bankruptcy to complete credit counseling prior to filing their bankruptcy petition. They are also required to take a debtor’s education (financial management) course prior to the bankruptcy discharge.

Credit Counseling vs. Debtor Education

Credit counseling courses are required to help the debtor determine if they really need to file bankruptcy. For example, a credit counseling agency will review your income, debts, and expenses and help you determine if you may be able to repay your debts through debt restructuring or some type of negotiated repayment plan. If the credit counseling agency recommends other options to you, however, you still have the right to file bankruptcy.

The debtor education course is completed after the bankruptcy filing and prior to the discharge. It is a separate course from the credit counseling course and is not designed to analyze your options prior to filing bankruptcy, but rather its purpose is to help you make better financial decisions by teaching you money management strategies, such as repaying financial obligations and managing credit. Ideally, after taking the debtor education course, you will understand the steps you need to take to avoid filing bankruptcy in the future.

When do I have to take the debtor education course?

The debtor education course is taken after the debtor’s bankruptcy case is filed. Chapter 7 bankruptcy claims require debtors to complete the debtor education program within 60 days of the initial date set for the meeting of creditors. Chapter 13 bankruptcy cases require the debtor to complete the course prior to their last Chapter 13 repayment plan payment.

Debtors who fail to take the debtor education course at the appropriate time can have their case closed without receiving a bankruptcy discharge. In some cases, the debtor’s plan can be reopened, but generally, additional fees must be paid.