The Credit Counseling Requirement in Bankruptcy

With a few rare exceptions, you must get credit counseling before you file for bankruptcy. Here are the details.

by: , J.D.

Before you can file for Chapter 7 or Chapter 13 bankruptcy, you must consult a nonprofit credit counseling agency. The purpose of this consultation is to see whether there is a feasible way to handle your debt load outside of bankruptcy, without adding to what you owe.

Counseling Requirements

To qualify for bankruptcy relief, you must show that you received credit counseling from an agency approved by the U.S Trustee’s office within the 180-day period before you file your bankruptcy. Once you complete the counseling, the agency will give you a certificate of completion that you must file no later than 15 days after your bankruptcy filing date. It will also give you a copy of any repayment plan you may have worked out with the agency. You can find out which agencies have been approved for your judicial district by visiting the Office of the U.S. Trustee’s website at; click “Credit Counseling & Debtor Education” to see the list.

The supposed purpose of credit counseling is to give you an idea of whether you really need to file for bankruptcy or whether an informal repayment plan would get you back on your economic feet. Counseling is required even if it’s pretty obvious that a repayment plan isn’t feasible (that is, your debts are too high and your income is too low) or you are facing debts that you find unfair and don’t want to pay. (Credit card balances inflated by high interest rates and penalties are particularly unpopular with many filers, as are emergency room bills and deficiency judgments based on auctions of repossessed cars.)

Bankruptcy law requires only that you participate in the counseling—not that you go along with whatever the agency proposes. Even if a repayment plan is feasible, you aren’t required to agree to it. However, if the agency does come up with a plan, you must file it along with the your bankruptcy papers.

Counseling Costs

Credit counseling agencies may charge a reasonable fee for their services. However, if a debtor cannot afford the fee, the counseling agency must provide services free or at reduced rates. This means that the service must offer a sliding fee scale and a waiver of fees altogether for people below a certain income level (below 150% of the poverty level for a family of equal size). The Office of the U.S. Trustee, the law enforcement agency that oversees credit counseling agencies, has indicated that a “reasonable” fee might range from free to $50, depending on the circumstances.

If you speak Spanish or another language other than English, you can get this counseling in your preferred language.

The U.S. Trustee's website has a list of approved bankruptcy credit counseling and debtor education agencies that provide services in Spanish and 29 other languages.

Exceptions to the Counseling Requirement

You don’t have to get counseling if the U.S. Trustee certifies that there is no appropriate agency available to you in the district where you will be filing. However, counseling can be provided by telephone or (usually) online, so it is unlikely that approved debt counseling will ever be “unavailable.”

You can also avoid this requirement if you certify to the court’s satisfaction that:

  • You had to file for bankruptcy immediately (perhaps to stop a wage garnishment or foreclosure).
  • You were unable to obtain counseling within five days after requesting it.

If you can prove that you didn’t receive credit counseling for these reasons, you must certify that to the court and complete the counseling within 30 days after filing (you can ask the court to extend this deadline by 15 days).

You may also escape the credit counseling requirement if, after notice and hearing, the bankruptcy court determines that you couldn’t participate because of:

  • a physical disability that prevents you from attending counseling (this exception probably won’t apply if the counseling is available on the Internet or over the phone)
  • mental incapacity (you are unable to understand and benefit from the counseling), or
  • your active duty in a military combat zone.

Excerpted from The New Bankruptcy: Will it Work for You? by Attorney Stephen Elias (Nolo).

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