Why must you complete credit counseling prior to bankruptcy?

If you are like most of those in Nashville for whom personal bankruptcy is looking more and more like its your only viable option to get out of debt, then you may adopt an attitude of just want to hurry through it and get it done. Your desire is understandable; this likely represents a chapter in your life that you would rather put behind to be able to move on to a brighter financial future. Unfortunately, bankruptcy court proceedings will sometimes try to slow the bankruptcy process down to both prevent the privilege from being abused as well as ensure if it is indeed the best option. 

One of the ways the court does this is by requiring you (like all bankruptcy filers) to first go through credit counseling. Indeed, according to the Federal Trade Commission, both those pursuing Chapter 7 and Chapter 13 must complete credit counseling within 180 days prior to filing for bankruptcy. The purpose of this meeting is to obtain an outside perspective on your current financial situation. Part of the job of the credit counselor is to construct a budget to determine if you would be able to reasonably be able to repay your debts without having to file for bankruptcy. He or she will then review his or her plan with you (as well as offer some debt avoidance techniques. You are not legally required to accept the plan that he or she creates, but it must be included in your bankruptcy case paperwork. 

The judge may review the credit counselor’s plan and find it to be doable. Yet even in that case, the only change is that you would no longer be able to file for a Chapter 7 bankruptcy, and would instead be converted over to a Chapter 13. 

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