To start the Bankruptcy Counseling you will need to read through the information below.  After reading through the information you will be taken to the signup and payment page.

What is Bankruptcy?

Bankruptcy is a process designed to help individuals and businesses get protection from their creditors.

• The right to file for bankruptcy is provided by federal law   
• All bankruptcy cases are handled in federal bankruptcy court

What Are The First Steps In Filing Bankruptcy?

• The first step involves completing some basic forms, including a three page initial “petition”
• A number of other forms, requiring disclosure of the consumer’s financial affairs, must also be filed with the petition or shortly after the petition is filed (usually within 15 days)
• It is important that all forms be filled out completely and accurately
• Bankruptcy is a legal proceeding with complicated rules and paperwork.  It is difficult without an attorney

What Will Happen After Filing?

• In most cases, the consumer only has to go to a proceeding called the “meeting of creditors”
• The meeting of creditors gives the bankruptcy trustee and any creditor who chooses to attend a chance to ask questions about the consumers financial affairs
• Few creditors attend in consumer cases

What About Homes, Cars and Other Secured Property?

• Bankruptcy usually does not eliminate a creditor’s lien on or security interest in property.  A secured creditor may be able to foreclose on a home or other property, usually after the bankruptcy case, if the consumer does not take some action
• In a chapter 13 case, the consumer may be able to keep certain property by     
  1. Paying the value of the property rather than the full amount owed on the debt (but usually not on auto loans taken out within 910 days of the bankruptcy or home mortgages), often at a lower interest rate
  2. Paying the amount needed to catch up on back payments and bring the loan current
• In a chapter 7 case, the consumer may be able to keep certain secured property by either:
  1. Agreeing to continue payments on the debt until it is paid in full (some creditors may request a formal “reaffirmation” agreement, which must be filed with the bankruptcy court)
  2. Paying the creditor the amount that the property is worth (this is called “redemption” and must be made with a lump sum payment)

What Must The Consumer Do To Complete The Case?

• After the case is filed, the consumer must complete an approved course in personal finance
• The personal finance course takes approximately two hours to complete
• The course may be taken in-person, by phone, or internet
• The course must be provided without regard to ability to pay
• The certificate for completion of Debtor Education must be filed with the bankruptcy court for the discharge to be completed

Does Bankruptcy Affect The Consumers Credit?

• Bankruptcy can stay on a consumer’s credit report for ten years, rather than the normal seven years for other credit information
• Bankruptcy usually does not make a credit record any worse if there have already been numerous reports of defaults
• Some creditors will lend to recent bankruptcy filers knowing that all or most of a consumers debts have been discharged and the consumer can not file another chapter 7 case for a period of eight years
• Bankruptcy may present a problem in getting approved for a conventional home mortgage
• Most lenders will provide a mortgage loan if the consumer has re-established good credit for a period of  two to four years after discharge

What Can Bankruptcy Do?

Bankruptcy may make it possible to:

• Eliminate the legal obligation to pay most or all debts (even if debt has become a court judgment)
• Stop home foreclosure and allow the homeowner an opportunity to catch up on missed payments -  but bankruptcy does not automatically eliminate mortgages and liens without payment
• Prevent repossession of a car and other property (may even force the creditor to return repossessed property) 
• Stop wage garnishment, debt collection harassment, and similar creditor actions to collect a debt
• Restore or prevent termination of utility service
• Lower the payments on some debts
• Allow the consumer to challenge claims of creditors who have committed fraud or a creditor who is trying to collect more than he is really owed

What Bankruptcy CAN NOT Do:

Bankruptcy does not cure every financial problem, nor is it the right step for every individual in financial trouble.

In Bankruptcy it is usually not possible to:

• Eliminate certain rights of “secured”  creditors
• Discharge some types of debts, such as child support, most student loans, criminal fines, and most taxes
• Protect co-signers on debts (except in chapter 13 cases)
• Discharge debts that arise after bankruptcy is filed

What Are Some Key Bankruptcy Concepts?

Automatic Stay:

Filing bankruptcy instantly creates an “automatic stay”

• Temporarily stops almost all creditor actions to collect debts
• However, if the consumer had another bankruptcy case dismissed within the previous year, there may be no “automatic stay” or it may last for only 30 days
• However, the court may impose or extend the automatic stay if the consumer’s current case has been filed in good faith

Fresh Start:

The goal of bankruptcy is to provide help with existing debts and give the consumer a second chance.  Two key elements of a “fresh start” through bankruptcy are:

• Discharge:  Elimination of the legal obligation to pay a debt
• Exemptions:  Property the bankruptcy “debtor” is allowed to keep by law

What Are the Different Types of Bankruptcy Cases?

There are four types of bankruptcy cases an individual can file:

1. Chapter 7, known as “straight” bankruptcy or “liquidation:

• Requires individuals to give up property which is not exempt so it can be sold to pay creditors
• Most consumers who file chapter 7 are allowed to keep all their property with the exception of:
  • Property the courts deem to be of excessive value
  • Property subject to a lien which must be paid

2. Chapter 13, is a type of reorganization used by individuals
   • Consumer submits a plan to pay all or a portion of their debts over a period of years using current income
   • Homeowner who has defaulted on their mortgage is given time to get caught up.  Generally this is over a longer period (often up to 3 years) than provided under a workout agreement
   • Unsecured debts (such as credit cards) may be paid either in full or a percentage of the amount owed (over a 3 to 5 year period)
   • Late charges and interest after filing chapter 13 do not have to be paid on unsecured debts
     
     
3. Chapter 11,  known as “reorganization” is used by businesses and a few individuals whose debts are very large
   
   
4. Chapter 12, is for family farmers and fishermen

Most consumers file bankruptcy under chapter 7 or chapter 13.  Either type may be filed individually or by a married couple filing jointly.

What Must Be Done Before Filing Bankruptcy?

Credit Counseling:

• Consumer must receive budget and credit counseling “briefing” from an approved agency within 180 days before the bankruptcy case is filed
• Agencies are approved by the United States Trustee Program
• Briefing session may be in individual or group session and may be delivered in person, over the telephone, or by internet
• Consumers should be advised to complete counseling as soon as they think bankruptcy may be an option, especially if they may need to stop a foreclosure sale.

Can Credit Counseling Requirement Be Waived?

• Counseling may be waived if a debtor is: disabled, incapacitated, or on active military duty in a combat zone.
• Counseling may be deferred for 30 days after the case is filed if: “exigent circumstances” exist, or the debtor requested counseling from an approved agency, but was unable to obtain services during a five day period after the request is made

Can Counseling Fee Be Waived?

• Approved agencies must provide bankruptcy counseling and necessary certificates without considering ability to pay
• If the consumer cannot afford the fee, they should ask the agency to provide counseling free of charge or, at a reduced rate

What Does It Cost To File Bankruptcy

• The chapter 7 filing fee is now $299, and for chapter 13 it is $274
• Approximately $50 for credit counseling briefing and $50 for the education course, if the debtor is filing individually

Can The Bankruptcy Filing Fee Be Waived?

Chapter 7 filing fees may be waived if both of the following are met:

• Debtor’s income must be below 150% of the poverty line (figures for 2006 are $19,800 for a family of 2 and $30,000 for a family of 4)
• Debtor must be unable to pay the filing fee in installments

Who Is Eligible To File Chapter 7?

“Means Test”

• There are few preconditions to filing bankruptcy although, a bankruptcy judge can dismiss a chapter 7 case, if filing is deemed an abuse of the bankruptcy system
• A “means test” was added in 2005 to make it more difficult for wealthy    consumers to file a chapter 7 bankruptcy.  Most consumers who file bankruptcy are not affected by this change
• Consumers with household income below the state median family income are protected by a “safe Harbor” and are not subject to the “means test”  (national median family income for a family of 4 in 2006 was approximately $65,796)
• A consumer with  an income above the median must fill out the form comparing their monthly income with their actual and assumed expenses in a variety of categories
• Some expenses are based on IRS collection guidelines
• If the form shows that the consumer should have a certain amount left over to pay unsecured creditors, the bankruptcy court may decide the consumer cannot file a chapter 7 case, unless there are “special circumstances”

What Are My Options?

Instead of filing bankruptcy consider:

• Money from a 401k plan to pay down debt
• Equity from your home to pay down debt
• Sale of assets to generate cash to pay down debt
• Contacting a credit counseling agency to make use of a debt management plan to pay debt
• Cashing out a certificate of deposit
• Asking for an advance on your inheritance

What Is Required To Continue?

• Indicate your state of residence and filing status (single or joint)
• Pay for the course with either a debit card or checking account information
• Furnish financial information about your household, such as income and expenses

What Happens After I Complete The Bankruptcy Counseling On Line?

• Upon finishing you will be contacted by a certified credit counselor to review your information
• After review your packet and certificate will be printed and mailed to you at the address shown on your work sheet
• Please be advised the Certificate of Credit Counseling is valid for 180 days from the date and time the counseling session was completed
• During the course of your internet session if you have questions and need assistance or advice please call 1-800-856-0257

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