Credit Counseling Is Not Just Another Hoop To Jump Through

There is a Revolutionary War era fort in Morristown, New Jersey known as Fort Nonsense. Legend has it that Washington has his men construct the fort in order to keep them busy and out of trouble during a winter encampment in the town.

The idea that Washington needed to keep his men thinking about the war and out of trouble makes a good story, but scholars say it is probably not true. Forts like the one Washington ordered built were a common form of defense, and he typically had more things on his to-do list than he had soldiers to do them, so soldiers were not just loafing around during the winter months.

There are a lot of things about the bankruptcy process that are Fort Nonsense-like. Numerous aspects of the process seem like they are only there to make filing more difficult and time-consuming than it needs to be. However, each step of the process exists for a particular reason.

Credit Counseling Is Not Nonsense

Take credit counseling for example. Debtors that want to file for personal bankruptcy under Chapter 7 or Chapter 13 must first seek credit counseling with a court-approved provider. This may seem like just another hoop that a would-be filer must jump through, but everyone who takes the credit counseling requirement seriously learns a few things that can help them manage their finances better in the long term. This is true even in cases where the debtor has been forced into bankruptcy by something like surprise medical bills.

The counselors typically work with a debtor to put together a budget, and discuss strategies for sticking to it. Counselors also make sure the debtor understands how to avoid financial risks and the importance of having a good credit score.  

Depending on the type of program, the credit counselor might also help the debtor consolidate debt, negotiate a better deal on existing debt, or set up a repayment plan.

Some debtors who were previously planning on filing for bankruptcy find that they no longer need to do so after they have worked with a credit counselor.

Finding A Counselor

As mentioned above, the courts have a list of approved credit counseling providers. Debtors who want to file for personal bankruptcy under Chapter 7 or Chapter 11 must get counseling from someone on the court’s list.

Here in the Eastern District of Wisconsin, there are counselors that will meet with you face to face, or you can work with a counselor over the phone or online.

Even though it is mandatory, counseling is not free. The credit counseling providers can charge a reasonable fee for their service. However, if a debtor absolutely cannot afford to pay, the counselors are supposed to work for free, or at a reduced rate.

At the end of the counseling course, the debtor will get a certificate of completion. This certificate must be filed with the court or the bankruptcy judge will throw the case out.