National Foundation for Credit Counseling Addresses Commonly Asked Questions about the Financial Counseling and Education Provisions of the New Bankruptcy Law

Business Wire, Oct 14, 2005

SILVER SPRING, Md. -- As the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 takes effect on October 17, 2005, the National Foundation for Credit Counseling (NFCC) addresses some of the most commonly asked questions about the financial counseling and education provisions of the new law and their impact on consumers.

Q:  With regard to financial counseling and education, what will
    change as a result of the new bankruptcy law?

A:  For the first time, financial counseling and education will be
    mandated by the Bankruptcy Code and will benefit consumers facing
    serious economic problems.  Prior to filing for bankruptcy,
    individuals will be required to receive a briefing from an
    approved nonprofit budget and credit counseling agency.  Prior to
    completing the bankruptcy process and receiving a discharge,
    individuals will be required to complete a course on personal
    financial management.

Q:  What are the benefits of the pre-filing counseling session?

A:  For most individuals, whether they should file for bankruptcy is
    one of the most serious financial decisions they can make.
    Consequently, that decision should be made only after knowing what
    the bankruptcy process entails, the consequences of filing for
    bankruptcy, and the available alternatives to filing for
    bankruptcy.  The pre-filing counseling session will enable
    consumers to fully understand the potential advantages,
    disadvantages of, and alternatives to declaring bankruptcy before
    taking action.

    The NFCC believes that helping consumers to fully understand the
    implications of bankruptcy and the possible alternatives will
    enable them to make an informed decision about whether bankruptcy
    is the best option for their specific financial circumstances.

Q:  What will take place during the pre-filing counseling session?

A:  On and after October 17, all individuals filing for bankruptcy
    under Chapter 7 or Chapter 13, will be required to participate in
    a pre-bankruptcy filing counseling session with an approved
    nonprofit budget and credit counseling agency within six months of
    filing. The agency providing the session must be approved by the
    Executive Office for U.S. Trustees (EOUST). (Agencies located in
    North Carolina or Alabama must be approved by the local Bankruptcy
    Administrator).

    Consumers who receive pre-filing counseling with an NFCC member
    agency can expect:

    --  Estimated length: A counseling session of approximately 90
        minutes.

    --  Content: The session will include an overview of the
        bankruptcy process; a discussion of possible alternatives to
        bankruptcy, including their advantages and disadvantages; and
        a personalized budget analysis. The session also will include
        a discussion of the circumstances that led the consumer into
        financial difficulty.

    --  Format: Counseling can be face-to-face, over the phone or via
        Internet.

    --  Certificate: Consumers will receive a certificate indicating
        that they completed the counseling session. Should they decide
        to file for bankruptcy, they will have to include the
        certificate in the filing with their bankruptcy petition.

Q:  What will occur during the pre-discharge financial education
    course?

A:  Before a bankruptcy is finalized and debts can be discharged,
    consumers will be required to complete a pre-discharge financial
    education course from an EOUST (or Bankruptcy Administrator)-
    approved agency.

    The NFCC believes that the pre-discharge financial management
    educational course will provide more Americans than ever before
    with the financial know-how they need to manage their money, keep
    their personal finances in order and reduce the chance of future
    financial problems.

    The following is an overview of what to expect from the
    pre-discharge education:

    --  Estimated course length: 2 hours

    --  Content: NFCC members approved to provide the pre-discharge
        financial education course will address financial literacy
        issues that will arm individuals with the tools to prevent
        future financial problems. Among key topics: rebuilding
        finances after bankruptcy, developing and following a budget,
        understanding and using credit, "predatory lending" and
        identity theft.

    --  Format: Face-to-face, over the phone or via Internet.

    --  Certificate of completion - Consumers will be given a
        certificate verifying completion of the course, and will have
        to file that certificate with the Bankruptcy Court in order to
        have their debts discharged.

Q:  How can consumers considering bankruptcy select a reputable credit
    counseling agency?

A:  Consumers intending to file for bankruptcy or waiting for debts to
    be discharged after filing will need to select an organization
    approved by the EOUST (or Bankruptcy Administrator) to provide
    such services.  Visit www.nfcc.org for a list of NFCC members with
    EOUST approval, and for general tips on how to select a reputable
    credit counseling agency.