Business Services Industry
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.
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