before you file

DEBT COUNSELING REQUIREMENT

You are not eligible to file a bankruptcy unless you receive an individual or group briefing from an approved nonprofit budget and counseling agency. That briefing must outline your opportunities for available credit counseling and assist you in performing a related budget analysis. It must occur within 180 days prior to filing the bankruptcy. It can take place on the internet or telephone. If you have not yet received the counseling and you want our assistance, we will help you make the arrangements for it.

REQUIRED DOCUMENTS

In addition to the information set out in these forms and in the bankruptcy questionnaire you will be provided, you must provide us with the following documents or information. These documents or information must be filed with your petition, or when specified, while your case is pending.

1. Copies of all pay stubs, payment advices, or other evidence of payment received within 60 days before the date of filing of the petition by you from any employer.

2. A statement disclosing any reasonably anticipated increase in income or expenditures over the 6- month period following the date of the filing of the petition.

3. (a) A certificate from an approved nonprofit budget and credit counseling agency describing the individual or group briefing received by you. (b) If you developed a debt repayment plan as a result of the briefing, a copy of the plan.

4. A record of any interest you have in an educational individual retirement account or under a qualified state tuition program.

5. A copy of your federal income tax return, or a transcript of the return, for the two most recent years ending immediately before we file your case and for which you filed the return.

What Must I Do Before Filing Bankruptcy?

You must receive budget and credit counseling from an approved credit counseling agency within 180 days before your bankruptcy case is filed. The agency will review possible options available to you in credit counseling and assist you in reviewing your budget. Different agencies provide the counseling in-person, by telephone. or over the Internet. If you decide to file bankruptcy, you will need to file with the bankruptcy forms in your case a certificate from the agency stating that you received the counseling.

If you decide to go ahead with bankruptcy, you should be very careful in choosing an agency for the required counseling. It is extremely difficult to sort out the good counseling agencies from the bad ones. Many agencies are legitimate, but many are simply rip-offs. And being an "approved" agency for bankruptcy counseling is no guarantee that the agency is good. It is also important to understand that even good agencies won't be able to help you much if you're already too deep in financial trouble.

Some of the approved agencies offer debt management plans (also called DMPs). This is a plan to repay some or all of your debts in which you send the counseling agency a monthly payment that it then distributes to your creditors. Debt management plans can be helpful for some consumers. For others, they are a terrible idea. 

The problem is that many counseling agencies will pressure you into a debt management plan as a way of avoiding bankruptcy whether it makes sense for you or not. It is important to keep in mind these important points:

1. Bankruptcy is not necessarily to be avoided at all costs. In many cases, bankruptcy may actually be the best choice for you.

2. If you sign up for a debt management plan that you can't afford, you may end up in bankruptcy anyway (and a copy of the plan must also be filed in your bankruptcy case).

3. There are approved agencies for bankruptcy counseling that do not offer debt management plans. It is usually a good idea for you to meet with an attorney before you receive the required credit counseling. Unlike a credit counselor, who cannot give legal advice, an attorney can provide counseling on whether bankruptcy is the best option. 

If bankruptcy is not the right answer for you, a good attorney will offer a range of other suggestions. The attorney can also provide you with a list of approved credit counseling agencies, or you can check the website for the United States Trustee Program office.