Bankruptcy and Credit Counseling: What it is and Why it's Required

Bankruptcy and Credit Counseling: What it is and Why it's Required

Credit counseling is one of the steps involved with filing for bankruptcy, and exploring how this process works may help you better prepare for it. Finding out the benefits of credit counseling can help you decide whether these steps are right for you. You can also consult with an experienced Chattanooga bankruptcy attorney about what bankruptcy involves.

Why is Credit Counseling Required

Not everyone realizes that one of the requirements for bankruptcy is undergoing credit counseling training. A credit counseling certificate from your credit counseling courses must be provided to the court. Otherwise, your bankruptcy request can be denied by a court judge or your trustee, who will manage the process.

Not only that, but certain states require you to only take credit counseling courses that are approved by the United States Trustee Program. Debtor education is another mandated course that must be taken for you to file for bankruptcy. In some cases, the debtor education course is taken before bankruptcy, and in other cases, this course is taken after bankruptcy.

You might be wondering why you have to take these courses to file for bankruptcy. The goal of credit counseling and debtor education is to prevent you from having to file for bankruptcy again. Credit counseling will teach you financial skills to escape debt and take greater control of your finances.

The outcome of credit counseling is usually a debt management plan and a certificate that you have completed the course. Your credit counselor will also negotiate with your creditors to lower your interest rates and debt payments. In some cases, this may involve debt forgiveness or debt consolidation. Bankruptcy plays a role in discharging debt as well.

Credit Counseling Benefits

You might be wondering if credit counseling will actually help you. Exploring the costs and benefits of credit counseling may help you decide. The costs of credit counseling are usually free because many credit counseling agencies are non-profit organizations. Many of the other cons involve the person seeking credit counseling:

  • Debt management plans do not work if the person does not commit to them

  • You may not gain the credit you want

  • Creditors may decide not to lower your debt

  • Missing payments still cause financial problems

Filing for bankruptcy may change some of these since bankruptcy involves blocking creditors from taking legal action. Bankruptcy also involves a new payment plan or debt discharge with your creditors, something the creditors will come to an agreement with.

The benefits of credit counseling are preventing future financial problems like bankruptcy. Other benefits include learning how to budget, creating budgeting plans, rebuilding your credit score, and accumulating powerful financial skills. Credit counseling may change the way you use money for the rest of your life.

Call Tom Bible Law for Legal Aid

You may not have to do the stressful bankruptcy process alone. All you have to do is contact us today at Tom Bible Law by dialing (423) 424-3116 for a consultation about your financial situation. Our dedicated team of Tennessee bankruptcy lawyers can help you navigate the complex process of filing for bankruptcy. We can be found throughout the Tennessee cities of Chattanooga and Tullahoma.

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