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Credit Counseling And Bankruptcy


When the bankruptcy laws changed in 2005 mandatory credit counseling became a prerequisite for bankruptcy.

I have to admit, that when it declared bankruptcy it was the credit counseling sessions that I was most afraid of. What if they told me I shouldn’t declare bankruptcy? What if they were rude? How did I even find a credit counselor, and how much would it cost?

If you’re considering bankruptcy and you are worried about some of the same things, I can honestly tell you that the credit counseling experience was a bit of a joke – it is definitely not something that you need to stress or worry over. In fact, when the credit counseling was all said and done, I was a little sad that it wasn’t more helpful.

This is how it worked for us:

We gathered all of our paperwork together, and visited our lawyer. He agreed to make payment arrangements with us, and told us he could stop the garnishment that was about to go through at my husband’s job.

Our lawyer explained that he was affiliated with a credit counseling agency (most lawyers are now, since it’s a requirement for bankruptcy). He also explained that if we wanted to go through his company we could do our first counseling session that same day.

The cost of the credit counseling sessions we went through was $50. Our lawyer did tell us that there were free agencies out there we could use, but we wanted to get it over with and do it that day, so we added the $50 into our payment arrangement with our lawyer.

As soon as we were done speaking to our lawyer, they led us into a room with a computer, and a phone. We sat down, and logged onto the credit counseling agencies site. My husband and I had to fill out a questionnaire that asked about our debt, our budget, and our income.

Since we had given that information to our lawyer and no longer had it with us, we guessed as closely as we could. Once the questions were complete, the software helpfully concluded that we had too much medical debt…..(Yeah…you think?? That’s why we were declaring bankruptcy in the first place…)

After we filled out the questions we had a five minute phone call with a “credit counselor”. The counselor apparently had access to our survey, and they spoke with us and concluded the same thing. “You have too much medical debt, try to get some insurance!”

So, that was our first credit counseling session. The second counseling session was required after we declared bankruptcy. I don’t remember exactly when we did it, but it was either after our first court date (the 341 meeting of our creditors) or after our court appearance on the day our bankruptcy was discharged.

My husband and I returned home, and logged online together. The second process was very similar to the first, and the credit counseling software really didn’t even do what I hoped it would do – It didn’t give us any clue about how to repair our credit after bankruptcy.

We followed up the second online questionnaire with another phone call to a credit counselor, and then we were finished. The credit counselor gave us a code that we passed on to our lawyer to prove that we had completed the session.

That was that. Completely unstressful, but also completely unhelpful!

So, I guess what I can draw from this experience is pretty simple:

  1. If you are worried about the bankruptcy credit counseling experience, don’t be. It’s an easy process that your lawyer can walk you through, and it will be taken care of with very little effort.
  2. If you are looking for a real credit counselor, instead of someone who is just willing to take $50 to sign off on you, don’t use the credit counselor that your lawyer will provide.
  3. If you are considering credit counseling as an alternative to bankruptcy, you will definitely want to find your own accredited counselor who is trained to help you figure out your debt and what to do.

    For more information on choosing a credit counseling agency, check out these two articles:

    How to Tell if a Credit Counseling Service is Legit

  4. Find your own education materials after bankruptcy. Since the credit counseling experience has pretty much been dumbed down to a joke, it means that if you really want to improve your situation you will have to do some research on your own.
  5. There are a few excellent resources that I can recommend to you. I have read them all since my bankruptcy, and they definitely helped me learn about what I needed to do to get my credit back on track, get my credit report cleaned up, and not make the same types of financial mistakes again.

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