debt counseling

The Benefits Of Credit Counseling When Filing Bankruptcy

If you’re working with a chapter 7 bankruptcy attorney to do an individual filing for bankruptcy, you may have heard about or been urged to take a credit counseling course as well. There is a credit counseling requirement for both chapter 7 and chapter 13 bankruptcies, and while it may be mandated, that doesn’t mean that it is without benefit. In truth, there are some good reasons for wanting to fulfill that credit counseling course during a bankruptcy filing.

Pre- and Post-Bankruptcy Coursework

We briefly mentioned the credit counseling requirement, but it’s actually one of two requirements, with the other being a debtor’s education course.

The credit counseling course serves as the preliminary coursework, in which you review your finances, explore alternative repayment options, and move forward with bankruptcy if it is the right choice for you. The primary purpose for the pre-bankruptcy credit counseling is to gain an idea of whether or not you truly need to file for bankruptcy.

In some cases, the answer will be “yes,” but in others, it may be possible that some kind of repayment plan is the better option. In either case, the credit counseling process will take a close look at your current financial picture and debt relief possibilities, while providing you with education (from a certified counselor) on some of the following important topics:

  • How to stay on target with monthly payments.
  • How to pay down debts more quickly.
  • What you’ll need to do to improve your credit score.
  • Formulating a debt repayment plan.
  • Learning how to budget and manage money.
  • Various credit repair tactics.

Successful completion of that credit counseling course may bring you some of the following benefits, which will help you avoid making the mistakes that lead you into debt:

  • Credit counseling can help you avoid going through bankruptcy altogether, and the negative consequences that may come with it.
  • The debt management plan you devise could be useful in consolidating your debts into a single, monthly payment that may be more manageable for you.
  • The information you learn about creating (and sticking to) budgets will be invaluable. You should, once you’re finished, be able to discern the differences between good/bad debt and make the right decisions in the future so you can avoid trouble. 

What’s more, this credit counseling is generally free, so it’s an excellent resource for you to take advantage of regardless. Combined with post-bankruptcy debtor education, you should be equipped with a whole host of tools to better manage your financial situation. This is assuming, of course, you’re able to mitigate drawbacks and surmount some of the hurdles of credit counseling. Broadly speaking, you should watch for the following:

  • Becoming lackadaisical and not following through with debt-management measures.
  • Failing to pay what you owe on-time or leaving the program too early.
  • Having another financial setback during your counseling period.

All-in-all, though, this is a sound measure for helping improve your financial competency, so be sure to follow through with your credit counseling courses and make the most of them.

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