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Bar News - May 19, 2006

Credit Counseling Required Before Filing Bankruptcy


It has been six months since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) took effect and a number of issues remain surrounding the credit counseling provisions of the Act.  Presently there are over 100 counseling agencies approved by the U.S. Trustees Office to provide bankruptcy counseling.  It is not my intention to explain industry practices, but to provide some insight on how Consumer Credit Counseling Service of New Hampshire and Vermont (CCCS) views and approaches the bankruptcy counseling process.


In order to receive approval from the Executive Office for U.S. Trustees (EOUST) to provide bankruptcy counseling, an agency must meet certain requirements.  Some of the requirements include:

  • being organized as and operating as a nonprofit entity;
  • having adequate experience and background in credit counseling;
  • providing counseling by a trained credit counselor;
  • meeting bonding requirements if the agency manages client’s funds through a debt management program;
  • charging a reasonable fee and providing services without regard to the client’s         ability to pay.


CCCS has been approved by the EOUST to provide pre-filing credit counseling and pre-discharge debtor education.  The most frequently asked questions received from attorneys and debtors typically pertain to the pre-filing credit counseling requirement.  Some of these questions include: What is covered at the counseling session?  What fees do you charge?   How does one obtain services and when will the counseling certificate be issued?


The credit counseling requirements of the BAPCPA mandates that an agency shall “provide adequate counseling with respect to a client’s credit problems that includes an analysis of such client’s current financial condition, factors that caused such financial condition, and how such client can develop a plan to respond to the problems without incurring negative amortization of debt”.   (11 USC §111. (c)(2)(E))


In addition to these requirements CCCS provides an overview of the bankruptcy process and the possible effects bankruptcy may have on future credit use, such as resulting in a lower credit score, higher interest rates on loan products and the denial of credit.   While some clients may look at the counseling certificate as their ticket to bankruptcy, most clients we see are thankful for the opportunity to have a professional review their finances and perhaps for the first time in their lives, receive help with developing a budget. 


From the counselor’s perspective, his or her role is to help clients better understand the causes of their financial problems, outline their alternatives to resolve credit problems and discuss how to avoid problems in the future.  It is not the role of the counselor to encourage, nor discourage an individual from filing for bankruptcy.  This decision is left entirely to the client and the attorney.  


The BAPCPA requires that “if a fee is charged for counseling services, counselors charge a reasonable fee, and provide services without regard to ability to pay the fee”. (11 USC §111. ( c )(2)(B))  CCCS allocates 90 minutes for a typical bankruptcy counseling session.  The fee the agency charges for this counseling session is $50 per filer. This agency does not require the fee to be paid prior to scheduling an appointment.  In accordance with the U.S. Trustee’s requirements, CCCS will waive the counseling fee for those clients receiving Pro Bono services and for those individuals who have through the budgeting process demonstrated they have insufficient financial resources to pay a counseling fee. 


All counseling certificates are generated through the U.S. Trustee’s Web site.  In most cases CCCS is able to issue the counseling certificate immediately following the counseling session.


CCCS was approved by the U.S. Trustees Office to provide pre-filing counseling either by telephonic means or in a face-to-face session.  CCCS intentionally does not offer Internet- based bankruptcy counseling services.   Our philosophy is that the most effective counseling takes place when there is a one-on-one personal discussion of issues.   Over the past 34 years CCCS has established a network of 11 counseling offices throughout NH.  This positions the agency as the only independent credit counseling agency able to offer in-person services throughout the Granite State.


Although we are required to provide counseling services within five days of the request for services, we typically are able to provide services within a shorter time frame.  In those cases where time is of the essence, such as the need to file a Chapter 13 in order to stop a foreclosure, we have generally been able to accommodate most requests for service and have been able to provide clients with their counseling certificate.


The goal of credit counseling is to help individuals better understand how to live within their means and to facilitate changes in behaviors and attitudes toward the use of credit.  The approach CCCS takes towards bankruptcy counseling will help clients with the fresh start bankruptcy provides and hopefully will prevent overuse of credit in the future.


Kerry J. York is Executive Director of CCCS of NH & VT and may be reached at 603/224-6593.

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