What Happens If I Don’t Complete The Debtor Education Course?
Filing for bankruptcy is not an enjoyable process, but at least it does provide relief from being overwhelmed with bills or fear of losing your home or other possessions. It’s often the last resort, an escape from hounding creditor phone calls, threats to take away personal property, and overwhelming financial burden.
Although bankruptcy does come at the cost of damaging your credit score for several years, it can provide security and peace of mind.
There are a few different options for bankruptcy. Two of the most common are Chapter 13, during which you can establish payment plans for your debt, and Chapter 7, where your debts are forgiven, or “discharged.” You are no longer liable for their repayment, and it becomes illegal for creditors to harass you any further.
Under Chapter 7, a person may need to turn over some property (non-exempt) to a third party known as a trustee, so the trustee can sell it and use the proceeds to pay off some debts. Otherwise, exempt property can be kept and outstanding debts are erased.
Courts understand that it’s possible for even responsible people to fall on hard times, lose a job, get carried away with purchases, or bite off a little more than they can chew financially, and when that financial burden becomes too great for repayment to remain as an option, Chapter 7 is a way out.
While the process is relatively straightforward, its components are each vitally important. Missing even a single element will result in a denial of your claim, or your case being closed or dismissed without a discharge. In that event, you would continue to owe all previous debt, and your home and possessions would once again be at risk. For this reason, we always recommend that you seek competent legal representation to assist you in filing bankruptcy.
Pre-Filing Credit Counseling
Before filing bankruptcy, you must attend (or complete online) a credit counseling course. The course must be completed within six months of the time you decide to file for bankruptcy.
Bankruptcy, while it is a means to escape oppressive debt, should only be used as a very last resort option, as it does not come without cost. It deeply impacts your credit for quite a long time, which can impact major life events, like getting a mortgage to purchase a home, establishing financing to buy an engagement ring, even securing student loans.
While it may seem like a “quick fix,” the lasting implications can be more serious, and credit counseling works with the debtor to make sure it is truly a last resort. It is often a good idea to get an idea of what alternatives may be available in your case. In many cases, filing bankruptcy really is your best option. Once this class has helped you to assess your situation and finances clearly, with all options presented, the bankruptcy can be filed and proceedings can begin.
What If There’s An Emergency?
If you need to file bankruptcy immediately to avoid an impending disaster like a foreclosure or wage garnishment, you could seek to avoid taking the credit counseling course. In that case, you must have contacted the credit counseling agency, been unable to complete the course in under a week, but needed to finish filing for bankruptcy in less time than that.
This circumstance, however, is merely a time extension, not a true exemption, It does not mean that you never need to take the course, just that you may do so after filing for bankruptcy, and even then you’ve only got 30 days to complete the course.
This kind of a situation would occur if your creditors have gotten far enough along in their pursuit of payment where they are ready to start garnishing your wages within the week, and you simply cannot afford not to be paid. In this case, you would need to get ahold of your nearest, quickest credit counseling provider that is approved by the US Trustee and begin the course, and not be able to complete it before your bankruptcy needs to be approved to prevent the garnishment.
Again, this would be very unlikely because the course usually only lasts an hour and a half. If you have had time to contact your lawyer, file all the paperwork, and get to court for the creditor meeting, you probably can find an hour and a half to finish this one last piece of the bankruptcy puzzle.
Meeting of Creditors
Once proceedings begin, debtors must participate in a meeting of creditors.
Usually, this consists of the trustee and possibly a creditor for a vehicle, or the IRS interviewing the debtor to learn more about their financial situation and assets, the accuracy of their bankruptcy information, and other banking information. If you have an attorney, typically your attorney or an associate from their office will be there with you.
Finish the Debtor Education Course on Time…and Prove It
Once that is completed successfully, you are required to participate in a financial management course within 60 days following the debtor’s meeting of creditors. This course reviews household budgeting and bill paying techniques to set you up for success in the future, so you don’t wind up in need of bankruptcy in the future. You will need your case number and filing district to be able to sign up online for the course. This is the course that BE Adviser offers, and you can sign up for an account here.
While it sounds like a simple “Personal Finance 101”, it is one of the most important elements of your bankruptcy proceedings, since you will not be granted a discharge of your debts if your lawyer has not successfully filed your certification of completion of the course with the courts. Just as important as taking the class, however, is making sure your lawyer files your certification of completion with the courts within the allotted time frame.
If the certificate is not filed, your case could be closed without a discharge, and you’ll be back where you started. Without the discharge granted, creditors may continue to demand payment, even though you have filed a request for bankruptcy, and your case may be closed.
But I Don’t Have Time / Transportation
The course is designed to be very easy to find and attend. To avoid the issues of time or transportation constraints, these courses are often available in person, online, or over the phone. The BE Adviser course is offered online to make it simple.
By virtue of being in bankruptcy proceedings in the first place, the court assumes that you have not learned or practiced responsible debt usage, how to prepare and adhere to a budget, consumer protection laws, or what to do when unexpected financial emergencies arise.
As such, the course is tailored to address all of those issues so you can be prepared to start over more successfully. Keep in mind, everyone in bankruptcy has to take the course, regardless of their current financial knowledge or skill level.
What If My Case Is Closed Without Discharge?
The fact that your case may be closed does not mean that it is closed forever. If time got away from you and you neglected to complete the course in time, or if your lawyer didn’t get around to filing the certification of completion with the courts in a timely fashion, all is not lost.
First, you will need to complete the financial management course. It is required as part of your bankruptcy, and there is no avoiding it unless you qualify for a rare exemption.
Then, your lawyer will need to file form 23 with the courts as quickly as possible. Your bankruptcy attorney will then need to file a motion to reopen the case. Because of your failure to complete the requirements in a timely fashion, the case has been tucked away in a drawer labeled “closed” where no one has reason to look at it again until you tell them to. For their efforts to dig out your paperwork once again, you’ll have to pay a fee to reopen the case.
If your case was closed without discharge because your lawyer was the one who did not file the certificate of completion after your financial management course, you may be able to get him to cover the fee. If you were the one who did not take the course in time (or at all), the fee will be on you, and your debtor’s lawyer will probably charge you a fee for working with the courts to open the case again as well.
Then you will need to schedule a hearing date for the motion, and serve the motion and notice of hearing. Both you and your lawyer will need to attend the hearing. The hearing itself is not terribly involved at this point.
As long as you have everything documented and filed, you will likely have any difficulty receiving a discharge. However, you may be required to provide an explanation as to why you failed to complete (or just to file paperwork for) the financial management course in the first place.
The best way to avoid this hassle is to complete the course in the first place, make sure your bankruptcy attorney is in possession of your certificate of completion of the course, and make sure your attorney actually follows through and files the document in a timely fashion.
This sounds like it would be utterly unnecessary, reminding your lawyer to file mandatory paperwork in a timely fashion, the simple act of neglecting to file this paper can cost you your entire case. Lawyers, like the rest of us, have a lot on their plate, and it’s easy to miss a deadline, so remember for them!
One of the nice things about the BE Adviser course is we have an expedited filing feature. If you have that option on your account, the certificate will be filed with the court by us within two hours during normal office hours. When the course provider files the certificate, Form 23 is not required. It saves your attorney some time, and gives you the peace of mind that the certificate was filed promptly.
What If I Never Complete The Course?
If you decide never to complete the course at all, even if you have fulfilled all the other bankruptcy obligations, everything will go back to the way it was before you ever filed for bankruptcy.
The case will be considered dismissed without discharge, meaning the whole court case gets thrown out. Creditors and debt collectors may resume calling and pursuing their payments, foreclosures can continue, cars can be repossessed, and lawsuits can even be filed against you for failure to pay. If your case is closed without a discharge, you will want to get back in to see your attorney immediately to correct the issue.
What If You Can’t Afford To Take A Course?
Thankfully, the US Trustees realize that if you are filing for bankruptcy, the last thing you need is another giant fee to pay. Recent laws set forth by the US Trustees state that companies offering Debtor Education Courses can charge no more than $50, unless they have special permission to do so.
If your income falls below 150% of the poverty line, you may be eligible to have the course fee waived if you apply and are approved. Under some circumstances, the course company may choose to challenge the waiver by using your financial information to prove that you are capable of paying at least a reduced fee. In the scheme of the whole bankruptcy procedure, the $50 fee to pay for this class is really the least of your worries, and by far the least expensive part.
The fact that simply paying to take this class (and actually taking the class) will help to dismiss all the rest of your debt makes it well worth the price!
Is Exemption From The Course Possible?
There are exceptions to every rule. In very special circumstances, you may be exempt from having to complete debtor education course. These circumstances are exceedingly rare, so don’t count on them.
You are exempt if you have a disability or incapacity that makes taking the course impossible, if you are on active duty in an active combat zone, are filing bankruptcy in an enormous hurry to prevent significant harm, or if no debtor education course is available in your area.
This last situation is nearly impossible because most of the courses are available online, in person, or over the phone if you prefer.
Remember, the court is trying to help you.
They want to make sure you are well educated on what led you to make the financial mistakes which resulted in the bankruptcy, and how to avoid those mistakes in the future.
Whether it was simply mismanagement, lack of funds, exorbitant spending, mistakenly neglected bills, or a lost job, the court wants to give you a way to move forward, but this time with the tools and understanding to be able to make educated decisions to set you up for future success.
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