Pre-Bankruptcy Credit Counseling: Is it Required?

nj bankruptcy

If you are contemplating or have already made the decision to file for bankruptcy, you may be wondering about the NJ pre-bankruptcy credit counseling course you’ve heard mentioned. Is it required to do pre-bankruptcy credit counseling before filing for Chapter 7 or Chapter 13 bankruptcy in New Jersey? Does everyone have to take the course? What are the stipulations and specifics? Let’s take a look at the nitty gritty details.


When do I have to take the pre-bankruptcy credit counseling course?


Within 180 days of filing for bankruptcy in New Jersey, you must show proof of credit counseling from a non-profit agency that has been approved by the office of the U.S. Trustee. This step is required if you plan to file for bankruptcy. Within 15 days of filing for bankruptcy, you have to file the certificate of completion your credit counseling agency presented you with. Additionally, any suggested repayment plan(s) that you developed with the agency will also be provided so you can present it to your bankruptcy attorney.


Is this really necessary? Who is profiting from this course?


You may be asking, is there more than meets the eye when it comes to pre-bankruptcy counseling? Some debtors are initially suspicious of taking the course, with thoughts like:

  • “Am I going to be charged more money for this course?”
  • “I am already paying a bankruptcy attorney to help me with this.”
  • “Is this just a ploy for the government to make even more money?”

The goal of bankruptcy counseling is to help you determine if filing for bankruptcy is really the right move for you. During the course, you’ll work through your finances with a certified credit counselor. They’ll be able to assist you in deciding if Chapter 7 or Chapter 13 is better for your unique situation, or if you can come up with an informal payment plan to help you overcome the debt without filing for bankruptcy. The repayment plan may not be realistic for you, especially if you have a low income and the bills are too high. You may not want to pay off high credit card debt with inflated interest rates or emergency room bills.

Even if either of the above stipulations in bold describe you, counseling is still required. Typically, the agency will prepare a repayment plan for you based on your income and debt, and then will review your available options for repayment. In the majority of cases, if you don’t have any other options besides filing for bankruptcy, the agency will confirm that no feasible options exist.


I’ll listen to what they have to say, but I’m not going to participate.


You are actually obligated to participate in the counseling, as well. This will be one of your first steps in getting your money mindset turned around. Your counselor will help you begin to formulate a working budget so that you don’t end up in this situation again. Whether you choose to follow the suggested repayment plan or not (if one was proposed during counseling), you do have to include it when filing for bankruptcy.


What kind of agency provides pre-bankruptcy credit counseling?


Here are a few tips when searching for a professional credit counseling agency:

  • Look for a non-profit agency that has at least 7 to 10 years of experience.
  • If you can’t afford the fees, ask around – some agencies are willing to renounce or lessen them.
  • Debtors who make less than 150% of the poverty level for a family of the same size, there must be a sliding scale fee or fees must be waived completely.
  • The agency should be a part of the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA).
  • It’s important to check with the Better Business Bureau to see what information they have on the agency you’re researching.
  • The agency must be approved by the Department of Justice if you’re specifically in need of pre-bankruptcy credit counseling.

I’m disabled; do I still have to take the course?


Pre-bankruptcy credit counseling is required whether you’re considering filing for Chapter 7 or Chapter 13 bankruptcy. The only people who are exempt from the course are those who are:

  • Currently on active military duty in a combat zone
  • Physically and/or mentally impaired or handicapped so severely that it prevents you from taking the course

If, for some reason, you intended to take the required course but became ill or encountered an emergent situation that prevented you from attending, you’ll need to petition your bankruptcy court to allow you to take the course after your case has been filed. Talk to your NJ bankruptcy attorney about this, if this situation arises.


What do I need to do to prepare for the credit counseling course?


Make sure you are knowledgeable regarding your current financial state before attending counseling. If you have already met with a bankruptcy lawyer in NJ, you can ask what they recommend you have with you when you begin the course. In short: anything you’d share with your bankruptcy attorney is applicable and should be mentioned and discussed during your credit counseling course.

It’s crucial to be mentally present during your credit counseling (avoid going on “auto-pilot” or “zoning out”) because it will help you reach your goal of climbing out of debt. Not only is it a practical way to deal with your debt outside of bankruptcy, but it can also help you to avoid adding even more debt to what you already owe.

Remember: your NJ bankruptcy attorney can assist you with setting up the pre-bankruptcy counseling course, as well as help you get all of your financial paperwork and information organized prior to attending so that you’re prepared. This will allow you to get the most out of the assistance the counseling will offer you.

Image: “Pieta House” by Joe Houghton – licensed under CC 2.0

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