Thursday, July 21, 2005

Credit Counseling

Credit Counseling, Part 1

The requirement for credit counseling prior to filing bankruptcy has been widely published and discussed as a major reform that is to reduce the number of bankruptcy cases filed. §109(h)(1) of the amended Code titled “Who may be a debtor” introduces this new requirement. (for a redlined copy of the amended code I have been using one from Skadden Arps, a .pdf is available at http://www.skadden.com/content/Publications/Publications1029_0.pdf ) No more than 180 days prior to the filing of a case a debtor must obtain credit counseling from an approved organization, described in §111(a). This counseling may take to form of one-on-one counseling, group counseling, telephone or internet based counseling. On its face this seems to be a fairly innocuous requirement, who could argue that it is too much to ask that people try to solve their problems without filing bankruptcy? In the practice of consumer bankruptcy here in SC this will be an issue the last Friday of every month, as foreclosure sales are the first Monday of every month. What do you do when a debtor comes into your office at 5:00 on “Black Friday” and wants to save their house? Well, section 109(h)(3)(A)(i) does allow that under “exigent circumstances” a debtor may receive a waiver of this requirement(counseling still must happen within 30 days of filing a case). I would not expect there to many waivers granted based on debtors waiting to the last minute to file, this would seem to be more like inexcusable neglect than “exigent circumstances”. Waiver may also be granted if counseling is not available within 5 days of the request for counseling. What I would expect to come of this situation is that some enterprising non-profit will create and get approved a web based counseling system which will allows debtor attorney in this situation to bring clients in day or night, sit them at a computer and have them do what’s needed to comply. A copy of any repayment plan devised by a credit counselor must be submitted to the Court as well(section 521(b)(2)). This requirement, like many in the reformed Code, directs debtor attorney to submit documents to the Court, but gives no indication of what effect it will have.

The waiver under section 109(h)(3)(A) requires all three prongs, exigent circumstances, unavailable counseling (within 5 days), and court approval.


7 Comments:

At 10:16 PM, Anonymous avoid bankruptcy said...

Hi there Mark W... Look where I landed searching for info on types of bankruptcy. But since Im here... I thought I'd just stop by and read... I found your post "Credit Counseling" kinda interesting.
Do you always write that way?
I guess I'd better be on my way as I still need stuff on types of bankruptcy for my project.
Thanks for a good read Mark W ...and keep doing all the great blogs. Cheers.

 
At 11:15 AM, Anonymous bankruptcy law said...

Hiya Mark W,
Didnt know searching on the net for chapter 11 bankruptcy would bring me here. But hey... reading your post "Credit Counseling" was entertaining.
While it may not be exactly related to chapter 11 bankruptcy, it was nevertheless a pleasure to have visited your blog. That's the beauty of the internet.. u just dont know what you will find at the next corner.
Mark W, its been great to visit your blog...do keep blogging and continue to make the web a more interesting place..cheers mate

 
At 8:46 PM, Anonymous bankruptcy lawyer said...

Hi there Mark W... Look where I landed searching for info on chapter 11 bankruptcy. But since Im here... I thought I'd just stop by and read... I found your post "Credit Counseling" kinda interesting.
Do you always write that way?
I guess I'd better be on my way as I still need stuff on chapter 11 bankruptcy for my project.
Thanks for a good read Mark W ...and keep doing all the great blogs. Cheers.

 
At 7:25 AM, Anonymous bankruptcy law said...

Hello Mark W,

Hmmm...fancy that a search for chapter 11 bankruptcy brought me to your blog. Hah! Maybe our stars are aligned tonight :)

May not be the exact infomation on chapter 11 bankruptcy ...but am glad to have dropped by. Your post on Credit Counseling makes an intersting read.
Mark W, keep up the nice work on the blogs. Cheers and all the best!!

 
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