Bankruptcy and Pre-Petition
Credit Counseling
The debtor must
receive a Credit Counseling Briefing and budget analysis within six months
prior to filing the bankruptcy case. The requirement permits the briefing
to occur by telephone, in person or on the Internet.
The credit
counseling agency is to be a nonprofit agency and approved by the U.S.
Trustee. The charge is for the briefing to be reasonable and to be waived
if the debtor is unable to pay. See a
list of agencies
approved by the U.S. Trustee for the District of
Arizona.
The counseling is
to analyze the 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.
The counseling agency is to disclose its funding sources, counselor
qualifications, possible impact on credit reports of its credit counseling
program and the costs of a credit counseling program.
The exceptions to
the briefing requirement are:
-
a debtor that
provides a certification of exigent circumstances that require an
immediate filing and that the debtor was unable to get the briefing
within the prior five days,
-
there is no
qualified counseling agency within the court district, or
-
the debtor is
disabled or on active military service in a combat zone.
Courts interpreting
these changes tend to define "exigent circumstances" extremely narrowly.
For example, the fact that a homeowner facing a foreclosure with a 20-day
notice contacted an attorney on the 20th day has been found not to be an
exigent circumstance, as the debtor had 20 days to take the Credit
Counseling Briefing. Also the courts are requiring extreme diligence
within that five-day period. If the court does find exigent circumstances,
the debtor is still required to get the briefing within 30 days of the
filing.
The case of a
debtor who does not get a timely Credit Counseling Briefing will be
dismissed. The consequence of a dismissal can be severe. The case can not
be reinstated, and if the debtor files a second case within a year, that
debtor will have to prove entitlement to extend the automatic stay for
more than thirty days against creditors. |
