Credit counseling is a required step before you file for bankruptcy. This consultation, which you get at a credit counseling agency, is to determine if you have any alternatives to bankruptcy that would not increase your debt load. Here are some things you need to know about this process.

When you file for bankruptcy, you have to present a certificate of completion from the agency where you had credit counseling. This certificate must be presented in fifteen days or less from the day that you filed for bankruptcy. You have to actually take the counseling before you file. For the certificate to be valid, you must have received counseling from an agency that has been approved by the U.S. Trustee's office.

Why do you have to have this pre-bankruptcy counseling? As helpful as bankruptcy can be, you do not want to take this step if you do not need to. A consultation is meant to look over your options to see if you can create a plan of repayment with creditors yourself. The agency will likely look at your income and expenditures and establish a budget. With this, they will look at your debt and see if there is a way for you to get out of it on your own. For many people, however, this consultation is a formality; an agency will usually agree that you need bankruptcy.

However, if an agency says otherwise, you do not have to follow what it says. You only have to go to the consultation; it is not binding. You will have to file any of its alternate recommendations in the bankruptcy though. You should consult a bankruptcy attorney about this, as a bankruptcy court could see this alternate repayment plan and decide that you should file for Chapter 13 instead of Chapter 7 bankruptcy. This would mean that you end up paying a good bulk of the debt yourself.

Will this consultation cost anything? That will depend. If you cannot afford to pay, then agencies are required by law to offer a consultation that is discounted or free. Lowered prices are often based on income level. If you are not in a hurry, you might be eligible to get free counseling from ConsumerBankruptcyCounseling.info, but to get the certificate of completion will usually cost five dollars.

Now, having said that credit counseling is mandatory, there are exceptions to this still. For example, if you find that there is no U.S. Trustee certified agency in the area where you want to file for bankruptcy, then you do not have to go to this consultation. But you do have to get it over the phone or online if this is possible, so to get entirely out of this step is pretty hard to do. At least you could be saved an unnecessary trip.

Another exception is if you could not wait to file for bankruptcy, such as to evade foreclosure or wage garnishment, and you could not get counseling by the time five days had passed for your request for a consultation. If you can prove this to a court, then you can bypass the credit counseling, for the time being. If the court accepts your reasons for not getting credit counseling yet, this will usually mean you have to finish a consultation within 30 days from the time your bankruptcy was filed. You can request a 15-day extension if necessary.

You do not have to take credit counseling if you are physically disabled and cannot go to a consultation (but you will probably have to get this on the web or on the phone though). Also, anyone who is mentally unable to understand this counseling is exempt. Finally, an exemption for credit counseling is available if you are in a military combat zone on active duty.

If you have any further questions about what it takes to file for bankruptcy, do not hesitate to contact a legal expert. Call a bankruptcy lawyer today!