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What Is the Debtor Education Requirement in Bankruptcy?

In addition to the ā€œcredit counselingā€ that you must doĀ beforeĀ you can file a bankruptcy case,Ā afterĀ filing the bankruptcy you must also complete ā€œan instructional course concerning personal financial managementā€ in order to get a discharge of your debts. This second step is generally called the ā€œdebtor educationā€ requirement.

It is required in both Chapter 7 and Chapter 13 cases, as stated inĀ Sections 727(a)(11)Ā andĀ 1328(g)Ā of the Bankruptcy Code.

The Most Important Thing to Know about This Requirement

The most important thing is to get it done, and done on time. The primary goal of a Chapter 7 case is to get a discharge of your debts. Most Chapter 13 cases have that as a major goal as well—to discharge whatever debts are not paid during your case.Ā If you do not complete the debtor education step, your bankruptcy case will close but you will not receive a discharge of your debts.Ā You will have gone through a great deal of trouble without getting to your intended goal.

If your caseĀ isĀ closed without a discharge, usually you can still complete the debtor education, a judge will likely be persuaded to reopen your bankruptcy case and enter the discharge order, but there are two big reasons you want to avoid having to go through all that:

  1. It would cost you hundreds of extra dollars of filing fees and attorney fees for this additional work.
  2. Your creditors would be able to pursue you and your assets during the period of time from when your case is closed until this problem is fixed. Clearly these are consequences you want to avoid.

So What Does ā€œDebtor Educationā€ Actually Involve?

This 90-minute or so class is ā€œdesigned to assist debtors in understanding personal financial managementā€œā€”such as the appropriate use of credit, and budgeting skills. Like the pre-bankruptcy ā€œcredit counseling,ā€ it can be done online, over the phone, or in person. You can choose to have it be in English or various other languages. When both spouses file a joint bankruptcy, both spouses must take this course. When you complete the course, you receive a certificate of completion which must be filed at the court.

Also like ā€œcredit counseling,ā€ the service is provided byĀ a long list of agencies approved by the U.S. Trustee’s Office. Because these agencies’ quality, convenience, and cost can vary widely, and can also change over time, if you are in the Dallas or Fort Worth area please call us, Leinart Law Firm, for information about credit counseling.

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