Under new laws, an individual debtor is ineligible to file for bankruptcy unless he or she has gotten a briefing from an approved credit counseling service or nonprofit budget organization. This is true unless the bankruptcy administrator or the U.S. Trustee determines that the service in the debtor’s location is not reasonably able to provide appropriate services for that person.
The law exempts individuals who are unable to comply as a result of active military duty, disability or incapacity. When you come to a credit counselor, you’ll be asked to provide clear and upfront information about your living expenses, your assets, your income, the creditors to which you owe money and household information. Credit counselors may attempt to get you to enter into a plan of repayment and would then accept their payment as a percentage of what is paid out to the creditors. This sum is typically between zero and 15%.
There is a monetary incentive for credit counselors to keep you out of bankruptcy but this does not necessarily mean that credit counseling will resolve all of your problems or that it is indeed the best avenue to go in order to resolve your issues. This is because many people who are in the position of filing for bankruptcy to begin with, may be in way over their head and are unable to come up with the appropriate funds to make payments even when a credit counselor takes the necessary steps to improve their overall situation.
If you are already struggling to keep up with the minimum payments and feel as though a credit counseling service is not going to do enough to push you in the right direction, you could end up being more stressed out than when you started. Although it is important to go through the credit counseling process, you should also consult with an experienced bankruptcy attorney to discuss all of your other options.
If credit counseling is not successful, filing for bankruptcy promptly can help you gain the benefits of an automatic stay and may even stall your foreclosure proceedings in the event that you’re concerned about losing your home. Talking to a bankruptcy attorney will give you a clear overview of what to expect in the bankruptcy process and can help to alleviate some of your fears and concerns.