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Is credit counseling required before filing for bankruptcy?

An Ohio resident considering bankruptcy may have exhausted numerous strategies for dealing with debts, but it is important to understand that pre-bankruptcy credit counseling is required prior to filing. This counseling must occur within the 180-day period before filing, and it must be provided by an organization that is approved by the government. In finding an approved agency for this course, it is helpful to explore resources from the U.S. Trustee Program as only the organizations appearing on the program's lists are acceptable.

The counseling session typically takes up to 90 minutes and is given in person, is conducted via telephone or is offered online. The session may cost approximately $50, but exceptions may be provided if an individual going through the counseling cannot afford the fee. The scope of the session will involve the evaluation of one's financial condition. A personal budget may be created, and a counseling organization may also help an individual to explore alternatives that may eliminate the need to file for bankruptcy.

Upon completion of pre-bankruptcy counseling, an individual should receive a certificate as proof of participation. While many may continue in their plans to file for bankruptcy, some may find that the solutions explored during the course delay or eliminate the need for the filing. Those who do proceed into bankruptcy will also face a later educational requirement as they go through a post-filing session. While some of the information may seem repetitive, the post-filing course is designed to help those dealing with bankruptcy to manage credit and money wisely in the future. Procedures and costs for these courses may be similar to those of the pre-bankruptcy courses.

An individual who has completed the counseling requirement may still believe that bankruptcy is the best option for getting a fresh financial start. In this case, it may be important to discuss the options with a lawyer so that the type of bankruptcy can be determined and so that paperwork can be filed.

Source: The Federal Trade Commission, "Filing for Bankruptcy: What to Know", September 22, 2014

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