Satisfying the Debtor Education Requirement

Posted by Kevin on November 27, 2017 under Bankruptcy Blog | Comments are off for this article

In a prior blog, we talked about the credit counseling course that a debtor must take before he or she can file under Chapter 7 or 13.  After the petition is filed, the debtor must take the debtor education course.  This is sometimes called the personal financial management course.

The course is given by a non profit budget and credit counseling agency approved by the United States Trustee.  The course is usually taken online but, depending on the provider, can be done over the phone, or even in person.  The  purpose of the course is to provide the debtor with insight into his or her current financial situation which led to the bankruptcy, and how to budget income and expenses to avoid financial problems going forward.

The debtor education course requirement was part of the 2005 amendments to the Bankruptcy Code.  As I stated in the blog dealing with the credit counseling course, in my opinion, one of unspoken policies for the 2005 amendments to the Bankruptcy Code was to discourage bankruptcy filings by making them more time consuming and expensive.   The debtor education course requirement (just as the credit counseling course requirement) is an additional hoop through which a debtor is forced to jump.  Hate to sound cynical, but in the 12 years since the 2005 amendments, I have never had a debtor tell me how valuable either course was.

So, what happens if you decide to save a few bucks by not taking the debtor education course.  The punishment is draconian.  No course taken- no certificate of completion filed with the Clerk of the Bankruptcy Court, no discharge.  That means that your debts are not wiped out.

I remind my clients at the meeting of creditors that if they have not already taken the debtor education course, they should do so immediately.

Let’s say you mess up and don’t take the course.  Any recourse?  You may be able to re-open your case to take the course and file the certificate of completion.  However, you will incur additional legal and filing fees.  In the meanwhile, because your debts are not discharged, your creditors can take action to collect of their debts.  Finally, there is some risk that the judge will not let you reopen the case.  Don’t put yourself in that position.