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The Bankruptcy Abuse Prevention and Consumer Protection Act (2005), the first major bankruptcy law reform in two decades, requires all filers to have financial and credit counseling sessions. Although mandatory pre-bankruptcy counseling has been the rule since the act took effect, many consumers express surprise when advised of this necessity. Miami residents are no exception, since bankruptcy is, hopefully, a once-in-a-lifetime financial solution.

While more Americans than ever, are choosing to file for either Chapter 7 or Chapter 13 bankruptcy to deal with their financial woes, most consumers are completely unaware of the “intricacies” of this federal law. Having so much “company” does not eliminate the trauma and uncertainty of entering bankruptcy. The lack of a strong rebounding economy has fueled recent spikes in bankruptcy filings. Most people are still waiting for the real estate market to awaken, further spurring bankruptcy filings, as foreclosures continue on a large scale.

Mandatory credit counseling must take place within 180 days prior to filing a bankruptcy petition. Be sure to get financial counseling from a source that is approved by the U.S. Justice Department’s Trustee Program to meet this requirement.

Fortunately, you need not become a financial “guru,” as most counseling sessions take 90 minutes or less. You can even complete this requirement in-person, over the phone or online. If you can show that you’re unable to pay for the program (you are about to file bankruptcy, are you not?), counseling services are free.

The goal is to help you better understand, manage and organize your financial life in the future. Combining this new financial knowledge with having an experienced bankruptcy attorney should help you avoid using federal bankruptcy laws more than once.

How do you feel about the merits of mandatory credit counseling before filing for bankruptcy?

Source: Minuteman News Center, “Heading to bankruptcy? Follow the counseling rules,” April 4, 2012