Bankruptcy Credit Counseling
When people are having credit card debt problems, they often turn to bankruptcy as a last resort. Bankruptcy is an appealing option to many people because it allows them to discharge their unsecured debt. Of course, bankruptcy is a dangerous for many people. It can lead to a severely damaged credit report, making it difficult to obtain new credit. Because of all the risks that come with bankruptcy, laws were passed to make sure people think about it before using it as the solution to their credit card debt problems. As part of the law, you are required to participate in a credit counseling session at least six months before you file for bankruptcy. The session is supposed to last about 90 minutes, and the goal is to determine if there is a better option for you than bankruptcy.
When you participate in the credit counseling session, you will go through a budget analysis. The credit counselor will evaluate your debt and income in an effort to determine if bankruptcy is the right fit. This session usually carries no fee. If the credit counselor decides that bankruptcy is good for you, you can proceed with filing. However, they may decide that a debt management plan is a better option for your situation. A debt management plan is a process in which you make one monthly payment to the credit counselor. They then spread your payment out among the creditors. With a debt management plan, you will repay all of your debt over the course of months and years. However, a credit counselor can negotiate the removal of fees and interest. This option is appealing to a consumer because it is much better for their long term credit. Additionally, it can also help you learn healthy budget habits. Of course, the law only requires that you have the counseling session. You are not required to participate in a program. If you don’t participate in the program and opt for bankruptcy, all you need is a certificate that says you had your meeting.
The goal of the law is to help consumers understand what other options are available to them besides bankruptcy. Credit counseling can provide people with valuable budget help. That can help them avoid credit card debt and other debt issues in the future. For that reason, this is a good part of the bankruptcy law.