What is a Credit Counseling Class for Purposes of Bankruptcy?

August 17, 2010

By: David M. Serafin

Right before filing for bankruptcy in Colorado, my clients understandably want to know what a credit counseling class is. There are actually 2 courses which need to be taken: a pre-bankruptcy credit counseling course and a financial management course. Each course requires that you provide information about your monthly income and expenses, and assets and liabilities (e.g. the same info to be provided in the bankruptcy petition). The requirement to complete a credit counseling course is rather new as it was included within the 2005 bankruptcy revisions.

Each course can be taken on-line or by phone, and each course only takes about 1 hour to complete. A very strict requirement imposed by the Bankruptcy Code is that debtors in Colorado must complete the entire credit counseling course BEFORE filing for bankruptcy (or else an already filed case will be dismissed and the debtor will be required to pay another filing fee).The timing requirement for the latter financial management course is a bit more lenient – this course needs to be taken within 45 days after the 341 Meeting of Creditors.

The bottom line for my clients in Denver and most areas of Colorado is that there is no pass or fail grade issued when the class is completed. And you cannot be told by anybody that you do not qualify for bankruptcy. Also, keep in mind that many credit counseling agencies are owned and operated by credit card companies, which have an incentive to discouraging you from filing for bankruptcy and which will attempt to deceive you into believing that you can pay back all of your debts (even as the credit card companies continue to charge interest rates of 20%-35%, not to mention the late fees, finance charges, etc.