Vast numbers of people filing for bankruptcy for the second, third or even fourth time has prompted major changes to the Federal bankruptcy code. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was signed by President Bush in 2005, and requires that all filers complete financial education classes in an effort to prevent those people from becoming repeat filers. Two different classes must be completed: one prior to filing and one before your bankruptcy becomes final.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
This act not only instituted mandatory education requirements for filers, but introduced other mandates in an effort to curb bankruptcy filings, such as a "means test" that compared a filer's income with their state's median income and requiring proof of income through an income tax return. For those who earn more than their state's median, filing for bankruptcy depends on the existence of several mitigating factors, such as an unusually high mortgage.
You can complete this class up to 180 days prior to your filing, and proof of completion must accompany your bankruptcy petition. Part of this class requires that you set up a budget that shows a complete picture of your current financial situation, and must be reviewed and approved by a credit counseling agency. The credit counseling agency is tasked with determining whether or not you are able to fulfill your financial obligations without filing for bankruptcy. The class takes approximately an hour to complete.
If the agency recommends that you should be able to pay your debt without filing for bankruptcy, you must be prepared to refute that analysis and show exactly why you are unable to pay your debts. You will have the opportunity to show good cause for allowing your bankruptcy petition to become approved at the creditor's meeting. Filers can take the credit counseling class in person, online or over the phone and the cost is adjusted depending on your income.
Personal Finance Class
This class must be taken no more than 45 days after the creditor's meeting and focuses on how to recover from the financial ramifications of bankruptcy and on preventing further problems in the future. You will learn budgeting, the important of having a fund for emergencies and using credit wisely. You must use a Justice Department approved agency and you can take this class in person, online or through the mail.
Contract a bankruptcy attorney like one from Collins Toner & Rusen for more information about how to comply with these, and other, requirements for declaring bankruptcy.