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Personal bankruptcy and mandatory credit counseling

Under federal law, any individual filing for personal bankruptcy is required to participate in two credit counselling sessions. The first session takes place before filing and the second near the end of the process, before the bankruptcy discharge is entered. Massachusetts residents who are considering filing for personal bankruptcy should not be put off by the required counseling sessions -- they don't take long and they are relatively simple and straightforward.

In the pre-filing session, a credit counselor will typically explain the benefits and pitfalls of filing for bankruptcy. One of the main purposes of the pre-filing counseling is to determine whether the debtor can avoid bankruptcy. During the session the counselor will explore non-bankruptcy debt relief options. It is very rare, however, for a debtor to discover an alternative to filing for bankruptcy during these sessions. Once the session is completed the debtor will receive a certificate -- good for 180 days -- that the debtor must have before filing.

The pre-discharge session is required before the court will enter an order discharging the debtor's debts. The focus of this session is on helping the debtor learn sound money management strategies in order to avoid getting back into trouble with debt. Topics covered include keeping a budget and understanding credit scores.

The mandatory counseling sessions must be conducted by nonprofit agencies approved by the Justice Department. They are often conducted online or over the phone. There is a small fee for each session, usually in the range of $20 to $50.

Mandatory credit counseling is just one of a number of steps a debtor must go through during the bankruptcy process. Fortunately, it is one of the easier steps of the process. An experienced bankruptcy attorney can explain the counseling requirements in more detail.

Source:, "Bankruptcy Counseling: What It Is, What to Expect," Sean Pyles, May 18, 2016

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