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What happens during Chapter 7 credit counseling?

In a post a couple of months ago we discussed how Long Island area debtors who want to file for bankruptcy must complete a credit counseling course prior to filing, and must complete a debtor education course before their debts will be discharged. This week we will go into the specifics of each of these requirements and discuss what will be covered in each type of course.

The pre-filing credit counseling course will cover a number of topics. First of all, it will cover the advantages and disadvantages of filing for bankruptcy. It will also cover other debt relief options, so that debtors can decide whether filing for bankruptcy is right for them. Some debtors may conclude that they can reduce their spending and save enough money to cover their debts, but often debtors will conclude that filing for bankruptcy is the most appropriate option.

The pre-discharge counseling course also covers a number of topics. Its aim is to explain how debtors can save money by focusing on the amount of money they earn, what their expenses are, and savings strategies. The pre-discharge course will also provide debtors with information regarding credit scores, how to make and stick to a budget, and how to avoid certain risks that could derail their finances.

After the Chapter 7 bankruptcy process is complete, debtors are left with a clean slate upon which to rebuild their financial future. For example, they may be able to save money for a rainy day, or even apply for a secured credit card. While bankruptcy does affect a person's credit score, if the debtor handles their finances wisely for a few years after the discharge they may see an improvement in their credit score.

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

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