The Short Answer
You have to take a credit counseling course because federal law requires it. Congress added this rule in 2005 to make sure people understand their options before they file. You must finish the course within 180 days before you file your case. You can take it online, by phone, or in person from an approved agency, and most people finish in about an hour.
If you are getting ready to file for bankruptcy, you may have heard that you must take a credit counseling course first. Maybe your attorney mentioned it. Maybe you saw it on a form. Either way, you might be wondering what it is and why it is required.
The good news is that this course is short, simple, and easy to finish. Below, we will explain what the course is, why the law requires it, and how it fits into your bankruptcy case here in North Carolina.
The Short Answer
You have to take a credit counseling course because federal law requires it. Congress added this rule in 2005 when it changed the bankruptcy laws. The idea was to make sure people understand their options before they file.
You must finish the course within 180 days (about six months) before you file your case. You can take it online, over the phone, or in person from a government-approved agency. Most people finish it in about an hour.
There is also a second course, called a financial management course. You take that one after you file but before your debt is wiped out. We will explain both below.
Why the Law Requires Credit Counseling
In 2005, Congress passed a law called the Bankruptcy Abuse Prevention and Consumer Protection Act. Most people call it BAPCPA for short. This law made several changes to how bankruptcy works.
One of those changes added two course requirements for most people who file. The first is the credit counseling course. The second is the financial management course.
The reason behind the credit counseling course is simple. Lawmakers wanted people to understand all their choices before filing bankruptcy. The course reviews your budget and looks at whether other options, like a repayment plan, might work for you.
This rule is found in the Bankruptcy Code at 11 U.S.C. § 109(h). It applies to most people who file Chapter 7 or Chapter 13.
It is important to know this is not a rule made by our law firm. It is a rule made by Congress and enforced by the bankruptcy court. Almost everyone who files has to do it.
The First Course: Credit Counseling Before You File
The credit counseling course comes first. You must take it before your bankruptcy case is filed.
Here are the key points:
- You must take the course within 180 days before you file.
- You must use an agency approved by the U.S. Trustee Program.
- After you finish, the agency gives you a certificate.
- Your attorney files that certificate with the court.
The course covers things like:
- Your current budget and income
- Your debts and expenses
- Other ways you might handle your debt
- A basic look at whether a repayment plan could help
Most people finish the course in about an hour. You can take it online, by phone, or in person. Many people do it online from home because it is fast and easy.
You do not have to pass a test. You just have to complete the course and get your certificate.
The Second Course: Financial Management After You File
The second course is called the financial management course. Some people call it the debtor education course. This is a different course than credit counseling.
You take this one after you file your case but before the court wipes out your debt. The court calls wiping out your debt a "discharge." This rule comes from 11 U.S.C. § 727 for Chapter 7 and 11 U.S.C. § 1328 for Chapter 13.
The financial management course teaches helpful money skills, such as:
- How to build a budget
- How to manage money wisely
- How to use credit responsibly
- How to plan for the future
Like the first course, you can take this one online or by phone from an approved agency. When you finish, you get a second certificate. That certificate also gets filed with the court.
If you skip this second course, the court may not give you your discharge. So it is important to finish it on time.
How This Works in North Carolina
North Carolina follows the same federal rules as the rest of the country. Both courses are required no matter where in the state you live.
Whether you file in Charlotte, Greensboro, Winston-Salem, Asheville, High Point, or Salisbury, you will need to:
- Take the credit counseling course before you file.
- Take the financial management course after you file but before your discharge.
You must use an agency that the U.S. Trustee Program has approved for North Carolina. Your attorney can point you to approved agencies so you do not have to guess.
At Duncan Law, we walk our clients through both courses step by step. We make sure you take the right course at the right time so nothing slips through the cracks.
Chapter 7 vs. Chapter 13: Do Both Require the Courses?
Both Chapter 7 and Chapter 13 require these two courses. The timing is almost the same for each.
Here is a simple comparison:
| Course | Chapter 7 | Chapter 13 |
|---|---|---|
| Credit counseling | Required within 180 days before filing | Required within 180 days before filing |
| Financial management | Required before discharge, usually within a few months | Required before discharge, near the end of your repayment plan |
The main difference is the timing of the second course. In Chapter 7, your case usually ends in a few months, so you finish the financial management course fairly quickly. In Chapter 13, your case lasts three to five years, so you take that course later, near the end of your plan.
If you are still deciding between the two, our guide on Chapter 7 vs. Chapter 13 can help you understand the differences.
Are There Any Exceptions?
In a few rare cases, a person may not have to take the credit counseling course right away. For example, the court may grant a short delay or a waiver in certain situations, such as a serious medical emergency, a disability, or active military duty in a combat zone.
These exceptions are narrow and do not apply to most people. If you think one might apply to you, talk with a bankruptcy attorney. Most people simply take the course and move forward.
What Should You Do Next?
If you are thinking about bankruptcy, here are a few calm, simple steps:
- Gather your basic financial information, like your income and a list of your debts.
- Talk with a bankruptcy attorney about whether Chapter 7 or Chapter 13 fits your situation.
- Take the credit counseling course before your case is filed.
- After you file, complete the financial management course before your discharge.
You do not have to figure all of this out by yourself. A good attorney will guide you through each step so you know exactly what to do and when. If you are not sure whether bankruptcy is right for you, our page on whether you need bankruptcy is a helpful place to start.
We Are Here to Help
The credit counseling course can feel like one more thing to worry about. But it is one of the easiest parts of the whole process. Most people are surprised by how quick and simple it is.
If you are dealing with debt in North Carolina, you do not have to face it alone. Duncan Law can explain both course requirements, help you understand your options, and figure out whether bankruptcy makes sense for you. You can schedule your free consultation online, or call the office closest to you:
- Greensboro: (336) 856-1234
- Charlotte: (704) 563-1224
- Winston-Salem: (336) 245-4294
- Asheville: (828) 348-5252
- High Point: (336) 294-5800
- Salisbury: (704) 297-4000
We serve clients in Greensboro, Charlotte, Winston-Salem, Asheville, High Point, Salisbury, and communities throughout North Carolina.
Frequently Asked Questions
Federal law requires it. Congress added this rule in 2005 to make sure people understand their options before they file. You can find the rule at 11 U.S.C. § 109(h).
Most people finish in about an hour. You can take it online, over the phone, or in person from an approved agency.
You must take it within 180 days, about six months, before your case is filed. Many people take it shortly before filing.
Yes. Many approved agencies offer the course online. You can complete it from home at a time that works for you.
If you do not take it before you file, the court may not let your case move forward. In most cases, the court can dismiss a case where the course was not completed on time.
No. They are two different courses. You take credit counseling before you file. You take financial management after you file but before your discharge.
No. There is no test to pass. You just complete the course and receive a certificate.
The cost is usually small. If you cannot afford the fee, many approved agencies will lower it or waive it based on your income.
Yes. If you file a joint case, both spouses must complete each course. Each person gets their own certificate.
If you skip the financial management course, the court may not give you your discharge. Your attorney will remind you to finish it on time so your debt can be wiped out.
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Key Takeaways
- Federal law requires credit counseling before you file for bankruptcy.
- You must finish the course within 180 days before filing your case.
- Most people complete the online course in about an hour with no test.
- A second financial management course is required before your discharge.
- Both Chapter 7 and Chapter 13 filers must take both required courses.
Attorney Insight
In my experience, clients worry the credit counseling course will be hard or stressful. It is actually one of the easiest parts of the whole process, and most people finish it online in about an hour.
