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Bankruptcy And Financial Management
Before you can discharge and successfully complete a personal bankruptcy filing under either chapter 7 or 13 of the U.S. Bankruptcy Code, you must complete a financial management class (also known as a “debtor education” course). Prior to 2005, there was a substantial need for this type of education, because many consumers would successfully file for bankruptcy, but then fall into hardship a second time. When using bankruptcy correctly, you should get a fresh start, without the need to ever file again.
In many cases, poor financial management is what led to the need to file bankruptcy in the first place. But even if it didn't, the financial management classes are designed to help families in all types of situations.
Introduced by BAPCPA in 2005, this class was established to help you take advantage of the fresh financial start you can receive through the use of bankruptcy. It's designed to help make sure you don't fall into the same trouble as before and to keep you from ever needing financial assistance in the future.
Similar to the credit counseling briefing, the financial management course can be taken in person, over the phone, or on the Internet. The class should help you with financial skills that may have been lacking before and could have contributed to your financial hardship in the first place. It should help you develop the following skills:
Budgeting: learning to control and prioritize your spending so you have money to cover everything you need (and some things you want).
Saving: start the habit of putting money away for emergencies, college education, and other major emergencies.
Investing: making sure your money is working for you effectively and you are investing the right amount in appropriate investments.
Using credit: developing a healthy relationship with credit to help strengthen your credit history and make you a more attractive borrower to lender.
Organizing: developing a system that allows you to stay on top of your finances for years to come.
"Bankruptcy can give you a fresh start but use the financial management classes to your advantage and learn as much as possible about managing your future debt and investments." Keep in mind, filers are not eligible for a bankruptcy discharge until they have completed the financial management course and their certificate of completion has been filed with the court, which is usually done by a bankruptcy lawyer.
Those who file under Chapter 7, usually only have only a few months to complete the course because the average Chapter 7 case is completed after 4-6 months. Those who file under Chapter 13 bankruptcy usually have longer time to complete the course, but should consider taking the course early on in the bankruptcy process in order to take advantage of the advice it offers.
Filing for bankruptcy doesn't have to be scary, just make sure it's your best option before moving forward.
Chapter 7 Bankruptcy
Chapter 13 Bankruptcy
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