Pre-bankruptcy credit counseling is a pain in the neck, primarily because it’s nothing more than a shakedown for a consumer who is pretty short on cash as is. After all, it’s not as if the credit counseling session is really supposed to DO anything – you pay your money and get your ticket.
Unfortunately, it’s a requirement. If you don’t get the pre-bankruptcy credit counseling certification, you’re not going to be eligible to file for bankruptcy. And it’s not limited to New York cases, either; it’s the law of the law.
Buried in Section 109(h) of the U.S. Bankruptcy Code is a paragraph that seemingly gives an “out” for the consumer who can’t get it done in time for the bankruptcy filing.
11 U.S.C. 109(h) states as follows:
(1) Subject to paragraphs (2) and (3), and notwithstanding any other provision of this section, an individual may not be a debtor under this title unless such individual has, during the 180-day period preceding the date of filing of the petition by such individual, received from an approved nonprofit budget and credit counseling agency described in section 111(a) an individual or group briefing (including a briefing conducted by telephone or on the Internet) that outlined the opportunities for available credit counseling and assisted such individual in performing a related budget analysis …
(3)(A) Subject to subparagraph (B), the requirements of paragraph (1) shall not apply with respect to a debtor who submits to the court a certification that —
(i) describes exigent circumstances that merit a waiver of the requirements of paragraph (1);
(ii) states that the debtor requested credit counseling services from an approved nonprofit budget and credit counseling agency, but was unable to obtain the services referred to in paragraph (1) during the 5-day period beginning on the date on which the debtor made that request; and
(iii) is satisfactory to the court.
(B) With respect to a debtor, an exemption under subparagraph (A) shall cease to apply to that debtor on the date on which the debtor meets the requirements of paragraph (1), but in no case may the exemption apply to that debtor after the date that is 30 days after the debtor files a petition, except that the court, for cause, may order an additional 15 days.
There have been a lot of cases brought to the bankruptcy court judges in New York about this clause and one thing is clear – the “waiver” of the credit counseling requirement is really nothing more than an “extension of time” to get it done. Specifically, the bankruptcy judges have held that you get 45 days to get the certification … but only if they approve the pre-filing exemption.
Photo of the New York Public Library taken by James Jowers in 1967, from Flickr.
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