A Lake Villa bankruptcy attorney describes the credit counseling requirement. Prior to filing a bankruptcy case under either Chapter 7 or Chapter 13 of the Bankruptcy Code, an individual must submit to a credit counseling session approved by the Office of the United States Trustees within 180 days prior to filing. The credit counseling is mandated under the new bankruptcy law that took place October 17, 2005. The goal of the credit counseling was to try to convince people who were struggling financially to not file bankruptcy but rather enter into some form of debt repayment plan so the creditors would receive more money back then, of course, if a person did a Chapter 7 where the creditors would get nothing. The credit counseling requirement was lobbied for and passed by Congress as a result of the credit card industry paying millions of dollars over the course of a decade in an effort to get the bankruptcy laws changed.
The hope again was that people would not actually file bankruptcy but would realize that they have bankruptcy alternatives that can work well for them as well. Unfortunately for Congress and the credit card industry as a whole, they underestimated the real reason why people are filing bankruptcy in this country at record rates. People are filing Chapter 7 bankruptcy not because they want to file bankruptcy, not because they are scheming to file bankruptcy, but because they are forced to file bankruptcy because they cannot pay their bills. Think of a situation where someone has $20,000.00 or $30,000.00 worth of credit card debt spread out between five or ten different credit card issuers. Once that person is unable to make the minimum monthly payment, the interest rate increases, the late fees come on top of that, and the over limit fees come on top of that.
Once this situation happens on multiple credit cards, there is no ability other than winning the lottery to pay off one’s debt. Another reason why people don’t opt for alternatives to bankruptcy after taking the credit counseling session is because they are typically sent to the credit counseling session from their bankruptcy attorney as a prerequisite to being able to file either a Chapter 7 or a Chapter 13 bankruptcy case.