Debtor education course focuses on post-bankruptcy financial issues
After debtors have completed several steps in a bankruptcy proceeding, they are expected to take a financial management course that will help them avoid accumulating significant debt in the future.
Along with a credit counseling class before filing bankruptcy, there is a post-filing course that is required by the U.S. Bankruptcy Court before debts can be discharged. But rather than reviewing alternative ways for a person to resolve their current financial troubles, as the counseling course does, the second program is focused on what lies ahead.
Frequently referred to as debtor education, those involved in a bankruptcy case are guided on forming short- and long-term financial goals, developing a manageable budget for themselves and their families and learning the skills to handle finances so they won't become overwhelmed by debt again.
That was the goal when credit counseling and debtor education were mandated by the Bank¬ruptcy Abuse Pre¬ven¬tion and Con¬sumer Pro¬tec¬tion Act of 2005. According to the National Financial Literacy Foundation, "These pro¬vi¬sions were included to pro¬vide debtors in bank¬ruptcy with the skills and tools needed to poten¬tially avoid future finan¬cial problems."
The benefits of taking the post-filing course range widely, states the Academy of Financial Literacy (AFT), one of the agencies approved by the U.S. Department of Justice Trustee Program to provide the courses. The lessons may be as straightforward as teaching people when it is better to pay a bill with cash rather than a credit card or more intricate measures needed to deal with identity theft, which can cause financial problems for many people.
Beyond starting a written budget and setting goals, the debtor education program focuses on warning signs that alert people who have been through bankruptcy that they may be headed again into unmanageable debt. Becoming knowledgeable about banking products and services that can help them avoid such pitfalls is another goal of the course.
Life after bankruptcy, when people need to rebuild their damaged credit, is also explored in the debtor education course. People can learn how to review credit reports and scores and how they can be improved during the class. For instance, people need to be aware that once their debts are discharged by the court, each account listed on their credit report should show a zero balance and be noted as having been included in the bankruptcy.
"The failure to update this information can have a significant negative impact on a consumer’s credit score and will undermine the consumer’s ability to obtain a fresh financial start," writes attorney John Rau of the National Consumer Law Center.
Just as important, the AFT states that the debtor education program should help its participants teach their children about handling financial matters responsibly.
The post-filing financial management program must be taken, and a certificate of completion filed with the court, within 45 days after the Chapter 7 debtor attends the 341 meeting of creditors. In a Chapter 13 bankruptcy, in which creditors are paid over several years, debtors must file the certificate before the last payment is made through the trustee assigned to their case.
Sign up for a free bankruptcy attorney consultation to have all your questions answered.