Filing for bankruptcy can be a challenging and daunting task, but it is not the only step in the process. Before filing, individuals must complete a course on credit counseling, which is a crucial step in getting back on track.
But what exactly does credit counseling entail? In addition, why is it necessary, and how can it benefit you if you are seeking a fresh start via bankruptcy?
The purpose of credit counseling
The credit counseling requirement aims to educate individuals on managing their finances. The credit counseling course must typically last 60 minutes, but it can be shorter or longer. It can be conducted online, over the phone or in person.
Among the credit counseling topics are:
- Budgeting and financial management: This can include creating a budget, prioritizing expenses and managing income.
- Identifying causes of debt: This may involve analyzing spending habits and recognizing patterns of debt accumulation.
- Developing a plan to avoid future debt: This could include setting financial goals, creating a debt repayment plan and putting up an emergency fund to avoid future debt.
- Knowing the consequences of bankruptcy: This can include understanding the impact on credit scores, future credit availability and possible legal consequences.
- Exploring alternative options to bankruptcy: This may involve considering debt consolidation or debt settlement.
While some may view credit counseling as an added hurdle, it is a critical step in the bankruptcy process. It can help you to better understand and manage your situation, avoid potential pitfalls and take the first step toward rebuilding your credit.
Charting a path toward starting anew
As you prepare to file for bankruptcy, it is vital to recognize the importance of financial literacy. By seeking the guidance of an advocate, you may make informed decisions and chart a path toward taking control of your finances and starting anew.