Keep Up In Class: Financial Education Requirements For Bankruptcy
Many people have valid reasons for filing bankruptcy, and they file only after careful thought and after all other avenues have been exhausted. In fairly recent times, however, the large number of people filing for bankruptcy multiple times grew substantially, leading the government to amend federal bankruptcy codes. With the introduction of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, all bankruptcy filers were required to undergo two separate financial education classes. One class seeks to ensure that a filer's financial situation is severe enough to file and another seeks to avoid repeat filers. Read on to learn more about these two classes.
The "Means" Test
Another important change that the Act of 2005 brought was a so-called "means" test. This guideline uses each state's median income level to prevent filers with high incomes from filing chapter 7 bankruptcy. Filers must now show proof of income earned with a most-recent tax return, and the income must not exceed the state's median income, unless mitigating factors are present. Some mitigating factors include unusually high medical expenses or mortgage payments.
Credit Counseling Class
The first class required in the new Act can be completed up to 180 days before you actually file for bankruptcy. The focus of this class is the formation of a budget by the filer, which will present a snapshot of a filer's monthly financial obligations. The submitted budget is reviewed by a credit counseling agency and a determination of your financial situation is made; either that you are eligible to file for bankruptcy or that your financial situation is not bad enough to file for bankruptcy.
It cannot be overemphasized: take great care when completing this budget. It is not simply a budget but a vital part of your bankruptcy, and if the credit counseling agency deems that you can pay your debts in a reasonable and timely manner, your ability to file for bankruptcy could be in jeopardy.
Personal Finance Class
Once you have filed for bankruptcy, you must take the personal finance class within 60 days of your first creditor's meeting. Unlike the credit counseling class, this class is meant to give you vital financial education in an effort to prevent you from becoming a repeat filer. Subjects covered include recovering from bankruptcy, using credit wisely in the future, the importance of emergency savings and more.
Both of the above classes use a sliding scale to determine the fees. They are available online, in person or over the phone. For more information about these requirements, consult with a bankruptcy attorney from a company like Demers Gagnier Inc.