In 2005, Congress amended the Bankruptcy Code and added two specific measures. One requires consumers to receive credit counseling before filing for bankruptcy. The other requires completion of a personal financial management course, commonly referred to as debtor education, after filing and before the discharge of debts. The two are separate requirements and both must be met separately or the debts will not be discharged.
The debtor education requirement and how to meet it
All people who have filed for bankruptcy under Chapter 7 or Chapter 13 must obtain a certificate verifying they have completed a debtor education course with an education provider authorized and approved by the Department of Justice’s U.S. Trustee Program. The program issues its certificates with internal controls to prevent fraud and assigns each certificate a number. A certificate issued by any other entity will not be honored. You can find an approved debtor education program in your specific California jurisdiction at the Department of Justice website found here.
The debtor education program can be taken in person, online or even on the phone and lasts about two hours. It must include the following topics:
- Wise use of credit
- How to develop a budget
- How to stick to the budget
- How to manage money
The course will cost between $50 and $100 and a numbered certification of completion will be issued. The certificate is included in the cost of the course. If you cannot afford the cost of the debtor education course, there is a financial form you can submit to request a waiver of the fee.
After completion, you file Form 23 with the bankruptcy court which has you list the date you completed the course, the name of the course provider and the number that is on the certificate of completion.
If you have filed for Chapter 7 bankruptcy, Form 23 must be filed with the bankruptcy court within 60 days after the date for the creditor’s meeting is set. If Chapter 13 bankruptcy, it must be filed before you either make your last payment under your reorganization plan or before you file for a hardship discharge.
Consequences for failing to meet the debtor education requirement: The bankruptcy court will eventually close your case without issuing a discharge. You will have to pay an additional fee to have your case reopened, which currently is more than $200.
Exemptions from the debtor education requirement: Those who are incapacitated to the extent they cannot make decisions, are disabled to the extent they cannot complete a course in person, online or on the phone, or those who are on active duty in a military combat zone are exempt from the debtor education requirement.