Bankruptcy Financial Management Course

In order to receive a discharge, or cancellation, of debts in bankruptcy, almost all petitioners are required to take a financial management course from an accredited institution. The required course is known by several different names, including budget counseling and debtor education.

What Is The Financial Management Course?

This post-filing course is a separate one from the mandatory credit counseling plaintiffs in a Chapter 7 liquidation or Chapter 13 consumer reorganization bankruptcy must complete before filing. The pre-filing credit counseling course is intended to inform potential bankruptcy filers about any alternatives to bankruptcy they may have. In reality only a tiny percentage of people manage to avoid filing for bankruptcy after credit counseling, but all individuals nonetheless must present their credit counseling certificate to the court before being allowed to file.

The financial management course, on the other hand, is designed to offer debtors guidance regarding money management and budgeting to help increase that person’s chances of not needing to bankruptcy relief in the future.

In general, debtor education courses provide individuals with information about money management, budget preparation, consumer protection laws and agencies, how to use credit wisely, and how to deal with unexpected financial crises.

Who has to take the financial management course?

There are several narrow exceptions to who has to take the course. They are:

  • If you are mentally incapacitated or have a disability
  • If you are on active military duty in a combat zone
  • If the bankruptcy administrator in your case or the United States Trustee determines that there are no approved courses available in your district
    • This exception is highly unlikely as the courses are available online and via telephone.
Can My Spouse and I Attend the Same Course if We are Jointly Filing for Bankruptcy?

Yes. Joint filers are permitted to attend the same financial management session if the course provider gives each personalized instruction and issues a separate certificate of completion to each person.

What Are the Requirements of the Financial Management Course?

Federal bankruptcy laws require the debtor to file two things with the bankruptcy court within a certain amount of time after filing: an Official Form 423 where the debtor personally certifies that they completed the money management course, and the certificate of completion from the institution (or, as of a new law in 2013, the debtor education provider can send the certificate directly to the bankruptcy court). Regardless of which party sends them, the time limits within which these documents must be filed are as follows:

  • Chapter 7: Within 60 days of the first set date for the meeting of creditors.
  • Chapter 11 or 13: By the date of the debtor’s last payment under the payment plan or of the filing of a motion for discharge.

The course also must be given by an approved institution or it will not count. For all states except for North Carolina and Alabama, the U.S. Trustee is responsible for pre-approving the courses. However, the U.S. Trustee program by law does not operate in those two states. Instead, “bankruptcy administrators” are responsible for approving financial management courses in North Carolina and Alabama. The listing for the pre-approved programs in these two states can be found here.

Penalty for Failure to Complete the Course

If the debtor does not file the financial management course certificate with the court within the requisite time, the court will close the debtor’s bankruptcy case with no cancellation of debts. If a bankruptcy case is closed without discharge, the automatic stay against creditors ends and they can resume calling and sending letters to the debtor once more. The debtor can complete the course late and petition the court to reopen their bankruptcy case, but this will be up to the discretion of the court and only adds further costs to the debtor.

Meanwhile, filing a fraudulent certification with the court (i.e., submitting a certificate without actually completing the course) is punishable by up to five years’ imprisonment and/or a fine of up to $500,000.

If you are contemplating bankruptcy, especially if you did not complete the mandatory financial management course by the deadline, it is important to speak with an experienced bankruptcy attorney. Bankruptcy can be a complicated and overwhelming process and having a skilled and nonjudgmental professional to navigate you through can provide great peace of mind. Arnold & Smith, PLLC is a civil and criminal litigation firm based in Charlotte, North Carolina serving the Queen City and surrounding areas. Contact our office today for a free initial consultation about your case with one of our bankruptcy attorneys.