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How does credit counseling work for consumer bankruptcy?

People in Wayne County, Michigan, who are considering bankruptcy may have heard that consumers are required to undergo credit counseling before filing. To some people, this sounds like it could be an unpleasant browbeating and finger-pointing session where a credit counselor spends an awkwardly lengthy amount of time berating consumers for being in financial distress. However, this does not have to be the case. This brief blog post will serve to dispel a few misconceptions that could exist regarding the credit counseling process.

Credit counseling for consumer bankruptcy purposes should not be an overly time-consuming commitment. Typically, such counseling sessions will last no more than 90 minutes. Often they do not last much longer than an hour. Although credit counseling services usually charge a fee for their services -- usually around $50 -- financially strapped consumers may not have to pay under certain circumstances. Counseling organizations are required to provide this service free of charge to those who cannot pay. Be sure to ask for a fee waiver from the organization before the session begins if this is the case.

Once the session begins, there should be at least three topics of discussion. The counselor should touch on the consumer's personal financial situation. There should also be a discussion of alternatives to bankruptcy and a discussion of a possible budget. The discussion may cover some of the same ground as a meeting with a bankruptcy attorney.

Once the session is over, the counseling organization is required to issue a certificate to the consumer. This serves as proof of completion of the counseling. The issuing of the certificate must be included in the fee charged by the counseling organization.

Credit counseling is just one of the many requirements of filing for bankruptcy. Bankruptcy attorneys are familiar with the requirements and how a Michigan consumer can fulfill them.

Source: Federal Trade Commission, "Filing for Bankruptcy: What to Know," accessed Oct. 3, 2015

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