Since the changes to the bankruptcy code in 2005, credit counseling has been mandatory for every individual who petitions for bankruptcy — whether under Chapter 7, Chapter 11 or Chapter 13. Petitioners must undergo approved credit counseling within the 180 days prior to filing a petition for bankruptcy relief. This requirement is meant to reduce instances of repeat bankruptcy by helping individual debtors recognize the factors that led to their financial troubles and learning ways to avoid making the same mistakes in the future.
Of course credit counseling is a buzz word among many less-than-reputable organizations. So it is important for individuals struggling with debt to be careful when seeking any credit related or debt reduction services. Many of these companies charge exorbitant fees to take action that has little or no effect or that you could have easily done yourself. Getting locked into a contract with an illegitimate credit counseling agency or other debt management company can often only make your financial situation worse.
Fortunately, as far as pre-bankruptcy credit counseling goes, finding a legitimate credit counselor is easy. This is because the law specifically requires your credit counselor to have been approved by the United States Trustee. The Department of Justice publishes a state by state list of approved agencies, including those that offer services in languages other than English. If a credit counseling agency is on this list, it has been vetted by the United States Department of Justice and can be used to satisfy your pre-bankruptcy counseling requirement.