Like many in Hernando County, you may be surprised at being asked to go through credit counseling prior to seeking personal bankruptcy. The reason for this requirement is three-fold; first, according the Administrative Office of the U.S. Courts, it is a federal requirement. Second, the hope is that you’ll be able to avoid the issues that led to you struggling with debt in the future, and education such as this (as well as that which comes from the required debtor education you have to complete prior to your bankruptcy being discharged) should help with that. Finally, pre-bankruptcy credit counseling is to help both you and the courts understand if bankruptcy truly is your best option.
As part of your credit counseling, the provider you work with will typically develop a debt repayment plan. This plan is created considering only those assets available to you right now, and does not take into account the potential of you filing for bankruptcy. You may have already considered repayment options on your own, yet credit counseling professionals can often contribute advanced knowledge and expertise to the process which can either verify that your potential to repay your debts is unlikely or make the prospect appear more probable.
An important point to remember is that you are not legally obligated to follow the repayment plan a credit counseling agency develops for you. You must, however, submit it to the court when you file for bankruptcy. If the court believes that the repayment plan can reasonably be followed, then it may exclude you from filing for a Chapter 7 bankruptcy and instead steer you towards a Chapter 13 case. This form of bankruptcy will also stop collection efforts, but it also requires that you repay your debts over a period of three to five years.