What is credit counseling, and do I need it?

Filing for bankruptcy protection is not necessarily as simple as filling out a few forms and submitting them to the courts. In fact, there are several steps a person needs to complete before he or she even files bankruptcy-related paperwork.

One of these steps is to complete credit counseling, which, in conjunction with debtor education courses, is required if a person wants to pursue bankruptcy. Knowing what these courses are and what purpose they serve can help you get a better idea of what to expect if you are considering bankruptcy as a means of discharging or repaying debt.

Credit counseling and debtor education programs, which are discussed more fully in this article, are intended to help you deal with the mistakes you may have made that led to overwhelming debt and prevent them from happening again in the future.

The purpose of the counseling requirement is in place so that you will have a counselor review your financial situation and help you identify potential resolutions outside of filing bankruptcy. The education aspect involves completing course designed to help you learn more about budgeting, responsible credit practices and managing income and expenses when there is a financial emergency.

Once the counseling and education courses are completed, you may be required to take a test (and score at least 70 percent) to prove that these requirements have been met. Only after meeting these requirements will a person be allowed to file a bankruptcy petition.

This is just one aspect of filing for bankruptcy that may come as a surprise to people who may not fully understand the process. If you are currently considering bankruptcy or other debt relief options, you can discuss your situation and get a better idea of your options by speaking with an attorney.