Federal Law Discourages Last-Minute Bankruptcy Filings

Federal bankruptcy law changed significantly in 2005 with the enactment of Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA). The Act was a result of a billion-dollar lobbying effort by the banks and credit card companies. It was aimed at reducing the number of bankruptcy filings in the country or, in the alternative, forcing consumers who would normally be eligible for a Chapter 7 bankruptcy filing, to file a Chapter 13 case instead.

One of the ways this legislation attempts to make bankruptcy more difficult for consumers is its credit counseling requirement. Prior to BAPCPA’s enactment, consumers were able to simply complete a bankruptcy petition and file it with the local bankruptcy court. Thus, a bankruptcy petition could be filed at the last minute. An individual could file at 8:55 (or 8:59 for that matter) prior to a 9:00 foreclosure sale. Now, post-BAPCPA, there is a requirement that prospective debtors complete a credit counseling course prior to filing. There are very few exceptions to this requirement and failure to satisfy it will result in the dismissal of the bankruptcy case.

The purpose of this credit counseling requirement is to evaluate the financial situation of consumers, educate them about alternatives to bankruptcy, and inform them how to prepare an effective budget to handle future finances. Thus, as a secondary purpose, this requirement aims to reduce the likelihood that the debtor will file bankruptcy again in the future.

Typically, a prospective bankruptcy filer must complete a credit counseling course within 180 days of filing a bankruptcy petition. Bankruptcy provides a fresh start for individuals experiencing financial problems and difficulty repaying debts. An experienced and qualified bankruptcy attorney may help reduce stress and uncertainty by providing valuable assistance throughout the entire bankruptcy process.

Anyone may reduce the stress of the difficulties in repaying debts. Contact the experienced Sacramento metropolitan area/Northern California attorneys at the Montefalcon Law Office. Contact us online or schedule a bankruptcy consultation at any of our three conveniently located offices. Telephone our downtown Sacramento office at (916) 444-0440, our South Sacramento office at (916) 399-9944, or our Concord office at (925) 222-5929.