The Bankruptcy Code requires individual debtors to take credit and budget counseling during the 180 days preceding the commencement of the bankruptcy case.
The requirement applies to all consumer debtors regardless of which chapter the debtor files under and irrespective of whether the debtor has primarily consumer or business-related debts.
Exceptions to the Credit Counseling Requirement
The credit counseling requirement does not apply to a debtor the bankruptcy court determines is unable to complete the course because of “incapacity, disability, or active military duty in a military combat zone.”
“Disability” under the Bankruptcy Code means the debtor is “so physically impaired as to be unable, after reasonable effort, to participate in an in person, telephone or internet briefing.”
Bankruptcy Court Denies Debtor’s Request for Exemption from Credit Counseling Requirement
In a recent case in the Southern District of Illinois, a pro se (not represented by a lawyer) debtor who was an inmate at a local prison asked the court to exempt him from the credit counseling requirement because he was physically unable to complete credit counseling as a consequence of his incarceration.
In essence, the debtor argued that he was “disabled” by his incarceration from being able to complete the credit counseling course.
The bankruptcy court denied the debtor’s motion and dismissed the debtor’s chapter 7 case.
Bankruptcy Court’s Dismissal Affirmed on Appeal
The bankruptcy court denied the debtor’s motion and the District Court affirmed the dismissal observing that [the Bankruptcy Code] provides certain clearly delineated exceptions to the [credit counseling] requirement and incarceration is not one of them.”
The Bankruptcy Code and related procedural rules are fairly complicated and contain numerous requirements that must be followed. While there are often exceptions to such requirements, debtors are best advised not to test the limits of such exceptions where the failure to get the exception leads to dismissal of the case.
If you are contemplating personal bankruptcy and would like to learn more about the credit counseling and other requirements, call us 914-385-1032 or email us firstname.lastname@example.org.
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