Bankruptcy

Take your Financial Management Course, But Wait to File the Certificate

By Dan Press, Virginia and D.C. Bankruptcy Attorney

While it is necessary to take your Financial Management course (also called Debtor Education or the Second Credit Counseling course) after you file bankruptcy – it is a requirement to receive your discharge – it’s also a good idea to wait to file the certificate until the deadline.

The course is very important.  If you fail to take the course or don’t file the certificate, your case will be closed without a discharge, and at best you will have to pay another filing fee to reopen the case.  Even worse, if you don’t have a good enough excuse, some judges may deny the motion to reopen and make you re-file your whole bankruptcy case.  And unlike the pre-bankruptcy credit counseling requirement, many of our clients actually tell us that they learn valuable lessons from the Financial  Management course.

So why wait to file the certificate?    A few weeks after Mr. and Mrs. D filed their bankruptcy case, their son was involved in an accident, and he was seriously injured.  Fortunately, he recovered.  But Mr. D’s health insurance did not cover all of the costs, and the medical bills were astronomical.  Worse, because he had already filed bankruptcy before the accident, they were not going to be discharged.   But by not filing his Financial Management certificate, the D’s bankruptcy case was able to be closed without discharge, allowing it to be re-filed with the medical debt included — and discharged — in the second case.

A bankruptcy discharge  absolves you of liability for debts incurred before filing your case.  And once you receive a Chapter 7 discharge, you can’t get another one until 8 years after you filed  the prior case.  You even have to wait 4 years to file a discharge-eligible Chapter 13.   So what happens if you or your spouse or children get in an accident, or get seriously ill, and incur medical bills or other significant debt in the weeks after filing?  If the Chapter 7 case proceeds to discharge, those post-petition debts will not be discharged.

That’s why we wait to file the Financial Management Certificate (Form B23).  We ask our clients to complete the course as early as possible, so that you don’t forget.  But we hold it and file it on the due date (45 days after the meeting of creditors).   Then if something bad happens in the meantime, we just won’t file it at all, and let the case close without discharge.   And then we file the case all over again, this time including the new debt.    A fresh start for your fresh start!

Full post as published by Bankruptcy Law Network on February 23, 2010 (boomark / email).