Before You File

October 31st, 2011, by

Q: I currently have about $85,000 in debt. I don’t want to file for bankruptcy, but I make less than $30,000 a year. Is there any way to try to fix my credit and avoid bankruptcy or is that the route I should take?

Lawrence, MA

A: Having $85,000 in debt can certainly be overwhelming. But, I applaud you for not immediately resorting to bankruptcy.

Here’s the thing. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 now requires individuals seeking bankruptcy protection to get credit counseling from a government-approved organization within 180 days before they file. Filers also have to complete a debtor education course to have their debts discharged.

The rule requiring a pre-bankruptcy counseling session will help you figure out what’s best for you, because your session has to include an evaluation of your personal financial situation, a discussion of alternatives to bankruptcy and a personal budget plan.

Generally, the session will cost $50 or less, depending on where you live. If you cannot afford to pay the fee for credit counseling, you should request a fee waiver from the counseling organization before the session begins. You can find a list of approved agencies on the U.S. Justice Department’s “List of Approved Providers of Personal Financial Management Instructional Courses.” You can also search for an agency on the National Foundation for Credit Counseling’s Web site.

Last modified: October 31, 2011 at 1:43 pm