Incarcerated Debtors and Chapter 7 Bankruptcy
Are you thinking about filing for consumer bankruptcy in Chicago? It is important to understand the requirements for credit counseling and debtor education prior to filing for personal bankruptcy. A recent Illinois case clarified a question about pre-bankruptcy credit counseling requirements for an incarcerated debtor. According to an article in Bloomberg BNA, the court decision, which came down last month, made clear that “incarceration doesn’t exempt a debtor from the requirement of completing a credit counseling and financial management course prior to bankruptcy.” What else should you know about pre-bankruptcy credit counseling and the impact of the recent Illinois decision?
Credit Counseling and Debtor Education Before You File for Bankruptcy
If you are going to file for bankruptcy in Illinois, you will need to go through approved credit counseling and debtor education, as a fact sheet from the FTC explains. What are these counseling and debtor education requirements? As the fact sheet explains, these take place at different points during the bankruptcy process. Before you file for bankruptcy, you must go through approved credit counseling. Then, after you have filed for personal bankruptcy but before your debts are discharged, you must provide evidence that you have completed debtor education.
Since the recent case involves pre-bankruptcy counseling, we would like to focus on this requirement. What will happen in this session? The FTC explains that the following should take place:
- Evaluation of your current financial situation;
- Discussion about possible alternatives to bankruptcy; and
- Development of a personal budget plan.
These sessions are not particularly time-intensive, as they last only between 60 and 90 minutes. A pre-bankruptcy counseling session also need not take place in person. As the FTC explains, you can also complete this requirement online or over the phone. If you cannot afford to pay for pre-bankruptcy credit counseling, you can apply for a fee waiver. Under the Bankruptcy Code, a debtor must undergo counseling “during the 180-day period preceding the filing of his or her petition.”
Recent Illinois Case on Pre-Bankruptcy Credit Counseling and Incarceration
Now that you know a bit more about pre-bankruptcy credit counseling, what do you need to know about the recent Illinois bankruptcy case decision? In Black v. Eggmann, the court had to decide whether an incarcerated debtor could be exempt from the pre-bankruptcy credit counseling requirement. The court looked at exceptions to the requirement, which include “incapacity, disability, or active military duty in a military combat zone.” The court then had to decide whether incarceration fell under the category of a disability, which the debtor argued it did.
The Bankruptcy Code defines a disability as a situation in which the debtor is “so physically impaired as to be unable, after reasonable effort, to participate in an in person, telephone, or Internet briefing.” The court ultimately determined that incarceration does not meet the definition of a disability, and it emphasizes that “the statute provides certain clearly delineated exceptions to the requirement, and incarceration is not one of them.” The court’s decision makes clear that, unless a debtor clearly falls within one of the listed exceptions, the debtor likely will be required to undergo credit counseling prior to filing for personal bankruptcy.
Discuss Your Case with an Oak Park Bankruptcy Lawyer
If you have questions about filing for personal bankruptcy, you should discuss your case with an Oak Park bankruptcy lawyer today. Contact the Emerson Law Firm to speak with an advocate.
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