When filing Chapter 7 bankruptcy in New York, the debtor needs to see a credit counselor prior to filing. In the Chapter 7 bankruptcy petition, the debtor must sign asserting this requirement is met. The counseling agency must be approved by the United States trustee.
Most people enjoyed learning to ride a bike when they were little. It was tough at first with all the falling down, but once got back the bike mojo, riding in New York brought new scenery and racing adrenalin. Much of reaching financial security is like getting the bike mojo back. Like bicycle riding, where safety requires understanding traffic laws, putting on the right gear, and maintaining a bike, credit counseling prior to bankruptcy teaches informal debt repayment plans, bankruptcy filing laws, and calculating income status.
As to gear in bicycle riding, New York bicyclists must always wear a helmet. In an accident, head injuries are not sick, but helmets are. In credit counseling, the gear a debtor gets are the negotiations skills s/he picks up to negotiate with creditors to settle debt. According to Nolo Press in “The New Bankruptcy, Will it Work For You?”, if a credit counseling agency proposes a settlement that repays around 60% of a debtor’s debts, and the creditor does not accept the proposed settlement, the creditor may be penalized by being able to collect only up to 80% of the total claim, when and if a debtor’s assets get distributed in bankruptcy.
Aside from helmets in New York bicycle riding, cyclists often buy the glove. Gloves shield skin on the palms of hands when there is an accident on pavement. With credit counseling, the second positive that a debtor takes from financial training is how to calculate income status. In 2005, bankruptcy laws changed to make higher income individuals with mostly consumer debts file Chapter 13. These high income persons who have regular income are not able to file Chapter 7 to wipe out all their debts because they are capable of paying some of them. In choosing to file bankruptcy, the debtor uses the average gross income received during the 6 months prior to the month a debtor desires to file to find out the current monthly income.
In bicycling racing, cyclists prevent lost of self respect by using mouth guards. Mouth guards stop blows to the chin from ruining teeth in a fight. A debtor should not feel guilty about the word “bankruptcy”. Credit counseling reveals that “buy, buy, buy” has been the message in the United States. The government incents people to purchase new cars with rebates. Utility companies incent people to throw away perfectly working appliances with discount coupons. Bankruptcy is not based on redemption, but forgiveness.