Credit Counseling Requirements Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 and the Pension Protection Act of 2006 Page: 4 of 13
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Credit Counseling Requirements Under the Bankruptcy Abuse Prevention and Consumer
In April 2005, President Bush signed P.L. 109-8, the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 (BAPCPA). The purpose of BAPCPA is not only to
"improve bankruptcy law and practice by restoring personal responsibility and integrity to
the bankruptcy system," but to ensure fairness of the system for both debtors and creditors.'
BAPCPA consists of a comprehensive package of reform measures pertaining to both
consumer and business bankruptcy cases. One of its many amendments requires debtors to
participate in credit counseling programs before filing for bankruptcy relief.2 BAPCPA's credit
counseling provisions are intended to give consumers in financial distress an opportunity to learn
about the consequences of bankruptcy, such as the potentially devastating effect it can have on
their credit rating.3 BAPCPA also requires debtors, after they file for bankruptcy relief, to receive
personal financial management training. This training is intended to provide debtors with
guidance about how to manage their finances in order to avoid future financial difficulties.4
On August 17, 2006, President Bush signed the Pension Protection Act of 2006 (P.L. 109-280).
Although the Act does not change BAPCPA's credit counseling provisions, section 1220 of the
Pension Protection Act amends section 501 of the Internal Revenue Code, providing new
standards that a credit counseling agency must meet to be eligible for a federal income tax
exemption.
Credit Counseling Requirements Under the
Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005
Overview
Section 106 of BAPCPA adds credit counseling as a prerequisite to Chapter 7 or Chapter 13
bankruptcy filing or relief.5 Section 106(a) of BAPCPA amends section 109 of the Bankruptcy
Code to require an individual to receive credit counseling within the 180-day period preceding the
date of filing a petition for bankruptcy. The credit counseling must be provided by an approved
"nonprofit budget and credit counseling agency"6 and must consist of either an individual or
group briefing.' This briefing, which may be conducted by telephone or via the Internet, must
outline the opportunities for credit counseling and must assist the debtor in performing a budget
analysis.8
1 H.Rept. 109-31, p. 2.
2 The credit counseling provisions have been the subject of controversy. Prior to and following the enactment of
BAPCPA, there have been claims of abusive practices by several members of the credit counseling industry. See
S.Rept. 109-55; Leslie Linfield, Lightning Strikes Thrice: Emerging Issues in Bankruptcy Credit Counseling, 25-1 AM.
BANKR. JNST.J. 16 (2006). This report does not address this controversy.
s H.Rept. 109-31, p. 18.
4 Id.
s 11 U.S.C. 101 et seq.
6 Hereinafter referred to as "credit counseling agency."
7 H.Rept. 109-31, p. 54.
8 Id.Congressional Research Servicee
1
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Staman, Jennifer. Credit Counseling Requirements Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 and the Pension Protection Act of 2006, report, November 6, 2006; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc815926/m1/4/: accessed March 29, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.