Volume 9: Credit Counseling and Debtor Education

Table Of Contents

CHAPTER 9-0 KEY TERMS ............................................................................................ 1

CHAPTER 9-1: INTRODUCTION.................................................................................... 1

CHAPTER 9-2: CREDIT COUNSELING ........................................................................ 2

CHAPTER 9-3: DEBTOR EDUCATION ......................................................................... 2

CHAPTER 9-4: COMPLAINTS ........................................................................................ 3

CHAPTER 9-5: FIELD RESPONSIBILITIES AND FREQUENTLY ASKED

QUESTIONS ............................................................................................ 3

VOLUME 9 CREDIT COUNSELING AND DEBTOR EDUCATION

CHAPTER 9-0 KEY TERMS

“Agency” means nonprofit budget and credit counseling agency.

“CCDE Unit” means the Credit Counseling and Debtor Education Unit within the Office of

Oversight in the Executive Office for U.S. Trustees.

“CGS” means the U.S. Trustee Program’s Certificate Generation System.

“Debtor education” means personal financial management instructional course.

“EOUST” means the Executive Office for U.S. Trustees.

“QSR” means quality of service review.

“POA” means power of attorney.

“Program” means U.S. Trustee Program.

“Provider” means debtor education provider.

CHAPTER 9-1: INTRODUCTION

Individual debtors who file for bankruptcy protection must first obtain credit counseling from a

U.S. Trustee Program (Program) approved nonprofit budget and credit counseling agency

(agency) within 180 days before filing bankruptcy. In addition, to be eligible for a discharge of

debts, individual debtors must complete a personal financial management instructional course

(“debtor education”) from a Program approved debtor education provider (“provider”).

The Program approves organizations to provide the mandatory credit counseling and debtor

education. Only approved agencies and providers may advertise their approval to provide the

required credit counseling and debtor education, and only approved agencies and providers may

issue credit counseling and debtor education certificates. These certificates are generated

through the Program’s Certificate Generation System (CGS), and the certificates are both

numbered and bar-coded to protect against fraud.

The Credit Counseling and Debtor Education Unit (CCDE Unit) within the Office of Oversight

in the Executive Office for U.S. Trustees (EOUST) is responsible for ensuring agencies and

providers comply with all applicable federal laws and regulations. The CCDE Unit’s principal

functions include:

1. Reviewing the applications that agencies and providers submit seeking the United States

Trustee’s approval to offer credit counseling and debtor education;

2. Maintaining lists of approved agencies and providers;

3. Investigating and resolving complaints against approved agencies and providers, and

providing assistance to Program field personnel concerning credit counseling and debtor

education issues;

4. Maintaining the CGS;

5. Evaluating an approved agency or provider’s performance and compliance with 11

U.S.C. § 111, and the Program’s regulations, through quality of service reviews (QSRs).

CHAPTER 9-2: CREDIT COUNSELING

Section 111 of title 11 provides that, in applicable jurisdictions, a United States Trustee may

approve an application to become an approved agency only after the United States Trustee has

thoroughly reviewed the applicant’s qualifications and services. 11 U.S.C. § 111(b)(1)

Among other things, an applicant must establish it will:

1. provide qualified counselors;

2. maintain adequate provision for safekeeping and payment of client funds;

3. provide adequate counseling with respect to client credit problems; and

4. deal responsibly and effectively with other matters relating to the quality, effectiveness,

and financial security of the services it provides. 11 U.S.C. § 111(c)(1).

The EOUST provides the United States Trustees with notice of the credit counseling agencies

whose applications have been reviewed and that EOUST recommends for approval, denial, or

withdrawal from certain judicial districts, and requests any information concerning the agencies

that is inconsistent with approval. Once an agency has been approved, the CCDE Unit will

issue an approval letter to the agency. An agency approved to provide credit counseling

services for the first time shall be approved for a six-month probationary period. Generally

speaking, each approval period thereafter shall be for one year.

Limitations on Advertising

Any advertisements referring to the Program’s approval of an agency shall state: “Approval to

issue certificates in compliance with the Bankruptcy Code. Approval does not endorse or

guarantee the quality of an Agency’s services.”

The Program maintains a list of approved agencies. In addition, the Program’s Web site supplies

answers to frequently asked questions about credit counseling.

CHAPTER 9-3: DEBTOR EDUCATION

Section 111 of title 11 provides that, in applicable jurisdictions, a United States Trustee may

approve an application to become a debtor education provider only after the United States

Trustee has thoroughly reviewed the applicant’s qualifications and instructional course. 11

U.S.C. § 111(b)(1). Among other things, an applicant must establish it will:

1. provide trained personnel with adequate experience in providing effective instruction

and services;

2. provide learning materials and teaching methodologies designed to assist debtors in

understanding personal financial management;

3. if applicable, provide adequate facilities for providing an instructional course;

4. prepare and retain reasonable records to permit evaluation of the effectiveness of an

instructional course; and

5. if a fee is charged, charge a reasonable fee, and provide services without regard to ability

to pay the fee. 11 U.S.C. § 111(d)(1).

Standing chapter 13 trustees are eligible to become approved providers. The chapter 13 trustee

may only provide the debtor education course to debtors whose cases have been assigned to the

trustee. The chapter 13 trustee may not charge the debtor a fee for providing the debtor

education course.

The EOUST provides the United States Trustees with notice of the debtor education providers

whose applications have been reviewed and that EOUST recommends for approval, denial, or

withdrawal from certain judicial districts, and requests any information concerning the providers

that is inconsistent with approval. Once a provider has been approved, the CCDE Unit will

issue an approval letter to the provider. A provider approved to provide debtor education

services for the first time shall be approved for a six-month probationary period. Generally

speaking, each approval period thereafter shall be for one year.

Limitations on Advertising

Approved providers shall ensure that their debtor education courses contain no commercial

advertising, and that providers will not market or sell financial products or services, solicit

business of any type, or sell information about a debtor to any third party without the debtor’s

permission, whether the course takes place in a classroom, over the telephone, or on the Internet.

Any advertisements referring to the Program’s approval of a provider shall state: “Approved to

issue certificates in compliance with the Bankruptcy Code. Approval does not endorse or

assure the quality of a Provider’s services.”

The Program maintains a list of approved providers. In addition, the Program’s Web site

supplies answers to frequently asked questions about debtor education.

CHAPTER 9-4: COMPLAINTS

Submit complaints or concerns about approved credit counseling agencies or approved debtor

education providers by e-mail to [email protected] (credit counseling issues),

[email protected] (debtor education issues), or [email protected]

(complaints about either) by calling (202) 514-4100.

CCDE Unit personnel are responsible for providing assistance to the field, and may request

support from field personnel. Such support may include obtaining additional relevant

information from field office personnel within the scope of their personal knowledge, arranging

or conducting interviews of witnesses or parties, corresponding with local court personnel,

conducting Rule 2004 examinations or depositions, or preparing and/or transmitting document

requests.

CHAPTER 9-5: FIELD RESPONSIBILITIES AND FREQUENTLY ASKED

QUESTIONS

Program field offices may encounter a number of credit counseling or debtor education related

issues on a recurring basis. The most common issue concerns the validity of certificates that are

issued by the agency or provider after credit counseling or debtor education is completed. At

least one person in each field office has been authorized to access CGS and can determine

whether the certificate numbers in CGS are consistent with the certificate issuance times and

judicial districts set forth on the certificates, as well as confirm the identity of the agency or

provider that issued the certificate. Field personnel may also request assistance from the CCDE

Unit in determining whether a specific individual received credit counseling or debtor education

as represented. However, because individuals obtain credit counseling before filing

bankruptcy, and may choose not to file bankruptcy, the CGS does not record information

concerning the identity of individuals who receive credit counseling, in order to protect the

identity of those individuals. The CGS does collect information concerning the identity of

debtors who receive debtor education after filing bankruptcy, as well as debtors’ bankruptcy

case numbers.

A second common question concerns the treatment of individuals who receive credit counseling

or debtor education jointly. Program regulations require each individual to receive a separate

certificate of credit counseling or debtor education. See 28 C.F.R. §§ 58.22(g) and 58.35(f).

Although spouses may take courses jointly, a certificate listing both spouses is improper.

A third common question concerns the use of a power of attorney (POA) that authorizes a third

party to take credit counseling or a debtor education course on behalf of an incarcerated debtor.

Under 11 U.S.C. §§ 109(h)(4), 727(a)(11) and 1328(g)(2), on motion to the court and a

hearing, a debtor may seek to have the credit counseling and debtor education requirements

waived only in cases of incapacity, disability, or active military duty in a military combat zone.

(Incapacity and disability are defined in section 109(h)(4).) If the waiver is approved by the

court under one of these circumstances, the debtor is not required to take credit counseling or a

debtor education course.

However, since incarceration is not one of the grounds enumerated in the statute for a waiver,

an incarcerated debtor may seek to satisfy the credit counseling and debtor education

requirements by having another person act on his/her behalf, often through the use of a POA.

When a field office becomes aware of an incarcerated debtor who cannot take credit

counseling or a debtor education course because he/she does not have sufficient access to a

telephone or the Internet, staff should encourage the debtor and the debtor’s attorney to attempt

to make special arrangements with the institution for such access so that the incarcerated

debtor can complete the credit counseling or debtor education course himself/herself.

When such arrangements cannot be worked out or when the USTP does not have advance

notice of an issue, then the office should attempt to determine whether there is a valid POA in

place that is sufficient under state law where the bankruptcy petition was filed to permit filing a

bankruptcy petition. In addition, some bankruptcy courts have addressed the issue of whether

a person acting with a POA can take credit counseling or a debtor education course on behalf

of a debtor and have made different determinations. Field offices should become familiar

with the case law in their jurisdiction on this subject and should exercise sound discretion in

deciding whether to move to dismiss a case or to object to the debtor’s satisfaction of the

debtor education requirement based on this and the specific facts and circumstances of the

case. The debtor’s failure to properly disclose that a third party took the counseling or debtor

education course on the debtor’s behalf, as discussed below, may be an additional factor to be

considered by field offices in exercising their discretion.

When another individual takes the credit counseling and debtor education on behalf of the

incarcerated debtor, then 28 C.F.R. § 58.22(o) and 28 C.F.R. § 58.35(m) require that the

certificate evidencing completion of the credit counseling or debtor education course set forth

both the name of the debtor and the name of the individual holding the POA who took the

counseling or debtor education course. In these situations, the certificate should refer both to

the duly authorized representative acting pursuant to the POA as well as the debtor (e.g., John

Doe, POA for Jane Doe). This makes clear to the court and other parties how the debtor

attempted to satisfy the credit counseling and debtor education requirements and is consistent

with regulatory requirements imposed on credit counseling agencies and debtor education

providers.

For answers to other frequently asked questions, visit the Credit Counseling FAQ Web page

and Debtor Education FAQ Web page. Additionally, you may contact the CCDE Unit for

assistance.