But sometimes, waiting until the last minute is better.
The Required Bankruptcy Courses
Since 2005 when the Bankruptcy Code was most recently amended with changes known as the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA“), debtors filing bankruptcy are required to take two financial courses and file proof of taking those courses.
The first course comes prior to filing the bankruptcy case and relates to credit counseling.
The second is a “personal financial management” course and must be taken after the bankruptcy case is filed.
The timing of when to file the proof of the personal financial management course can be very important.
The Post-Filing Financial Management Course
All bankruptcy attorneys know that their clients must take the financial management course and file proof of completion with the court.
The form that must be filed is called the “Debtor’s Certificate of Completion of Postpetition Instructional Course Concerning Personal Financial Management” on Official Bankruptcy Form 23.
Completion of this course and filing the form with the court are prerequisites to a discharge being granted.
Failure to file these documents will result in the case being closed without a discharge.
Most bankruptcy attorneys push their clients to take the course and file the certificate ASAP after the case is filed, so they don’t forget.
That makes sense, but–at least in a Chapter 7 case– it is not the best time to file Form 23.
Last Day To File
Form 23 must be filed to get the discharge, so the outside date for filing is concurrent with the expiration of deadlines to file objections to discharge, which is 60 days after the initial date set for the meeting of creditors (F.R.B.P. 4007).
If the form and certificate of completion are filed much after that, you risk the case being closed without a discharge, necessitating that a Motion to Reopen be filed to allow Form to be filed and discharge entered.
Most attorneys want their clients to get this post-filing course completed as soon as possible after their case is filed. And that’s good advice.
But Don’t File it Too Soon
When the Form 23 actually gets filed can make a big difference in a small number of cases.
For example, what happens if the debtor meets with some misfortune and has a bunch of medical debt that is incurred a month or two after their bankruptcy case is filed?
If you have already filed the Form 23, the discharge will likely be granted and it will NOT include this post petition medical debt. And the debtor cannot file another Chapter 7 bankruptcy case for 8 years.
However, if you waited to file the Form 23 until around the end of the objections period, then you could decide NOT to file it and allow the case to be closed without a discharge. The debtor can then file a new case without any penalty and discharge the new debts along with the old.
Granted, this does not happen often. And we’re only talking about a few months. If the debtor is unfortunate enough to meet with her medical or other misfortune after their discharge is granted, they’re out of luck anyway (at least as far as discharging in a Chapter 7 goes).
But that’s not really the point.
The point is one of potential malpractice. Do you want to be the attorney who jumped the gun filing the Form 23 who is unlucky enough to have a client who gets into a car accident without insurance on the way to her Trustee’s Meeting?
It’s important to always minimize the risks and maximize the benefits to our clients, and one way to do this is to delay the filing of the post filing debt management course certificate until the latest possible time.
Have your client take the post-filing course.
Get the certificate, and then calendar the date to file.
Make the decision to file when you’re sure that a discharge in this case is best.
NOTE Recently authority was granted to some of the debt education providers to automatically file the Form 23 directly with the court, instead of requiring the debtor or debtor’s attorney to do so. For the reasons set forth above, it is important to find out from the provider whether the timing of when they file the form and certificate can be controlled.
Mark J. Markus is a Bankruptcy Attorney practicing in the Greater Los Angeles Area since 1991. He is a Certified Specialist in Bankruptcy Law by the State Bar of California Board of Legal Specialization.
Image courtesy of Flickr and Markus Grossalber