What Must I Do Before Filing Bankruptcy? Alternatives to Consider

Some of the approved credit counseling agencies offer debt management plans (also called DMPs).  A DMP is a plan to repay some or all of your debts in which you send the counseling agency a monthly payment that it then distributes to your creditors.

Debt management plans can be helpful for some consumers.  For others, they are a terrible idea.  The problem is that many counseling agencies will pressure you into a debt management plan as a way of avoiding bankruptcy whether it makes sense for you or not.  You should not consider a debt management plan if making the monthly plan payment will mean you will not have money to pay your rent, mortgage, utilities, food, prescriptions, and other necessities.

It is important to keep in mind these important points:

  • If you sign up for a debt management plan that you can’t afford, you may end up in bankruptcy anyway (and a copy of the plan must also be filed in your bankruptcy case).

There are approved agencies for bankruptcy counseling that do not offer debt management plans.

It is usually a good idea for you to meet with an attorney before you receive the required credit counseling.  Unlike a credit counselor, who can not give legal advice, an attorney can provide counseling on whether bankruptcy is the best option.  If bankruptcy is not the right answer for you, a good attorney will offer a range of other suggestions.  The attorney can also provide you with a list of approved credit counseling agencies, or you can check the website for the United States Trustee Program office at www.usdoj.gov/ust.

Unlicensed debt settlement companies that take your money, take fees, hold your money in escrow, do not pay your debts monthly, and then request settlements with your creditors for less than what is owed are illegal in Kansas.

Source: Answers to Common Bankruptcy Questions Pamphlet
National Consumer Law Center, Boston, MA
www.nclc.org

Remember:  The law often changes.  Each case is different.  This pamphlet is meant to give you general information and not to give you specific legal advice.

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