Involuntary Bankruptcy and Credit Counseling
A San Francisco bankruptcy attorney comments on Involuntary Bankruptcy and Credit Counseling
When the bankruptcy code was amended in 2005 one of the new provisions added by Congress was the requirement that all those planning on filing bankruptcy had to first complete a certified credit counseling course. This pre-filing requirement is mandatory for those who wish to file for bankruptcy. There is a question of whether involuntary proceedings against a debtor require the same compliance with the law.
Several courts have addressed the issue of involuntary bankruptcy and credit counseling completion. It would be rather difficult to comply with the requirement that the course be taken 180 days prior to filing when the petition is an involuntary one, because the debtor is not filing the petition; it is a creditor instead. It seems to be the consensus that the requirements do not apply to those debtors who are involuntary brought into bankruptcy.
Involuntary bankruptcy and credit counseling requirements would frustrate the purpose behind the credit counseling purpose initially sought when Congress made the changes. The purpose behind the credit counseling requirement is to allow the debtor to make an informed choice about whether to file. In an involuntary proceeding, the debtor is not making a voluntary choice and therefore requiring the course prior to the filing of an involuntary petition would not be in line with the goals Congress had in mind when the code was amended.
Therefore, creative debtors in an involuntary action cannot dismiss the bankruptcy for failure to comply with the credit counseling requirement. Involuntary bankruptcy actions are not subject to the credit counseling requirements.
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