Is Credit Counseling Something I Should Try Before Filing Bankruptcy in New York?

In response to questions we received from clients and prospective clients in Manhattan, Bronx, Brooklyn, Queens and Westchester, in a series of 4 posts we are exploring the most common alternatives to personal bankruptcy for New Yorkers faced with money problems.

A prior post on our blog I Live in New York and Am Considering Bankruptcy — Should I Try Negotiating with My Creditors First? covered negotiating directly with creditors and/or collectors.

Another prior post on our blog I Live in New York and Am Considering Bankruptcy — Should I Try Debt Settlement First? addressed so called debt settlement or debt negotiation.

In today’s post we will explore credit counseling. Future posts will explore other alternative to bankruptcy.

Credit Counseling

The Credit Counseling industry is more reputable than the so called Debt Settlement – Debt Consolidation – Debt Negotiation industry, in part because as a result of the amendments to the Bankruptcy Code in 2005 every individual debtor who wants to file for personal bankruptcy has to complete a credit counseling course from a credit counseling agency approved by the Office of the United States Trustee – which is part of the U.S. Department of Justice. Each federal judicial district has a list of authorized credit counseling agencies (you can find this list through the Bankruptcy Court’s website in your district).

The problem that many of our bankruptcy clients have reported to us is that although they were very interested in trying to resolve their financial problems through credit counseling, they were in too deep a hole financially. Credit counseling typically focuses on budgeting and looking for ways to try to cut costs and pay off debt over a relatively short period of time (typically 12 – 24 months). This can be very helpful for people who are entirely clueless about budgeting, but for most of our clients that is not the case. Credit counseling may not be able to help if the reason for your financial trouble is not a lack of ability to focus on and organize your debts and income and try to figure out a payment plan – but rather that you have incurred significant debt due to reasons beyond your control (such as illness, death in the family, unemployment, accident, etc.). Credit counseling also will not stop lawsuits, resolve judgments or prevent foreclosure like bankruptcy can.


Credit counseling is something that everyone with financial problems should explore as a serious alternative to bankruptcy. Even if you have already decided that bankruptcy is the right alternative for you, you will still need to complete an approved credit counseling program prior to filing bankruptcy.

The problem with credit counseling for many people is that they are in too deep a hole financially for credit counseling to help them, or they are faced with pending foreclosure, lawsuits or judgments, that credit counseling can’t stop or make better. If you are in that situation personal bankruptcy is an option you should seriously explore.

There is a lot of misinformation regarding the 2005 amendments to the bankruptcy law. Many people are under the mistaken impression that they are not eligible for chapter 7 (liquidation), when in fact they are. A prior post on our blog New York Personal Bankruptcy — Am I Eligible to File? addressed this specific topic.

The majority of the people who contact us for personal bankruptcy in New York are still eligible for chapter 7. Even if you are not eligible for chapter 7 bankruptcy, you are most likely eligible for chapter 13 bankruptcy.

If bankruptcy is an option you would like to pursue further please contact us at Starr & Starr, PLLC at 888-867-8165 to schedule a free initial consultation.

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