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Beginning October 17, 2005, consumers filing for bankruptcy will be required to go through a government-approved credit counseling program within six months before they file for bankruptcy protection.

In new information for consumers, the Federal Trade Commission suggests important questions for consumers to ask when reviewing the state-by-state list of government-approved credit counseling organizations at – including inquiries about fees, counselor training, and services offered.

The required counseling can take place in person, over the phone, or online. Consumers can expect the session to last about 90 minutes and include an analysis of their budget. While the organization can charge a reasonable fee for its services, possibly in the $50 range depending on location, services offered, and administrative costs, organizations approved by the government must waive the fee for anyone who cannot afford to pay. After the counseling is complete, consumers must get a certificate as proof; some organizations may charge extra for the certificate. Consumers should check to make sure they receive the correct certificate for the bankruptcy court where they will be filing.

As a result of Hurricane Katrina, the credit counseling requirement has been temporarily waived for consumers filing in Louisiana and the Southern District of Mississippi.

Credit counseling organizations advise consumers on managing money and debts and developing a budget; most offer free educational materials and workshops. Sometimes, they may recommend and negotiate a debt management plan (DMP) for their clients. In a DMP, consumers deposit money each month with the credit counseling organization, which then uses the money to pay off the debts according to a schedule worked out with the consumers and their creditors. A DMP is not required for consumers who are filing for bankruptcy, but if consumers do use one, they need to provide a copy of the plan to the bankruptcy court when filing.

For more information about other changes in the bankruptcy law and how they affect consumers, visit For more information about credit issues and choosing a credit counselor, visit

Copies of the consumer alert are available from the FTC’s Web site at and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

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