Following the passing of the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005, bankruptcy credit counseling is now a formal requirement. Whilst this legislation was passed to prevent solvent individuals abusing the rules, it was also introduced to prevent financial difficulties from occurring again in the future. Both debt counseling and debtor education courses were introduced by the new bankruptcy law to help consumers realise the importance of having a lower income-to-debt ratio.

Requirements of the New Bankruptcy Law

Individuals who intend to file for bankruptcy must now receive bankruptcy credit counseling from a government-approved organization no more than a 180 days before filing. A debtor education course must also be completed in order to be discharged. The intention is to put individuals in a better position to prevent financial difficulties in the future.