As it stands, today, debtors looking for a bankruptcy discharge must complete a financial education course (either online or over the phone) before the discharge will be granted.
Proof that the course was taken comes in the form of a certificate which must be filed with the bankruptcy court. (The certificate isn’t nearly as grand as the diploma pictured here, but you get the idea).
Since this system went into place in 2005, it has usually been the job of the debtor’s bankruptcy lawyer to file the certificate. (It is, of course, the debtor’s job to take and pass the course, something that usually takes about two hours).
But changes are on the way. Starting in December, 2013, the course providers will now be able to file the certificates directly with the Bankruptcy Court using their secure e-mail system.
While this might be convenient for debtors and lawyers, it might take away a seldom used, but occasionally critical strategy: intentionally NOT filing the certificate.
This would come into play when a debtor incurs massive unexpected debts (usually due to a medical problem) AFTER the bankruptcy filing but before discharge. Any debt after the filing won’t be wiped out by the case, and if a discharge issues, it will prevent the debtor from getting another one for eight years.
So in that circumstance, a debtor might not file his course certificate on purpose, have the first case dismissed without a discharge, then file a second case to try to wipe out all the debt.
Whether this will still be a viable emergency strategy remains to be seen.
By Doug Beaton