Since changes were made to the bankruptcy laws in 2005, debtors in bankruptcy have been required to complete both a pre-bankruptcy credit counseling interview and a course in personal financial management. Some bankruptcy professionals have questioned whether these requirements have any positive impact on the debtor. One recent study suggests that they do.
University of Illinois economist Angela Lyons completed a bankruptcy study that measures the impacts of both the counseling and education requirements by tracking debtors through the entire bankruptcy process.
“We looked at about 4,000 debtors across the U.S. who filed for bankruptcy,” said Lyons. “We learned that the counseling and education requirements appear to be serving their intended purpose and are likely viable mechanisms to help debtors deal with their financial situation and get the fresh start that they need.”
Lyons’ findings show that most participants in the study improved their financial behaviors after counseling, and also continued those behaviors 12 months later. She says, “From an educational perspective, the findings provide valuable insight into how the requirement is helping to improve debtors’ personal financial situations, learn from their mistakes and go on to make sound financial decisions in life.”
This information is consistent with what bankruptcy attorneys see every day. Many bankruptcy debtors initially resent these courses. However, most debtors report that they learn useful information and consider the time worthwhile. Both the credit counseling class and the personal financial management course can be taken either in-person, on-line, or over the telephone. The costs are generally less than $50 each. Each credit counseling agency or financial management course must be approved by the Office of the United States Trustee.
The credit counseling interview and the course in personal financial management are not only required for completing your bankruptcy case, they are also important to your future financial success. Your attorney can help you choose an approved credit counseling agency to assist with the Bankruptcy Code’s educational requirements.