I have been as big a critic as anyone about the silliness of the pre and postpetition counseling requirements. The prepetition counseling is completed 99% of the time after the decision to file bankruptcy has been made and is usually done immediately prior to the actual filing. A study by Prof. Katie Porter however has turned my eye a little about the postpetition financial management course. You can find her analysis on the blog Credit Slips. Here is a portion of the post.
Evaluating Mandatory Financial Education in Bankruptcy
posted by Katie Porter
Dr. Deborah Thorne and I have a new study that looks at how debtors themselves feel about the mandatory financial education course. It is a chapter in this book, Consumer Knowledge and Financial Decisions (ed. Douglas Lamdin, Springer, 2012) and available to read here. In the 2007 Consumer Bankruptcy Project, we asked debtors whether they believed that the information from the financial education class 1)would what they learned in the financial education class have helped them avoid bankruptcy originally, and 2) would help them avoid financial trouble in the future. While only 33% thought a financial instruction course similar to the one required of bankruptcy debtors could have helped them avoid filing, 72% thought it would help them avoid future financial trouble. As we report in detail in the chapter, some demographic groups were much more positive about the value of financial education than others.
About half (48.7%) of minority persons who filed bankruptcy, for example, thought the course would have helped them avoid bankruptcy; for whites, the response was 27.6%, a little more than half. Similarly, there significant differences in the perceived value of financial education–both to have helped prevent their bankruptcy and to help them keep out of future financial trouble. Those without a college degree, those aged under 25 years or 65 years or over, and those who less familiar with their household finances believed the course had more value. Note that the point is not that the course actually would have or will help debtors; the measure here is debtor’s perception of value, which I think is well worth evaluating in a system that is designed to rehabilitate debtors.