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Survey of Bankruptcy Filers Finds Mandatory Financial Course Useful but Not Preventive

November 5, 2010

Our San Bernardino personal bankruptcy attorneys have written here before about the requirement that bankruptcy filers take a financial education course. This is a standard part of the bankruptcy process and without it, the filer's debts can't be discharged and the case ended. However, it was added only in the last five years, with the Bankruptcy Abuse Prevention and Consumer Protection Act that changed the bankruptcy process. And it has come under fire from observers who believe it's ineffective, patronizing or adds unnecessary expense to the process. That's why we were interested to see a Nov. 3 press release from the University of Iowa, where law professor Katherine Porter just released a survey on how filers felt about the financial education course.

The survey took opinions from 2,000 bankruptcy filers from February and March of 2007 who participated voluntarily. Of those people, 72 percent said they found the program useful, but only one-third said it would have helped them avoid bankruptcy. Porter said this could be because the two-hour course assumes bad decisions were behind the bankruptcies of all those attending. In fact, she said, one respondent told the survey that no amount of financial education would have helped her avoid the heart attack that left her with heavy medical expenses. Porter also said those who found the course most useful tended to be unfamiliar with finances and have lower levels of education; most were under age 25 or over age 65. There was also a split according to race and level of education, with more people of color and more who hadn't finished college agreeing that the course had helped.

Unfortunately, these results don't surprise us at all. As Orange County individual bankruptcy lawyers, we felt this provision was a mistake from the start. While more financial education is generally a good thing, this course is a one-size-fits-all approach to the very individual problem of bankruptcy. In 2007, when the survey was taken, some filers were undoubtedly people who had overspent, but they could just as easily have been people whose businesses failed or who had catastrophic medical problems without adequate insurance coverage. These days, many filers end up in bankruptcy because of mortgage problems, or even go into bankruptcy specifically to avoid foreclosure. Financial education for people in some of those circumstances is a waste at best and at worst, an insult to someone who is already feeling down.

Howard Law PC can't get clients out of this mandatory requirement, but we do our best to make the process as smooth as possible. Bankruptcy is a difficult decision for many people, but more and more Americans are choosing it in response to record unemployment, the mortgage crisis and other unprecedented financial strains. When clients come to our San Clemente consumer bankruptcy attorneys, we start by carefully considering their financial situation to see whether a bankruptcy is right for them. If so we help them take the initial steps that allow them to file for bankruptcy as soon as possible, bringing down a court order stopping harassment or foreclosure by creditors. Later, when their debts are fully discharged, we counsel clients on the credit and taxation consequences, so there are no unpleasant surprises.

If you're considering bankruptcy as a response to an overwhelming amount of debt, you should call Howard Law for help. To learn more or set up a free consultation, call us today at 1-800-872-5925 or send us a message through the Internet.