Benefits of bankruptcy counseling

Today, MMI announced the results of the first phase of a bankruptcy study designed to measure the impact of our bankruptcy counseling and education programs. Following are some of the results.

Increased knowledge. Bankruptcy counseling participants were administered a financial knowledge test before and after counseling. On average, they scored 77 percent correct on the pre-test and 86 percent correct on the post-test – an increase of 11 percent.

Increased financial confidence. As a result of participating in the counseling session, more than 97 percent of bankruptcy counseling participants felt more knowledgeable about the bankruptcy process and the options available to deal with their current financial problems. More than 91 percent felt that their overall ability to manage their finances had improved.

Satisfaction with counseling. Overall, bankruptcy counseling participants were very satisfied with their experience. More than 99 percent found the counseling course helpful and about 97 percent reported that they were more likely to seek counseling again if faced with financial problems in the future. Almost all of those surveyed seemed to appreciate the educational value of the counseling session and did not feel that the requirement had been a burden or an administrative obstacle.

If you are considering bankruptcy, you might be wondering what you can expect from your bankruptcy counseling session. You can choose to participate in a bankruptcy counseling session online, by phone, or in person. While the details of your session will be unique and based on your specific situation, there are some things every consumer can expect from a bankruptcy counseling session with MMI. Following is a general outline of a phone or in-person bankruptcy counseling session.

First, after gathering some basic information, your counselor will talk to you about your financial problems and goals. Understanding your financial objectives is an important part of the counseling process.

Next, your counselor will ask your permission to pull a copy of your credit report. Information from your credit report can help you and your counselor get a clear picture of who you owe and how much you owe.

Next, you and your counselor will develop a reasonable and manageable spending plan. Working together, you will create a budget that includes fixed expenses (such as a car payment), variable expenses (such as your grocery bill), and periodic expenses (such as holiday gifts).

After creating your budget, you and your counselor will build a full balance sheet. The purpose of a balance sheet is to determine your assets and liabilities. It takes the value of what you own and weighs it against what you owe.

With all of this information in mind, you and your counselor can then talk about financial options and the advantages and disadvantages of each.

At this point, your counselor will create an action plan that includes short- and long-term financial goals. In addition to your action plan, you will receive a bankruptcy packet, and a certificate of participation that allows you to proceed with the bankruptcy filing process (if you choose to do so).

Your counselor will also remind you of next steps. For example, once your bankruptcy has been filed, and prior to your discharge date, you will be required to complete a bankruptcy education course to receive your second certificate.

You can also choose to start the bankruptcy counseling process by taking an online counseling course. The course consists of 10 modules covering a wide range of personal finance concepts including (but certainly not limited to) managing income and expenses; assessing assets, liabilities, and net worth; budgeting and tracking expenses; and financial goal setting. The course is available 24/7, and you can log in and complete the course in one session or several sessions if that is more convenient.  After completing the course, you will speak to a trained counselor who will review key points and answer any of your questions.

For more information, visit the section of our website dedicated to bankruptcy counseling. A complete copy of the study can be found on the Center for Economic and Financial Education's website.

Kim McGrigg is the former Manager of Community and Media Relations for MMI.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

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  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.