Credit counseling helps in bankruptcy recovery

We believe that as a leading provider of bankruptcy counseling and education, it is our responsibility to ensure our programs are successful in empowering individuals and families to build future financial security. We are pleased to have the opportunity to measure the impact of our bankruptcy counseling and education programs through a multi-phase study.

In connection with Dr. Angela Lyons, a leading researcher in financial education and program evaluation at the University of Illinois at Urbana-Champaign, the multi-phase research study was launched in 2009 to investigate the impact of the consumer counseling and education mandates outlined in the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005. 

The newest phase of the study measured the long-term impacts of both the counseling and education requirements by following up with debtors after they had completed the entire bankruptcy process. The following are preliminary findings, which point to marked improvements in financial management skills and practices: 
  • Improved financial behavior post-bankruptcy – Regarding the 12 financial practices identified as necessary to successfully recover from bankruptcy, results show that debtors’ financial behavior for all 12 practices improved significantly. Overall, behavior seemed to improve by almost 30%.
  • Sustained improvement in financial behavior over time – Debtors’ financial behaviors were not only significantly improved after counseling, but remained that way 12 months after counseling, with only a slight drop-off in behavior over time.
  • Proactive approach to improving financial situation — Debtors appear to be taking steps to improve their financial situations, including: finding ways to reduce expenses, increase income, and make other lifestyle adjustments. 
  • Longer-term financial goals are being set and achieved — Debtors indicated post-bankruptcy that they had achieved, or were working towards achieving, a number of longer-term financial goals, including: saving more money, starting an emergency fund, starting a retirement fund, re-establishing credit, finding employment, starting or completing school, buying a car or home, and becoming/staying debt free. 
The first two phases of the study collected data from a national sample of consumers who participated in MMI’s bankruptcy program and measured the educational value of the counseling and education services. During this phase, debtors were monitored throughout the entire bankruptcy process. The study measured whether participants were able to put what they learned from credit counseling into practice and if they received added value by participating in the financial education course prior to discharge. Results of the study showed that participants significantly benefited from the counseling and education services offered. The study showed improvement in consumer’s financial knowledge, attitudes, and behavior with regard to financial matters. 

“Overall, the entire study has shown that throughout the bankruptcy process, debtors’ financial situations seem to be improving,” said Lyons. “The evidence from this study suggests that credit counseling may in fact be a viable mechanism to help debtors deal with their financial situation and obtain a fresh start.” 

The final report is scheduled for release this spring. To view a summary of the preliminary results and learn more about the impact of bankruptcy counseling and education on debtors’ financial well-being, visit


Tanisha (Warner) Smith is a former communications manager at 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.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • 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.