Filing Bankruptcy News: Financial Literacy Pilot Program Deemed Successful
The Department of Justice has issued a report to Congress on the debtor education programs required under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 for all people who file bankruptcy. Financial management educational materials were designed to educate debtors who are filing bankruptcy on how to better manage their finances.
The Director of the Executive Office of United States Trustees was required under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 to develop, test and evaluate the effectiveness of the debtor education materials and then report on their effectiveness.
The Education Development Center was contracted to work on the financial literacy and debtor education materials. Financial management professionals and financial education professionals were consulted in the preparation of the materials.
Debt professionals were then called on to implement a pilot program using the financial literacy educational materials. The financial management program for debtors was implemented at six academic sites in Illinois, New Jersey, Texas, Virginia and Washington, and the results were evaluated. Credit counseling education was also made available during most of the educational programs.
Surveys were given to debtors who attended the financial literacy programs both before and after the educational materials were presented. Debtors were asked if they were satisfied with the educational materials provided to them, if their knowledge in the areas covered by the materials increased after attending the class, and if the debtors planned to implement sound financial behaviors following the class.
The debtors were also quizzed on their financial literacy knowledge both before and after the debtor education classes.
The results of the surveys and questionnaires were positive.
In all locations that offered the financial literacy program, 97 percent of debtors said that their ability to manage their finances had improved after attending the class and 97 percent of debtors said that they would recommend the debtor education program to others.
Following the class, 44 percent of people immediately planned at least one positive financial change and 22 percent of people had followed through and adopted the financial changes that they planned as a result of the financial education class three months later.
On the financial literacy quizzes that the program participants took, more people were able to answer the financial questions correctly after taking the course than before, but it was noted that the debtors were already fairly knowledgeable about financial matters. Most people said that they were filing bankruptcy due to circumstances beyond their control rather than poor financial planning.