Just Punch My Bankruptcy Ticket: A Qualitative Study of Mandatory Debtor Financial Education

When Congress amended the Bankruptcy Code in 2005 through the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), it mandated that individual consumer debtors undergo two debtor education courses, one as a condition precedent to filing for bankruptcy relief, and a second for later receiving a discharge of indebtedness. As for the pre-filing credit counseling course, Congressional aim was to have prospective debtors understand the potential alternatives to filing for bankruptcy relief with the goal of having some percentage of debtors settle their debt obligations outside of the bankruptcy system. Regarding the post-filing financial management course, Congress wanted debtors who utilized the bankruptcy system to learn effective financial management techniques to employ after the closing of their bankruptcy cases. Ever since the prospect of debtor education as a formal component of the bankruptcy process was raised decades ago, bankruptcy scholars and commentators have offered empirical studies and opinions about the efficacy of such a program.

To date, however, no empirical study has appeared in the legal literature regarding the effectiveness of the mandated debtor education courses imposed by BAPCPA. Accordingly, the purpose of this Article is to report the findings of my own qualitative study of Chapter 7 debtors regarding their experiences with, and impressions of, the current debtor education courses required by the Bankruptcy Code. My study sought to address two research questions. First, do either, or both, of these mandated debtor education courses help individuals in the way Congress intended?

And second, do consumer debtors change their financial behaviors as a result of participating in either, or both, of these mandated debtor education courses? As will be reported herein, the vast majority of the participants interviewed for this study did not find the courses to be of any help to them in their financial lives, and for most, any positive changes made to their financial well- being following bankruptcy was not attributed to anything learned from the education courses themselves, but from the experience of going through the bankruptcy process, never again wanting to find themselves in such a desperate and vulnerable place in life. Nevertheless, a small population of debtors interviewed for this study, less than seven percent, did find the debtor education courses helpful in the ways Congress intended.