Why Do Wait Until Bankruptcy To Require Financial Education?

Excerpt from inteview on WSJ Blog, The Wallet of Leslie Linfield, executive director of the Institute for Financial Literacy based in Portland, Maine.  She was asked what life was like after bankruptcy:

"My experience has been it’s a huge weight off people’s shoulders. I think it is a huge weight off their shoulders because you suddenly are not worried about this huge pile and mountain of debt. The other thing we are seeing, because the law now requires people have to go through financial education, they’re more financially literate…"

I dug a little bit and discovered this on a credit counseling website that there are twin requirements for debtors going through bankruptcy proceedings:

• Pre-filing credit counseling briefing:  Under the new law, consumers who want to file for bankruptcy must complete a credit counseling briefing, designed to inform them of their options in dealing with their debts, six months prior to filing. The course must be at least 90 minutes long and can't cost more than $50. Accredited agencies can't turn anyone away based on their ability to pay.

• Personal financial management class:  The back end of the twin requirements is a two-hour personal financial management education class that consumers must attend before a bankruptcy can be completed, or debts discharged...The topics covered include:
  • Budget development
  • Money management
  • Using credit wisely
  • Consumer information

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The need for improving financial literacy seems to be getting through to the politicians now too; Steve Pagliucca, Democratic candidate for Ted Kennedy's U.S. Senate seat, called today for a nationwide campaign for financial literacy as part of his financial reform plan, according to the AP. 

Comments

[Verbal]

What's the point of financial literacy education for people who are bankrupt because of necessary medical expenses? Or for people who got suckered into corrupt and useless degrees from diploma mills?

"In the future, I'll avoid getting cancer, and that will prevent future financial disasters?"

"In the future, I won't necessarily believe that a licensed and accredited educational institution is actually legit?"

Of course, we could always have decent health and education policy. But that's not bloody likely is it?

[Jeff Feroce]

"What's the point of financial literacy education for people who are bankrupt because of necessary medical expenses? Or for people who got suckered into corrupt and useless degrees from diploma mills?"

Easy: Borrower-rights.