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National Bankruptcy Research Center and Money Management International Financial Education Foundation Announce Results of Credit Counseling Value Study

HOUSTON, TX – May 11, 2009 – The National Bankruptcy Research Center in collaboration with the Money Management International Financial Education Foundation recently completed the second phase of a comprehensive study of the value of Credit and Bankruptcy Counseling. The study is the first comprehensive look designed to provide meaningful data measuring the effectiveness of counseling services offered by credit counseling agencies including credit counseling, pre-bankruptcy filing counseling, pre-discharge education and debt management programs.

“Valid questions have been raised regarding the effectiveness of the new counseling requirements,” said Steve Bucci, president MMI Financial Education Foundation, a non-profit organization that sponsors research and partnerships in the financial services industry. “The non-profit counseling industry has spent precious and scarce resources to provide timely quality counseling for those considering filing for bankruptcy while the legal community has been divided on the effectiveness of the requirement. There is now indisputable evidence that pre filing bankruptcy counseling offers significant value to the consumer whether they end up filing or not.”

Summary results of Pre-filing Bankruptcy Counseling Value Study – Phase Two:

  • Consumers who received pre-bankruptcy counseling exhibited significantly improved credit profiles in as little as two years in comparison to consumers who did not receive pre-bankruptcy counseling. Better credit profiles result in lower borrowing costs and increased access to financial products and services. These consumers demonstrated greater improvement in:
    • Vantage scores increased for those counseled and filed bankruptcy (7.69 percent) which was more than double when compared to those who did not receive counseling and filed bankruptcy (3.65 percent).”
    • Significantly fewer delinquent accounts - 27.5 percent fewer for those who did file and 25.6 percent fewer for those who did not file.
    • Accounts counseled remained in a current status for longer periods of time – 28.8 percent longer (9.4 vs 7.3 months) for filers and 13.7 percent longer (8.3 vs 7.3 months) for non-filers
    • Decreasing the total number of overlimit bankcard accounts by 62.2 percent for filers and 66.7 percent for non-filers.
Summary results of Credit Counseling Value Study – Phase One:

  • Consumers who entered a debt management plan had a significantly lower incidence of bankruptcy filing
    • Pre-BAPCPA Credit Counseling Clients – 28.9% vs 19.8%.
    • Post-BAPCPA Credit Counseling Clients - 30.4% vs 17.3%.
    • Post-BAPCPA Pre-BK Clients – 92.5% vs 58.2%.
  • Of the clients who received pre-filing bankruptcy counseling, 84.8 percent went on to file for bankruptcy and 15.2 percent did not file bankruptcy during the study period.
  • Credit counseled consumers who filed for bankruptcy had lower dismissal rates in comparison to the national sample for both Chapter 7 (1.6 percent vs. 2.1 percent) and Chapter 13 (30.9 percent vs. 44.6 percent) filings.
For more information please contact Ken Scott at 713-682-1382 or kscottcomm@aol.com.

National Bankruptcy Research Center (NBKRC) - www.nbkrc.com.

Money Management International Financial Education Foundation - www.mmifoundation.org.

Experian - www.experian.com.