How will filing bankruptcy change your life? Rachel Foley over at BankruptcyLawNetwork pondered about how bankruptcy might not change clients lives if they continue to confuse “wants” with “needs”.

My short, irreverent answer to that question from clients is that they will sleep better at night. They will experience a drop off in telephone calls from collectors and their mail will shrink in volume. The more serious answer has to reflect how they got to my office to file bankruptcy.

When the driving force was gambling or some other irresponsible behavior, I tell them that I can dig them out of this hole with bankruptcy relief, but I can’t save them from a recurrence of that kind of spending. When the driving force is one of those things beyond their control, like job loss, divorce or illness, I can be far more certain that they will cherish a fresh start. pay for insurance or savings rather than minimum payments on credit cards, and savor relief from crippling debt.

JumpStart, a national coalition of financial education organizations, tested high school seniors on financial literacy: the average score was an F-! No wonder young adults get caught up in the credit trap right out of school.

I see financial illiteracy in their parents, as well. So many of my clients seem to measure their financial management skills by their ability to make the minimum payments on overwhelming credit card debt on time. Too few of them have considered that it may take 30-40 years to pay off credit card debt making minimum payments. Meanwhile, they have no cash reserves and no retirement savings.

As a society, we have a real reluctance to speak openly even within our families about money matters. Our kids grow up knowing only what we tell them about how they manage their money, not about the financial realities of our family money situation. Educating kids about money is not just a task for the schools; it needs to be discussed and modeled at home.

I don’t believe that a more money savvy populace will necessarily significantly lower the rates of bankruptcy filings; bankruptcy is driven in the most part by illness, job loss, and divorce. I can hope that consumers with some financial skills may recognize earlier that they can’t escape their money woes by making minimum payments, and consider a fresh start sooner.

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