I’ve been doing research on families in financial trouble for more than twenty years to learn how many people were abusing the bankruptcy system. My colleagues and I did a really extensive analysis and learned that families turn to bankruptcy not because they want to find a way not to pay, but because they are desperate. More disturbing, we released a study earlier this year that revealed that over half of bankruptcies are in the aftermath of medical emergencies.
I never wanted to get involved in politics, but the bankruptcy bill now moving on a fast-track through Congress isn’t fair. It beats up the average family already staggering under the weight of bad luck and huge debts, while it lets real abusers go free. That appears to have been the idea from the start.
In 1997, financial services lobbyists wrote the bankruptcy bill and shopped it to “friendly” Congressmen. Since then, the bill has been introduced and re-introduced. Despite the very public bankruptcies of Enron, Worldcom, Adelphia, Polaroid, United Airlines, US Airways and TWA, there are no new provisions to rein in corporations that are paying millions to insiders while they cancel employee health benefits and wipe out retirement plans. Instead, this bill focuses on families, clamping down on people who have been driven to bankruptcy by job losses, by medical problems and by family break ups.
Because those are the people who owe credit card bills, and the credit card companies are the driving force behind this legislation. Some in the Senate recognize this.
The bill is more than 500 pages long, all in highly technical language. But the overall thrust is pretty clear:
- Make debtors pay more to creditors, both in bankruptcy and after bankruptcy, so that a bankruptcy filing will leave a family with more credit card debt, higher car loans, more owed to their banks and to payday lenders.
- Make it more expensive to file for bankruptcy by driving up lawyers’ fees with new paperwork, new affidavits, and new liability for lawyers, so that the people in the most trouble can’t afford to file.
- Make more hurdles and traps, with deadlines that a judge cannot waive even if someone has a heart attack or an ex-husband who won’t give up a copy of the tax returns, so that more people will get pushed out of bankruptcy with no discharge.
- Make it harder to repay debts in Chapter 13 by increasing the payments necessary to confirm in a repayment plan, so that more people will be pushed out of bankruptcy without ever getting a discharge of debt.
There are people who abuse the system, but this bill lets them off. Millionaires will still be welcome to use the unlimited homestead exemption. And if they don’t want to buy a home there, they can just tuck their millions of dollars into a trust, a “millionaire’s loophole” that lets them keep everything—if they can afford a smart, high-priced lawyer.
I don’t get paid by anybody on any side of this fight. I just think it isn’t fair.