Home of Invest in Yourself
A Dozen Reasons Why We Oppose
the Bankruptcy "Reform" Bill
By Gerri Detweiler, Nancy Castleman, and Marc Eisenson
Coauthors of Invest in Yourself:
Six Secrets to a Rich Life
As consumer advocates watching the banking and credit industry for the past couple of decades, we've seen the good and the bad. But what's going on right now on Capitol Hill in the guise of "bankruptcy reform" is downright ugly. We simply cannot fathom how, in this time of economic uncertainty and corporate abuse, Congress can get away with punishing Americans who are truly down and out.
We're sending email to every Congressional Representative and Senator imploring them to stop this bill from becoming law. To help you appreciate the far-reaching impact it will have if it becomes law, we've prepared a quick "dirty dozen" list of reasons why this bill should not be passed.
Our hope is that once you finish reading this, you'll want to learn more and let your elected officials know that you oppose the bankruptcy bill. We offer links below to make that easy. And for our ideas on how to "bankruptcy proof your life" click here.
1. The bill will punish people who really can't afford to pay their bills.
"Bankruptcy reform might make sense if the facts indicated Americans are doing what the financial industry claims: running up huge credit card bills and then gaily declaring bankruptcy to avoid paying them off. But bankruptcy judges, lawyers and consumer advocates paint quite a different picture: The vast majority of Americans who file for bankruptcy are victims of circumstances beyond their control. Divorce, job loss or huge medical bills are the trigger about 90 percent of the time."
The Mercury News - August 7, 2002
2. The bill does not hold corporations to the same standards.
"The real abusers of the bankruptcy process are less individuals than outfits like Enron and Adelphia. The fact that Congress is on the verge of passing a bankruptcy bill that goes after consumers and ignores corporations speaks volumes about who is really running the country. The credit card companies and their banker-partners have poured millions in campaign contributions into a willing Congress, and the measure has the support of many Democrats as well as Republicans."
Robert Kuttner, The Boston Globe (op-ed) - August 7, 2002
3. Children in particular will suffer.
"Child support and alimony would be paid less often. Currently, those payments, which are so critical to the health and well-being of our children and are often made to struggling single parents, are granted higher priority in bankruptcy repayment plans. The bill would effectively remove that priority and let a credit card company fight it out legally with a single parent over who gets paid first."
4. Older, sick Americans will pay too high a price.
"Because they take on less consumer debt per household, older Americans end up in bankruptcy less frequently than their younger counterparts. When they do file, however, a larger fraction - nearly 50% -- of those 65 and older are driven to bankruptcy by medical debts they cannot pay. Among debtors aged 50-65, more than two-thirds cite either medical or job problems as the reason for bankruptcy."
Elizabeth Warren & Leo Gottlieb --
Consumer Bankruptcy: Issue Summary -- Harvard Law School
5. Credit card companies that contribute to the problem, will be able to continue to do so.
"One reason that borrowers are being pushed to default and bankruptcy is that the financial companies keep pushing more and more lines of credit on people who are barely living from one paycheck to the next. The high risk inherent in this strategy is already accounted for in credit card companies' business model, in the form of steeper fees and higher interest rates for borrowers with poorer credit ratings. It's a free-market model that works for companies. Credit card issuers have seen their profits soar in recent years."
The New York Times - Editorial -- July 27, 2002
6. Women facing financial troubles will bear extra burdens.
"If it becomes law, the economic effects on more than 1.2 million women each year will be devastating … Most of these women will be in bankruptcy court for reasons beyond their control. More than 90 percent of women who file for bankruptcy have been hit by some combination of unemployment, medical bills and divorce."
Elizabeth Warren, The New York Times - May 20, 2002
7. The economy will suffer.
"Congress shouldn't cut the bankruptcy safety net during an economic downturn. It's puzzling that Congress, despite a depressed economy, would make things worse for consumers by eliminating the bankruptcy safety net, especially when many victims may be laid-off employees of companies that cooked the books or may be consumers who ran up large credit card debts because they were deceived by their irresponsible credit card company. Do these unfortunate consumers belong in debtor's prison for the next five years?"
8. Small businesses will be hard-hit.
"Small business is also victim. Large corporations, such as WorldCom and Enron, still will be able to file bankruptcy and have ample time to reorganize. But small businesses (and most of the bankruptcies in Missouri and Kansas fall into this category) will get much less time, and most will be liquidated as a result."
Corinne Cooper, The Kansas City Star - August 11, 2002
9. Now is not the time.
"“While credit card companies urge Congress to erect new bankruptcy barriers for many families, their profits are soaring. This bill simply doesn’t balance responsibility between families in debt trouble and the creditors whose practices have contributed to the rise in bankruptcies.”
Travis Plunkett - Consumer Federation of America
10. One size does NOT fit all.
"Under the legislation, if your family earns more than the median income for your state (in Texas, for example, that means more than $53,513; Oklahoma $48,459; California $63,206) you may be ineligible to file for Chapter 7, and may be forced to pay back some of your debts over a five-year period. That sounds fair, but here's the rub: to determine how much you must spend on your debt repayment plan, the bankruptcy trustee will rely on IRS figures as to what is "reasonable" for you to spend on your living expenses."
Gerri Detweiler, Ultimatecredit.com
11. Our privacy rights will be further eroded.
"One of the bill's most troubling aspects is the power it gives the credit industry to search through debtors' tax returns. Requiring families to file tax returns when it is unnecessary raises serious threats to privacy and calls into question the real motives behind it. …"
Consumer Federation of America, February 28, 2001
12. Here's the bottom line:
"Many people who go broke were irresponsible with their money. But most were paying their bills until walloped by fate - a layoff, a divorce or big medical bills. They deserve a break. Congress should lay off."
St. Louis Post-Dispatch - July 30, 2002