Bankruptcy Reform to Harm Consumers
Congress is on the verge of passing bankruptcy reform legislation. Sadly, it is one of the cruelest pieces of legislation for consumers and, if passed, will be extremely hurtful to the people of this country.
The bill's primary presumption is that people who wind up filing bankruptcy are careless and/or deceptive people who are trying to take advantage of creditors. In the vast majority of cases that is simply not true.
nor planned. Since that time, I have counseled and coached tens of thousands of people in the same situation, and I have yet to come across one single person who willfully and intentionally incurred debt just to walk away from it.
The picture painted by pro bankruptcy reform supporters of reckless and careless consumers is outrageously false. Often, the number of people filing for bankruptcy is hoisted in the press to justify that reform. On its face, the number of people who file bankruptcy seems like a big number, but it's not when you look at the number of eligible adults who could file. The reality is that less than 0.7 percent of adults file bankruptcy each year.
The new bankruptcy reform legislation seeks to punish individuals for the unfortunate financial situations they find themselves in, but does not require creditors to be more caring, compassionate understanding or more responsible as to how much credit they extend to people who clearly are already overextended. Neither does the proposed bill allow consumers to repay what they can actually afford.
The real shocker here is that when people approach creditors with a willingness to repay their debts to the best of their abilities, they are often met at the credit card companies with a brick wall of policies and procedures that will not allow them to do so. During my many years working with people in financial difficulties I have found that almost without exception creditors advise debtors to file for bankruptcy rather than allow them to pay what they can afford. They do so because the finance companies do not have a system in place to allow for non-standard or reasonable payments that do not fit their narrow criteria, and they are unwilling to create such a system. Consequently, many people who want to pay back their creditors are forced into bankruptcy court by the creditors themselves, unnecessarily inflating the numbers who file.
Surprisingly, credit counseling organizations eagerly await the passage of this legislation. You would think that these nonprofit groups would be acting in the interest of consumers, rather than creditors. Not any more. With all of the negative publicity credit counseling agencies have received recently, and the drastic funding cuts inflicted by credit card companies, they are salivating at the thought of provisions in the bill that require consumers to get pre-bankruptcy counseling and mandatory post-bankruptcy education. Agencies hope that the fees they will charge consumers for these services will solve their current funding woes.
If credit counseling organizations truly put people first, they should be leading the fight for consumers against this emotionally bankrupt legislation instead of eagerly planning behind closed doors for the income opportunity they hope this legislation will provide.
The main reason why the proposed reforms are bad is because they do not take into account the circumstances surrounding a person's financial problems. This bill uses a sledgehammer to thread a needle.
Money problems are about choices that we make or situations that life unexpectedly deals us. In a medical context, the inability to pay bills is a symptom of the illness and not the problem itself. When someone cites job loss as the reason for bankruptcy, it is only the triggering event and not the cause of why he found himself in over his head. The real situation is often a complex formula of many varied events.
Sure, consumers share part of the blame because they actually believe the marketing hype that bombards them: "No payments for 12 months", "No down payment.", "Easy financing." They also share the blame for being human. Money problems are rarely about the money.
There is never only one entity to blame when people face financial problems; everyone owns a portion of the situation. Creditors aggressively dole out credit in a, "Take this. Pick me," fashion. And, once you sign on the line, they have a "take no prisoners" approach when unexpected and unfortunate things happen that prevent someone from repaying their debt. Creditors also have no compassion or understanding when it comes to the underlying reasons that cause people to file bankruptcy such as medical costs, job loss and divorce.
I am appalled that our elected representatives would even consider such a poorly thought out bill that has clearly been crafted by the credit industry. This bankruptcy reform legislation is a cruel method of extracting cash from consumers without taking into account each individual's situation. It is punishment for falling on hard times. It is designed to solve a perceived problem of abuse that does not exist. It is a creditors dream come true.
Steve Rhode
President, Myvesta.org
(Myvesta is a non-proift organization dedicated to helping people develop healthy spending.) people so that they can break down their barriers to financial and personal success. For more information visit Myvesta.org online.)