Bad to Worse

Gross! How to take a horrible bill and make it genuinely loathsome. Look at this -- look at what they are doing with this bankruptcy bill.

The bankruptcy bill was a gift to big bankers and credit card companies to begin with, in return for copious showers of campaign contributions to our very own elected representatives in Congress. Same old, same old.

The big lenders, the kind who can legally jack up your interest rates at any time for any reason (read that fine print, folks), have a problem. More and more Americans are going broke. So they declare bankruptcy under Chapter 7, which wipes out their credit for 10 years, but gives them a chance to start over without debt. So, naturally, the banks want to make it harder to declare bankruptcy by forcing people to file under Chapter 13, only a partial diminution of debt.

According to a study by two associate medical professors at Harvard, published in Health Affairs, bankruptcies are indeed shooting up. Between 1981 and 2001, personal bankruptcies rose by 360 percent, but those caused by medical debts rose an astronomical 2,200 percent. Only job loss now slightly leads medical crisis as the reason for bankruptcy -- it's ahead of divorce.

Another cause, as well the usual usury, is that the card companies push accounts on people whose credit is only marginal -- your teenager has doubtlessly been offered several. Ooops, it turns out many of those with shaky credit can't pay (!), so of course the banks want the law changed even more in their favor. Poor little card companies -- only $30 billion in profits last year.

If you have not lived long enough to know that anyone can be hit by financial catastrophe, just wait. Your job, too, can be outsourced. And if you think health insurance can keep you out of financial trouble if you get sick -- surprise! Three-fourths of those who filed for bankruptcy because of medical costs had health insurance.

The study in Health Affairs reports that the middle class actually suffers most from the health crisis, accounting for 90 percent of all medical bankruptcies: Drug costs alone drive many into bankruptcy.

In a classic example of moral accounting, Sen. Charles Grassley, R-Iowa, the bill's chief sponsor, said, "People who have the ability to repay some or all of their debt should not be able to use bankruptcy as a financial planning tool so they get out of paying their debt scot-free, while honest Americans who play by the rules have to foot the bill."

That's a startling example of the "straw-man" school of argument. The study by the Harvard profs shows that in the two years before filing for bankruptcy, 19 percent of families went without food, 40 percent had their phone service shut off, 43 percent could not fill a doctor's prescription and 53 percent went without important medical care.

So, who are these feckless, irresponsible moochers using bankruptcy to avoid paying legitimate debts? Why, look at this: The New York Times reports "legal specialists say the proposed law leaves open an increasingly popular loophole that lets wealthy people protect substantial assets from creditors even after filing for bankruptcy."

What, our Republican Congress passing a bill that favors rich people at the expense of "honest Americans who play by the rules and have to foot the bill"? If you have a lot of money (most people filing for bankruptcy don't have this problem), you just put it in an asset protection trust and walk away. You don't even have to set up the trust offshore anymore -- five states have made it legal to set them up in their borders, and you don't even have to live in any of the five to do it.

If you don't like that feature of the bankruptcy bill, try this one: You may have read of the hardship on the families of those who have been called to fight in Iraq, including, of course, severe financial stress leading to many bankruptcies. Democrats in the Senate tried to put an amendment on this bill exempting military personnel, and the Republicans voted it down.

Elizabeth Warren, a Harvard law professor, pointed out in testimony before Congress that the bill assumes everyone is in bankruptcy because they're spendthrifts. "A family driven to bankruptcy by the increased cost of caring for an elderly parent with Alzheimer's disease is treated the same as someone who maxed out his credit cards at a casino. A person who had a heart attack is treated the same as someone who had a spending spree at the shopping mall. A mother who works two jobs and who cannot manage the prescription drugs needed for a child with diabetes is treated the same as someone who charged a bunch of credit cards with only a vague intent to repay."

But hey, that's the conservative idea of justice -- treat 'em all the same, except for the rich.

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