Call it the Anti-Child Support Act.
It is the product of a full-throttled campaign by the credit card companies and financial services industry to rewrite U.S. bankruptcy laws.
Their goal: to make it harder to declare bankruptcy and to impose heavy burdens on debtors who do fall into bankruptcy.
More than one million Americans declare bankruptcy each year. This should not be a surprise: the credit industry sends out 2.5 billion solicitations each year; credit card advertisements urge consumers, simply, to spend; and the consumer culture encourages extravagant purchases and constantly upgrades the measure of what is an "essential" versus a "convenience." All the while, real wages have stagnated or dropped over the last 25 years for 80 percent of the population.
When a person declares bankruptcy, they are required to undertake court-supervised repayment plans. During a period of three to five years, with some money set aside for essential needs like food and rent, they allocate their income to pay off their debts as best they can. At the end of the repayment period, their debts are wiped clean.
For the credit industry, of course, personal bankruptcies mean unpaid accounts. That's why the industry wants to make it harder to declare bankruptcy and more onerous to live through it.
The industry-supported "Responsible Borrower Protection Act" would force debtors to litigate their right to be in bankruptcy, and impose expensive new filing and other bureaucratic requirements -- just to get into bankruptcy. Once in bankruptcy, debtors would be forced to stay in repayment plans for five to seven years. The legislation would place payment obligations for credit card debt on a par with secured debt on critically important items like a home mortgage or a car loan.
It even would place credit card debt on equal footing with child support payment obligations, says Gary Klein of the National Consumer Law Center.
In other words, debtor repayment plans could not prioritize paying off mortgages -- enabling people to keep their homes -- or paying back child support over payments on overdue Visa or Mastercard accounts.
The industry spin on this draconian legislation is that it would crack down on "bankruptcies of convenience." The American Financial Services Association argues that debtors routinely file for bankruptcy to escape debts when they have the means to make payments. Bankruptcy is becoming a "financial planning tool," the Association contends.
These claims ignore some inconvenient facts: Bankruptcy debtors have an income 40 percent below the national average, for example. And the existing bankruptcy system imposes tough oversight provision on debtors, with strong civil and criminal penalties for fraud and dismissal of claims by people who can afford to pay their debts.
But the credit industry doesn't intend for facts to get in its way. It has launched a massive PR and lobbying blitz to generate public support for the Anti-Child Support Act.
Financial interests have banded together to form the National Consumer Bankruptcy Coalition. Members of the coalition poured more than $700,000 into federal candidate campaign coffers in the first half of 1997 alone.
The American Financial Services Association has hired a Dream Team of lobbyists and consultants to push the Anti-Child Support Act. Among its hires: Verner Liipfert, a law firm that is the current home of Bob Dole and Lloyd Bentsen, former Treasury Secretary; Timmons & Co., run by William Timmons, a top White House aide in the Nixon and Ford administrations; and former Republican National Committee Chair Haley Barbour's law firm.
The industry's big bucks and lobbyist Dream Team are all working to sabotage an institution that provides a modicum of fairness in the American economy. There is no debtor's prison in the United States; when people fall on hard times and into financial troubles from which there is no escape, we make them pay what they can -- and then offer them a fresh start.
There is, of course, one serious issue of bankruptcy abuse -- big corporations declaring bankruptcy to avoid liability payments for dangerous products they sold. But somehow that problem hasn't drawn the attention of the self-proclaimed advocates of "bankruptcy reform."
COPYRIGHT © RUSSELL MOKHIBER AND ROBERT WEISSMAN
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