LEXIS-NEXIS® Academic Universe-Document

LEXIS-NEXIS® Academic

May 8, 1999, Saturday

SECTION: Editorial; Ed. FINAL; Pg. 65A

LENGTH: 364 words

HEADLINE: MILD BANKRUPTCY REFORM

BODY:
Representatives of some consumer groups are practically frothing at the mouth because the U.S. House passed a bill to reform the nation's bankruptcy laws the other day.

You have to wonder, though, what consumers these groups are worried about - the average family that ends up spending something more than an estimated $500 a year because of mounting bankruptcies, or a small fraction of the relatively well-off who take advantage of loose laws to avoid debts they can afford to pay?

Although some accounts might lead you to think otherwise, the House bill was not a draconian measure that would break the backs of impecunious Americans. It applies only to those whose household incomes are above $51,000 a year. The bill says these people should no longer be excused from repaying even a cent of their debts when it can be demonstrated by IRS living-standard criteria that they have the means to repay a portion of what they owe over a number of years. At least 90 percent and maybe as many as 97 percent of those who now avoid any debt repayment at all under the Chapter Seven bankruptcy law would still get off scot-free. But, say some consumer group spokesmen, it's the credit-card companies that spur bankruptcies. And it is no doubt time for an intense review of an industry that, in its indiscriminate lust for customers, sends out an astonishing 4 billion credit-card offers a year. Still, the mounting personal bankruptcies - which have quadrupled over the past 20 years and hit a record 1.4 million last year - have many causes and affect more than just credit-card companies. Although people in fewer than 2 percent of all households declare bankruptcy, everyone ends up paying higher interest rates and prices as a result.

The House bill is far from perfect; on some issues, such as giving judges more discretion, the Senate should do better. But legislation should be passed. A thriving marketplace depends on most people, most of the time, meeting their self-incurred monetary obligations. Lax laws encourage lax behavior that can be economically dangerous. That's a case consumer groups should be making just as vigorously as business groups.

LOAD-DATE: May 10, 1999