Copyright 2000 Times Mirror Company
Los Angeles Times
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April 26, 2000, Wednesday,
Home Edition
SECTION: Metro; Part B; Page 8; Editorial Writers Desk
LENGTH: 371 words
HEADLINE: UNJUST
BANKRUPTCY REFORM
BODY:
Responding to a dramatic rise of personal bankruptcies, Congress set out three
years ago to rewrite what it considered a permissive law and restore a balance
between the rights of lenders and borrowers. Abuses of the bankruptcy code have
occurred, although far less frequently than claimed, and laws to discourage
debt-skipping are appropriate.
Yet the legislation, especially the House version, swings too far in favor of
creditors and does nothing to discourage consumers' inordinate spending.
The force behind the bankruptcy legislation--leaving aside a
multimillion-dollar campaign by banks and credit card companies--was numbers
showing that, amid the plenty, individual bankruptcies were on the rise. In
1998 alone, about 1.4 million people filed for bankruptcy, up 20% from the
previous year. The numbers dropped last year by 9.3%, reversing the trend. More
important, research showed only 3.5% of the bankruptcies were filed by debtors
who had repayment capacity. The rest were broke. This rebuts the credit
industry's claims that the current law is a haven for freeloaders.
The legislation imposes a rigid formula that denies Chapter 7 protection, which
wipes out most debts, in too many hardship cases. It gives judges little
discretion to alter the formula to account for individual cases of hardship. In
fact, bankruptcy judges, whom the credit card companies distrust, could not
even make procedural concessions--such as extending a filing deadline for
debtors. The judges' discretion should be restored.
Moreover, the legislation should include the stronger of two provisions in the
Senate bill that would require credit card companies to tell card holders in
clear language the consequences of repaying at the minimum rate. The weaker
provision, under which the monthly statement would say repayment at the minimum
level would cost more and take longer, is meaningless. The only way to deter
excessive spending is to tell consumers specifically how long it will take them
to pay down their balance and what it will cost.
Congress correctly set out to prevent abuses of the bankruptcy code. But it
ended up with a creditors' bill of rights that is unsympathetic and unjust to
most debtors.
LOAD-DATE: April 26, 2000
