Rich get protection, workers drown in debt
By Monica Moorehead
Congressional negotiators agreed to a proposed bankruptcy law on July 25 that would make it difficult for individuals and families drowning deeper and deeper into debt to declare bankruptcy. Both the Senate and House of Representatives are expected to pass this bill no later than Aug. 2, laying the basis for President George W. Bush to sign it into law before Congress adjourns for the rest of the summer.
This new bankruptcy law is without a doubt a victory for the big credit card and lending conglomerates. On the other hand, it is a slap in the face to millions of people in low-income and middle-income brackets who will find it more difficult to utilize the bankruptcy option to get parasitical creditors off their backs.
Hundreds of thousands of people are now rushing to file for bankruptcy before the bill becomes law. Filing of bankruptcy petitions rose by 15.1 percent from March 2001 to March 2002. More than 1 million people normally file for bankruptcy every year.
Even before this draconian bill was approved, it was not easy for an individual or family to decide to declare bankruptcy. According to Loan Links, "Bankruptcy ... stays on your credit report for up to 10 years and can hinder your ability to get a job, establish new credit, get insurance and even a place to live. Furthermore, you will lose control over your finances since a Trustee will be appointed [by court] to oversee the completion of your filing. ... They charge an average of 8 percent to oversee the successful discharge of your bankruptcy petition."
This bankruptcy law comes at a time when the general population has become more and more incensed at the growing epidemic of corporate abuses and scandalous behavior on the part of executives at Enron, WorldCom, Adelphia and many more who have "cooked the books" in order to attract more investments. The false profit margins have resulted in the massive theft of small-time investors' pension funds, not to mention workers' wages and benefits.
Some of these same global transnationals have filed for bankruptcy. But of course the new law will not apply to them. Corporations, large and small, declare bankruptcy every day. They can file Chapter 7 of the bankruptcy law that wipes out debt altogether, or they can file Chapter 13 that allows the debtor to keep some assets while simultaneously easing the balance of the remaining payments to their creditors.
The new law will virtually prohibit individuals and families from filing under a Chapter 7, depending on their state median income, and force them to file instead under Chapter 13. Yet for the big corporations, bankruptcy will continue to help protect them from their creditors--the big banks.
These same lending and credit card corporations helped give more than $700 million in election campaign contributions to both capitalist parties, the Democrats and Republicans, in 1996. This proves once again that the two big business parties owe their allegiance to these class forces. And it sheds light on the lengths to which they will go to serve the super-rich, powerful hand that feeds them.
Debt is endemic to capitalism
After World War II, the U.S. was the number-one lender country in the world while much of Europe and Japan lay in ruin. But today it is the most indebted country in the world. In fact, the U.S. economy runs up an average daily deficit of more than $1.1 million that has translated into over $6 trillion. That is over $6,000 billion!
Where does personal debt fit into this equation?
Eliminatedebt.org reports:
Almost one out of every 100 households in this country will file for bankruptcy.
According to the American Bankruptcy Institute, 302,829 people filed for bankruptcy in the first quarter of 2000.
The average U.S. household has 13 cards--including credit cards, debit cards and store cards. There are 1.3 billion such cards in circulation in this country.
The U.S. population made a total of $1.1 trillion in credit card purchases in 1999.
Individuals in this country carry an average $5,800 in credit card debt from month to month. If they were to make only the minimum payment on that individual debt every month, it would take 30 years to pay off and would include another $15,000 in interest.
Making the minimum payment, an $8,000 debt at an 18 percent interest rate would take 25 years to repay and cost more than $24,000 in the long run.
On average the typical credit card purchases cost 112 percent more than if the payment were made in cash.
It is no wonder that Visa, MasterCard, American Express and so on lure people into accepting credit cards--using incentives such as little-to-no finance charges or low-interest payments for the first several months. All that matters to them is how much profit they make just from the interest payments alone, while people are slowly going under in the insidious quicksand known as debt.
Novelist Charles Dickens wrote about the horrors of 19th-century debtors' prisons in England in books like "Oliver Twist" and "David Copperfield." This particular kind of jail does not exist here yet, although the prisons in this country have always been concentration camps for the poor.
But the new bankruptcy laws--along with growing layoffs, loss of benefits and pensions-- will make people feel desperate to do whatever is necessary to stay afloat and survive. Instead of passing a corrupt bankruptcy law, Congress should be passing an emergency moratorium on layoffs and foreclosures.
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Bankruptcy profiles
Average age: 38;
44% of filers are couples;
30% are women filing alone;
26% are men filing alone;
Slightly better educated than the general population;
Two out of three have lost a job;
Half have experienced a serious health problem;
Fewer than 9% have not suffered a job loss, medical event or divorce;
Highest bankruptcy rates: Tennessee, Utah, Georgia, Alabama.
Source: The Fragile Middle Class: Americans in Debt; Elizabeth Warren, Harvard Law School; Smith Business Solutions
The typical family filing for bankruptcy in 1997 owed more than one and a half times its annual income in short-term, high-interest debt. A family earning $24,000 had an average of $36,000 in credit card and similar debt.
Federal Reserve (1997)
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Reprinted from the Aug. 8, 2002, issue of Workers World newspaper
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