Mass Debt

As we probably are all aware, there’s an overhaul of the bankruptcy laws set to take effect soon, and I have a really hard time deciding which side of the issue to come down on. Ultimately, the culprit is the consumptive nature of our society.

As I see it, the arguments for and against line up like this:

On the anti side, we have poor people, unable to make ends meet (particularly with the minimum wage stagnant through nearly ten years of inflation) who get ever more into debt, and the only way to get out is to declare bankruptcy. The argument here is that if we paid them enough to actually live their lives they wouldn’t have to go bankrupt. The argument also is that the whole concept of bankruptcy is supposed to be to give someone a fresh start after screwing up, and by turning that into a restructuring of debt, you leave someone who is honestly in dire straits unable to climb out of the pit.

But the most compelling reason to me is that this is only PERSONAL bankruptcy. Heading every closer to a fascist state, as far as I can tell there’s no reworking of CORPORATE bankruptcy. This is further tipping the scales in favor of the corporations and away from the citizens. For an example of how this isn’t fair (and I recognize this may not be a typical example. It’s illustrative, however, of how the system isn’t fair):

Suppose Mr. & Mrs. Jones scrape and save to eek out a living, and they’re responsible about their debt load. They carry a mortgage and maybe a car payment, but they don’t carry revolving debt on their credit cards and they haven’t run up lines of credit anywhere else. Mr. & Mrs. Jones retire, having figured out that their pensions will be sufficient to pay their required monthly payments and still have enough left over to eat and live.

Now suppose Mr. & Mrs. Jones’ former company declares bankruptcy. As part of corporate bankruptcy laws, corporations are allowed to default on pensions. It’s one of the threats Northwest Airlines has been throwing at the striking union to try to force them to accept much lower wages. “Look, if you don’t take this pay wage, we’ll have to declare bankruptcy, and then you’ll all lose your pensions.”

So now Mr. & Mrs. Jones no longer have the income they earned, were promised, are owed and were counting on, and so they have no choice but to declare bankruptcy themselves so as not to lose their house and their cars and be either homeless or forced back to work in their golden years. But oh, no, according to the new PERSONAL bankruptcy laws, all they do is restructure their debt so they can make smaller payments, payments that, with no income, they still can’t afford.

In the extreme case, let’s assume Mr. & Mrs. Jones had actually worked for the very bank which holds their mortgage note. We would end up with a case whereby the corporation (the bank) could completely screw the Joneses and then turn around and hold them responsible for payments that they (the Joneses) could have made if the bank hadn’t defaulted to them.

Further examples of the fascist nature of the neo-conservative agenda. Anything that interferes with corporate profits is evil, even if it’s simply holding corporations responsible for cleaning up their own messes and meeting their own obligations.



However… on the other side of the coin, we have rampant consumerism leading large sectors of the population to go into debt for things they just don’t need. When we look at the middle class, not starving, not risking homelessness, but so many of them opening up lines of credit for that new wide-screen TV or that luxury automobile or for designer clothing when they could be similarly clad (but without the pricey designer name) for much less at generic stores.

Our society is so heavily oriented towards consuming more than our means will allow that huge numbers of people with the fiscal acumen of a toadstool get themselves so far into debt that they can never climb their way out. Should bankruptcy become just another step in the standard middle class life? “Well, let’s follow our parents. Buy lots of stuff on credit until we’ve maxed everything out, then declare bankruptcy sometime around 40 and live out the rest of our lives on the income that remains after being freed from our obligations” sounds too much like welfare for the middle class, funded by whoever granted them credit.

…and yet back to the anti side of the argument again, right now we’ve got too many companies pushing too many people into financing things they (the people) really can’t afford. If this law is passed, instead of getting better this situation will get worse. When there’s no longer much risk of default to the corporations, we’ll start seeing even more of these “Bad credit? No credit? NO PROBLEM!” ads exhorting the financially disinclined to open up more lines of credit. Why not, we’ll get our money back eventually!

The thing is, bankruptcy acts (or should act) as a deterrent to this sort of behavior. I’m not saying such loans shouldn’t be available only that they shouldn’t be so actively marketed to those who can least afford them.

So what it comes down to is that I just don’t know what’s the right thing to do here. I’m all about personal responsibility, and that part of me positively screams that this is a good thing, that we shouldn’t be giving people license to run up obligations and then legally stick it to those who were nice enough to provide the loan. On the other hand, let’s keep the playing field level and if we’re going to severely restrict personal bankruptcy, restrict corporate bankruptcy at the same time.

Liam.