First, let me say that I’m not opposed to personal bankruptcy. Every year, millions of people lose jobs, suffer major illnesses, or experience family losses that decimates their finances. These are the people bankruptcy was invented for. However, there is a new bankruptcy trend that really makes me stabby: filings by people who could pay their bills, but choose not to because they’d rather spend the money on something else.
Personal Bankruptcy Is the Latest Get-Rich-Quick Scheme
A friend told me that her friend proudly announced that he was filing for bankruptcy to eliminate his credit card debt. He decided he wants to remodel his house instead of paying his bills. He figured now was a good time to file for bankruptcy because so many other people are filing that “it won’t hurt you as much.” He also claims to know 10 other people doing the same thing. That makes me sick for so many reasons!
Unwarranted Bankruptcies Cost the Rest of Us
Bankruptcy was intended for people who are legitimately suffering. It’s not a system to be manipulated just because you don’t feel like paying your bills. When people take advantage of the system, it costs the rest of us more. Credit card companies charger higher fees and interest rates to those who do carry a balance. Businesses pay higher costs for credit because the banks have to make up for the loss somewhere else. When businesses pay more, we pay more for the goods we buy from them.
Unwarranted Bankruptcies Make Credit Less Available
We’re also in the midst of a massive credit crunch. Most of it is a result of the collapsing housing market, but defaulting credit cards also play a role. Those people who could pay their bills, but choose to take advantage of the system instead, are making it more difficult for honorable people to get loans that would stimulate the economy.
Unwarranted Bankruptcies Clog the Courts
According to Reuters, December 2008 personal bankruptcy filings increased 44% over the year before. Even if only 5% of those are unnecessary bankruptcies, that’s still a lot of extra workload for cash-strapped courts and cash-strapped creditors. It also delays relief for families that really do need the help.
Unwarranted Bankruptcies Chip Away at Society’s Morals
Each year, we seem to be moving further away from a national sense of personal responsibility. More and more people consider only how their actions affect them. They don’t consider how their decisions could affect their friends or even strangers. If we keep moving in this direction, all those futuristic movies will come true and we’re all doomed.
Okay, that might be a stretch. But the gist is still true – each time an unethical choice becomes acceptable, our ethics as a nation weaken and there’s no telling where it will end.
What Should Be Done?
Unfortunately, I don’t think there’s a way to punish people who file for bankruptcy for personal gain without inadvertently hurting the people who really need the help. My hope is that this jerk will be forced into Chapter 13, where he’ll have to repay most of his debt under a court-ordered system. I also hope that his credit will be trashed. I’m guessing that lenders are going to take a hard look at any bankruptcies when they’re ready to lend again. I also hope lawyers who choose to represent these *$#%@Q%Q# (sorry, the stabbiness overtook me) will be disbarred for abusing the court system.
Actually, if I’m hoping for things, I hope this guy and his lawyer are covered in honey and strung up by their toes over an anthill. But that’s just me.
Although the bankruptcy laws were made stricter at the behest of credit card companies and other creditors, people like this were part of the underlying reason. If this sort of deceitful, greedy, manipulative, so many words I can’t say on a family blog, behavior continues, we may have to get rid of bankruptcy entirely. Ultimately, that will only hurt the people who are genuinely suffering and who could genuinely benefit from a fresh start.
What do you think of people who manipulate the bankruptcy system for personal gain? What do you think should be done to punish them?