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April 14, 2005
Today a bipartisan majority in the House of Representatives will pass a bill making it more difficult for Americans suffering from financial misfortune to file for bankruptcy. The credit card industry-which stands to benefit enormously-has pushed the bill relentlessly, blaming rampant consumerism for most bankruptcies. In fact, studies show that 90 percent of all filings are caused by loss of a job, high medical bills or divorce.
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Average Americans will be hit hard. The new bill will make it harder for people to recover from financial misfortune. Those seeking to file for bankruptcy will be forced to pay for credit counseling before they do so and the bill will raise filing fees, require more documentation and trips to court and will likely result in higher attorney fees for filers.
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The sick and recent war veterans will also suffer. An amendment allowing those who became bankrupt due to illness to be exempt from the new rules failed. Similar amendments that would have protected veterans returning from Iraq and Afghanistan were also voted down.
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Credit card companies will win big. Although the bill creates new hurdles for Americans in debt, it does nothing to rein in the credit card industry. According to the National Consumer Law Center, the bill does not address companies' high fees or deceptive promotions. It also shields these credit card companies from liability and weakens legal protections from predatory interest rates.
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