Feed the banks

When Congress recessed last fall, Republican leadership promised to come back this spring with a major reform of bankruptcy law that would get tough with the nation’s swelling legion of chiselers. They said nothing about getting tough with the chiselers’ children.

Yet that is exactly where the leading measure in the House and Senate is headed with a provision that puts credit card debt on the same footing as child support. First lady Hillary Clinton has registered her objections, bipartisan opposition is growing, but it remains in doubt whether there is time to stop this bad idea.

The provision pertains to Chapter 7 bankruptcy, in which assets are liquidated and some debt is totally erased. Debt which by law cannot be erased, that must be paid, is called nondischargeable debt and is now limited to child support, alimony, federal taxes and student loans.

Add to that credit card debt incurred within 90 days of filing for bankruptcy and there is one more very hungry mouth to feed. The insolvent has only limited resources to pay nondischarged debt — perhaps some savings, that portion of income left after paying for essentials — and Congress now would divide that five ways instead of four.

Bankruptcy law is important. It protects those dealing with unforeseen difficulties, such as catstrophic illness or loss of a job, by allowing them to keep their home, the tools of their trade, a vehicle to get to work and food on the table. But while business bankruptcy has remained fairly stable, the shocking rise in personal filings (1.3 million last year, 20 percent more than in 1996 and 300 percent more than in 1980) strongly suggests an increasing number of Americans simply don’t want to pay up. Personal bankruptcy costs responsible, bill-paying consumers an estimated $50 billion a year in the form of higher interest rates and finance fees.

And Maine is front and center in this pathetic trend. The state had more than 4,200 personal filings last year, up nearly 38 percent from the year before, which was up nearly 42 percent from the year before that.

Blame for this belongs to those who run up debt they know they cannot repay, but banks are hardly innocent victims. Americans were swamped with 1.2 billion unsolicted offers of credit last year. In the jargon of the 12-step movement, banks are the enablers of the nation’s free-money addiction.

Besides, the law already allows credit card debt incurred within 90 days of bankruptcy to be prosecuted as fraud. It takes some work and a fair amount of digging to prove that a debtor intentionally took on debt he or she knew could not be repaid, but that’s why banks have all those in-house lawyers. Congress should tell the banks to fend for themselves and leave a few more morsels for the kids.