FINANCIAL LITERACY

Bankruptcy courts in Maine had a busy 2001 – 4,397 people filed for protection from creditors last year. That’s up 13 percent from 2000, down a tad from the record-breaking 4,500 of 1998, up a startling 200 percent since 1990.

Must be the bad economy. But business bankruptcies are at their lowest in a decade, the economy’s just as bad for business as anyone else, so maybe not.

Must be the aggressive marketing by credit- card companies. But magazine publishers and vinyl-siding manufacturers market their products aggressively and yet the public does not bury itself under unread periodicals or unneeded clapboards, so maybe not.

Must be this thing experts in the field call financial illiteracy – the inability, or unwillingness, to balance a checkbook, to stay within a budget, to avoid unnecessary borrowing and ruinous interest, to save for those inevitable rainy days and to have a financial plan for the future. Some 1.2 million Americans now declare bankruptcy every year, a number that doubled in a decade and that includes some who’ve suffered bad luck, many who are just plain financially illiterate.

Bankruptcy serves an important function – to protect the homes, tools of the trade and essential transportation of those who have fallen upon hard times, such as catastrophic illness, accident, layoff. It was never intended to be what it has become, an option to making tough decisions and sacrifices. That option costs the bill-paying set dearly; an estimated $50 billion in uncollectible debt is passed on to responsible consumers each year.

Bankruptcy reform passed by Congress last year is supposed to reverse this by putting the burden back on the debtor by making it much harder to file under Chapter 7, which wipes out credit-card and other unsecured debt, and forces them into Chapter 13, which puts them on a rigid repayment plan for all debts. It’s too early for final judgment on how it’s working, but the indications are not good.

Read any news account, from Maine or any other state, on this bankruptcy epidemic, and it becomes clear that financial illiteracy is largely a self-inflicted condition. The pattern in interviews with bankruptcy filers is so common it has become banal – they begin by blaming the credit industry or other lenders for their troubles, they end by admitting they knew they were spending money they didn’t have but didn’t care to stop themselves.

The opposite condition, financial literacy, is not merely a virtue, like personal responsibility; it’s an actual curriculum, like mathematics combined with personal responsibility. The Maine Council on Economic Education, the Maine Credit Union League and other financial organizations worked with the Maine Department of Education on developing the Maine Learning Results Standards in economics now being implemented throughout the state and that partnership provides materials and lesson plans to help schools teach it. The final grades will show in the bankruptcy court in the years to come.