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It’s been a year since President Bush signed a so-called bankruptcy reform bill making it harder for America’s working families suffering severe financial setbacks to start over. Has the law done what its backers—big credit card companies and corporate interests—said it would do?
Hardly.
After hitting 20-year lows in the first quarter of this year, bankruptcy filings sharply rebounded in the second quarter of 2006 and continue to rise. The only reason the filings were down is that nearly 600,000 people, 10 times the normal level, filed in the two weeks before the law took effect. Now, according to United Press International, 68.5 percent of the lawyers surveyed by the National Association of Consumer Bankruptcy Attorneys say their bankruptcy filings are up in the third quarter of 2006, compared with the first half of the year. Some bankruptcy attorneys predict we’ll have pre-reform levels of filings by the law’s second anniversary in October 2007.
By caving in to the corporate interests, Congress ignored the real reasons for most bankruptcies: job loss, divorce or illness.
When the House passed the bill last year, AFL-CIO President John Sweeney said the vote sent a dangerous signal to working families that “Congress will systematically gut protections for workers who have lost jobs or face crushing medical bills.”
Sweeney also said the law unfairly punished workers who were victims of corporate abuse of bankruptcy laws:
Studies suggest that 90 percent of those filing for bankruptcy do so because of circumstances largely outside their control. In recent years, business failures and mass layoffs resulting from corporate fraud have led to innumerable individual bankruptcies.
Rather than correcting deficiencies in current law that fail to protect workers in these circumstances, the bill puts more pressure on working families when they are most vulnerable.
In August, the AFL-CIO Executive Council called for bankruptcy reform, demanding real reform of the rules that allow corporations to dump collective bargaining and take workers’ hard-earned pensions and benefits:
Bankruptcy is no longer a last resort. Managers increasingly wield it as a proactive weapon to drastically and unfairly slash labor costs industry-wide—and to enrich themselves. This misuse of bankruptcy threatens the hard-won living standards of America’s working families and requires restoration of fairness and balance in the bankruptcy process through comprehensive reform of the bankruptcy laws.
What’s worse, the year-old Bush bankruptcy law has opened up the floodgates to predatory lenders and put the middle class in danger. Former Democratic vice presidential candidate John Edwards points out that falling home values and the bankruptcy laws are a deadly combination for workers:
Our middle class is built on shaky ground. The latest sign: a wave of new foreclosures driven by higher interest rates, lower housing prices, and predatory mortgage lending.
Middle and low-income families are under attack from predatory lenders who offer deceptive terms, charge unfair fees, and trap the unwary or the unlucky.
Rather than passing laws that punish consumers trying to make ends meet, we should be cracking down on the irresponsible lenders that prey upon them. Congress needs to start paying attention to the growing problem of predatory lenders.
It’s well past time to install leaders who care about issues like predatory lending, rising mortgage foreclosure rates, increasing the minimum wage, and helping middle and low-income families. Americans deserve leaders that have the backbone to stand up and do something about their concerns. We need a government that works for all of its people, especially the most vulnerable among us.
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