Why Bankruptcy Is Good For America

07 Feb Why Bankruptcy Is Good For America

I say bankruptcy is good for America. I say it’s good for people to get out of unbearable debt and get a fresh start. If we couldn’t keep the fruits of our labor, if everything we earned had to go to pay back debt, then sooner or later we’d stop working. There would be no point. Or we’d work under the table. Less income taxes paid would mean that everyone else’s taxes would go up. Perhaps there would be an increase in welfare rolls, or confusing role models for our children.

I say bankruptcy is good for America. You don’t have to be a biblical scholar to know that the concept goes back 3,000 years to Leviticus, with the Sabbath year discharging unsecured debt every seven years and the Jubilee Year discharging mortgages every 49 years. They saw the need, and they saw the benefits, even back then.

The credit card issuers aren’t getting hurt. They borrow their funds from our own Federal Reserve at 3% and lend it out to us at 25%. That’s a better deal than Tony Soprano.

If the country wants to restrict bankruptcy filings, let Congress pass a usury law. Let Congress simply overturn the two Supreme Court decisions which currently allow interest rates and fees to be set by the card issuers’ home states – which is why they are all headquartered in Delaware and South Dakota. Each state should be able to protect its own citizens.

Usury laws will reduce bankruptcy in two ways. First, affordable interest will mean that an honest borrower will actually be able to repay a debt. No one can repay a 25% debt; it just isn’t realistic. Second, a usury law will force lenders to reinstate lending standards and stop an honest but overly optimistic borrower from getting in over his or her head.

I say bankruptcy is good for America. I say bankruptcy makes sense for America.

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L. Jed Berliner practices exclusively in consumer bankruptcy, foreclosure defense, and related consumer protection litigation such as credit card defenses and suing debt collectors. He established his Springfield, MA practice in 1988. Attorney Berliner is a regular and active contributor to the Bankruptcy Law Network, the Bankruptcy Roundtable, and the National Association of Consumer Bankruptcy Attorneys, three specialized consumer bankruptcy forums on the Internet, and is an informal mentor to regional practitioners. He is recognized by his peers as an expert in consumer bankruptcy issues. He thoroughly enjoys being rated "excellent" in his client surveys.

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1Comment
  • Cathy Moran
    Posted at 10:25h, 08 February

    You’re not alone in your view. Thomas Friedman, columnist for the New York Times, picked generous bankruptcy laws as an essential feature of a successful economy for the globalized world.

    See an excerpt on bankruptcy at http://www.moranlaw.net/Friedman.htm.

    Cathy