A Fighting Chance (49 page)

family breakups had laid these families low:
For discussion of the causes of bankruptcy, see note,
“
or a family breakup…
”

tried to repay long past any reasonable chance of doing so:
Research by Ronald Mann and Katherine Porter using Consumer Bankruptcy Project data found that most households who file for bankruptcy seriously struggle for two years before filing. In one of their interviews with bankruptcy attorneys regarding how long it takes their clients to file, one Georgia attorney reported that “it’s very, very common for people to say[,] ‘I should have done this years ago’ or ‘I should have done this about two years ago.’ So I don’t think it’s a snap decision to contact an attorney.” Ronald Mann and Katherine Porter, “Saving Up for Bankruptcy,” University of Iowa Legal Studies Research Paper No. 10–02 (2010). Similarly, in
The Two-Income Trap
we found that the average person who filed for bankruptcy reports spending more than a year struggling with debts before filing. See
here
.

and I fought her at every turn:
During the Commission’s work, a news report broke that indicated Judge Jones had led a group of Commissioners in a secret meeting with bank industry representatives—in violation of federal open-meeting laws. Diana B. Henriques, “Bankruptcy Commission Faces an Inquiry,”
New York Times
, August 9, 1997.

shopped it around to some friendly members of Congress:
H.R. 2500 (105th), the “Responsible Borrower Protection Bankruptcy Act” was introduced on September 18, 1997, and had 147 cosponsors. “Sponsors of the bill acknowledge that lawyers and lobbyists for the banks and credit card companies were involved in drafting it. The bill gives those industries most of what they have wanted since they began lobbying in earnest in the late 1990s, when the number of personal bankruptcies rose to record levels.” Philip Shenon, “Hard Lobbying on Debtor Bill Pays Dividend,”
New York Times
, March 13, 2001. “The fact that McCollum and Boucher didn’t wait until the report was in to introduce HR 2500 says a lot about the overall attitude toward the NBRC’s efforts, analysts say.” According to a Visa executive, “Unfortunately the commission’s proposal was [dead on arrival].” Judge Jones was quoted saying to the press: “The lending industry became disaffected with the commission’s work pretty early on and decided, strategically, not to show us their hand.” “Proposed Bankruptcy Bill Gets Overwhelming Support,”
Credit Risk Management Report
, December 1, 1997.

bill would make life worse for families in trouble:
The industry-backed bankruptcy bill increased difficulty for families in financial distress in a number of ways. It created means testing, which erected legal barriers to people in financial trouble trying to discharge their debts altogether through Chapter 7. Instead, debtors in trouble were turned out of the system altogether or pushed into the much more arduous Chapter 13, in which a family was put on a very strict budget and forced to make payments on their debts for three to five years. Note that our research had shown that because people sometimes lose jobs or miss work, or are faced with unexpected expenses like medical bills or car trouble, approximately two-thirds of families who attempt Chapter 13 are unable to follow through with the strict budget and end up getting kicked out of the system and lose all bankruptcy protections. See National Bankruptcy Review Commission, “Chapter 13 Repayment Plans,” (1997). The method used for means testing created particular hardship on families who were going through divorce. In addition, repaying back child support payments would no longer take precedence over other kinds of debt repayment. As a result, a single parent who is due back child support from an ex-spouse would now be required to compete with professional collection agents when trying to collect monies due. Also, homeowners who had fallen behind on their mortgages would no longer be allowed to focus their resources on catching up on past-due mortgage payments until they had also paid off other debts, which increased the chances of foreclosure. Lastly, the provisions significantly added to the costs and complexity of filing for bankruptcy. See note,
“
charged more
,”
for more discussion of attorney costs to file.

stayed in the fight however I could:
By 1999, there were 1,281,581 personal bankruptcy filings. By 2001 that figure had climbed to 1,452,030. It would reach 1,625,208 in 2003. See American Bankruptcy Institute,
http://www.abiworld.org/AM/AMTemplate.cfm?Section=Home&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=66471
.

National Partnership for Women & Families pitched in, as did the AFL-CIO:
Many organizations joined the fight against the industry-sponsored bill and on behalf of consumer protection through bankruptcy. Some of the biggest supporters were AARP, AFL-CIO, the NAACP, the Consumers’ Union, the Consumer Federation of America, the National Partnership for Women and Families, the Leadership Conference on Civil Rights, the National Consumer Law Center, PIRG, the Center for Responsible Lending, and the UAW. These groups played a critical role in fighting for bankruptcy reform that would benefit struggling families.

In addition, the National Association of Consumer Bankruptcy Attorneys (NACBA) was formed in 1992 to serve as a voice for consumer bankruptcy attorneys and protect the rights of consumer debtors and also played an important role.

into their second terms, and they were also ready to help:
By taking on the bankruptcy issue, these lawmakers ended up fighting with some of the biggest banks and biggest credit card companies in the country. Senator Durbin mastered the details of the very complex bill, and he was constantly on the lookout for changes that would help families in trouble rather than hurt them. Senator Schumer was an amazing strategist, as his work on the abortion-protestor amendment showed. Senator Feingold and Senator Wellstone actively worked on bankruptcy issues, advocating for the families who needed them. Senator Chris Dodd pushed hard on the point about how bankruptcy helped women (and some men) collect past-due child support and alimony. On the House side, Congressman Jerrold Nadler was an active opponent of the credit industry efforts to weaken bankruptcy, along with Congressmen John Conyers, William Delahunt, and Marty Meehan. Their battles were uphill, but they kept fighting, and my admiration for each runs deep.

three different studies, each of which was touted as “independent”:
The number started out as a $400 hidden tax but quickly grew to $550; neither figure had any basis in fact. For the original studies, see Tom Neubig et al., Ernst & Young, LLP, “Chapter 7 Bankruptcy Petitioners’ Ability to Repay: Additional Evidence from Bankruptcy Petition Files,” American Bankruptcy Institute, (February 1998). See also WEFA Group Planning Services, “The Financial Costs of Personal Bankruptcy” (February 1998). See also John M. Barron and Michael E. Staten, “Personal Bankruptcy: A Report on Petitioners’ Ability-to-Pay 1,” Credit Research Center, Georgetown School of Business (1997).

hardworking, bill-paying American family a $550 “hidden tax”:
For more discussion, see
The
Two-Income Trap
, 154–55 & nn. 97–99; see also Elizabeth Warren, “The Phantom $400,”
Norton Journal of Bankruptcy Law and Practice
13 (2004): 77. According to our analysis, for the $550 statistic to have been true, then the families whom the banking industry was targeting to repay more monies in the bankruptcy courts would have had to have paid $550,000 per household. In our sample of more than two thousand bankrupt families, not one even owed at least $550,000, let alone earned enough money to repay that amount. In other words, the claim that bankruptcy cost every American family $550 was nonsense.

but the press reported it as “fact” for years:
For example, see Beth Dixon, “We All Pay Note on House of Cards,”
The Commercial Appeal
, December 14, 2003. “The American Bankers Association figures that the record number of bankruptcies in 2002 causes American families to pay an additional $400 a year in increased costs for goods and services.” See also Donald Barlett and James B. Steele, “Big Money and Politics: Who Gets Hurt? Soaked by Congress,”
Time,
May 15, 2000: “Representative Bill McCollum, a Florida Republican who has received $225,000 from the lending industry, upped the ante: ‘Bankruptcy will cost consumers more than $50 billion in 1998 alone. That translates into more than $550 per household in higher costs for goods, services and credit.’”

For more examples and discussion, see Elizabeth Warren, “The Phantom $400.”

working families, against “that awful bill”:
In her book, Hillary Clinton writes: “Proposed bankruptcy reform moving through Congress threatened to undermine the spousal and child support many women depend on.” Hillary Rodham Clinton,
Living History
(2003), 384. The
New York Times
also reported on then First Lady Clinton’s involvement in the bankruptcy fight: “[Mrs. Clinton] wrote dozens of personal notes to lawmakers last year as the [bankruptcy] bills made their tortuous way through the Congressional process. And she, along with Senator Edward M. Kennedy, Democrat of Massachusetts, played what the bill’s opponents say was a decisive role in helping to kill the legislation last year.” Katharine Q. Seelye, “First Lady in a Messy Fight on the Eve of Her Campaign,”
New York Times
, June 27, 1999.

inflicted chaos on the credit industry’s well-laid plans:
For more on the Schumer Amendment: “The provision would bar abortion opponents from declaring bankruptcy to avoid paying court-imposed fines or damages that result from violent protests at abortion clinics. In recent years, a number of prominent abortion foes have used the bankruptcy laws for that purpose, among them Randall Terry, the founder of Operation Rescue. In declaring bankruptcy in 1998, Mr. Terry said he wanted to avoid paying debts, which then totaled more than $1 million, ‘to those who would use my money to promote the killing of the unborn.’” Philip Shenon, “Abortion Issue Holds Up Bill on Bankruptcy,”
New York Times
, April 30, 2002. Senator Schumer had long been prochoice and his vigorous defense of an amendment to prevent abortion clinic protestors from discharging their debts was a critical strategic move.

bankruptcy than would be diagnosed with cancer:
See
The Two-Income Trap
, 6.

best predictor that a family would go bankrupt was if they had a child:
In
The Two-Income Trap
, we found that married couples with children are more than twice as likely to file for bankruptcy compared to couples without children. A divorced woman raising a child is three times more likely to file for bankruptcy than a woman without children (6).

right up until something went horribly wrong:
In
The Two-Income Trap
we found that two-income families were actually more likely to file for bankruptcy than their one-income counterparts (83).

“urge to splurge” was overtaking us:
Many scholars and pundits have belittled the American consumer as reckless and on a “credit binge.” In
Affluenza: The All-Consuming Epidemic
, John De Graaf, David Wann, and Thomas Naylor decry consumerism in the United States.

Juliet Schor blames “the new consumerism.” She points to “mass ‘over-spending’ within the middle class [in which] large numbers of Americans spend more than they say they would like to, and more than they have. That they spend more than they realize they are spending, and more than is fiscally prudent.” Juliet B. Schor,
The Overspent American: Upscaling, Downshifting, and the New Consumer
(1998), 20.

Robert Frank argues that America’s “Luxury Fever” causes middle-class people “to finance their consumption increases largely by reduced savings and increased debt.” Robert H. Frank,
Luxury Fever: Why Money Fails to Satisfy in an Era of Excess
(1999), 45.

pet food to boys’ pajamas:
“The Consumer Expenditure Survey (CE) program consists of two surveys, the Quarterly Interview Survey and the Diary Survey, that provide information on the buying habits of American consumers, including data on their expenditures, income, and consumer unit (families and single consumers) characteristics. The survey data are collected for the Bureau of Labor Statistics by the U.S. Census Bureau.” For more information, see
http://www.bls.gov/cex/
.

the average family spent
less
on food than they did thirty years earlier:
We found that the modern family of four spends 21 percent less on clothing than they had a generation earlier, adjusted for inflation. Similarly, the modern family of four spends 22 percent less on food (at-home and restaurant eating combined) than its counterpart of a generation ago.
The Two-Income Trap,
17–18.