Bankruptcy has become for many Americans a way to “wipe the slate clean.” Ford Elsaesser, vice president of the American Bankruptcy Institute, in a testimony before the House Banking and Financial Services Committee, remarked how there is no longer any shame in being in debt. But unless under extreme hardship, bankruptcy is immoral. It is a form of theft, especially when such irresponsible individuals go on a last-minute spending spree just before calling the nearest bankruptcy lawyer. It doesn’t matter if getting credit is easy. It doesn’t matter if the advertising world uses every brainwashing technique devised by humans to get people to buy things they don’t need. The responsibility for debt falls on the individual.
Credit card companies as a whole are more than willing to work with the consumer in making payment arrangements to eliminate outstanding debt. They allow months before an account is determined delinquent. Warning letters go out with the first late payment. Further warnings are issued before an account goes into collections. Further time is allowed before a charge-off takes place. The debtor must demonstrate a willingness to pay. Writing letters and follow-up calls to customer service representatives can yield surprisingly positive results. Often, company representatives will drop late fees and lower the interest rate as well as lower the usual minimum payment to help the debtor. The card is suspended, but this is reasonable. This is the same arrangement Consumer Credit Counseling Service makes.
Stephen Brobeck, executive director of the Consumer Federation of America, reveals that bankruptcies have skyrocketed through the 1990s, reaching well over the one million mark in 1997. Credit cards alone account for an estimated $450 billion in debt. The Federal Reserve Board’s Survey of Consumer Finances reports that consumer debt levels are highest among the estimated 25 million households with incomes of $15,000 to $30,000. In a recent study of Chapter 7 bankruptcies by Georgetown University’s Credit Research Center, debt loads for many families were not much higher than after-tax incomes.
Responsible credit card users pay the full bill every month. Credit cards are used for emergencies as well as the convenience of not having to write checks or use cash and sometimes to avoid the pitfalls of traditional loans such as transaction costs, need for collateral and long approval processes. Credit cards are safer. It is also close to impossible to rent a car or reserve a hotel room without one. They provide a good safety net, although savings should be the first place to go in case of emergency. Medals go out to individuals who manage to buy such high-ticket items as cars, houses and college degrees with cash. They serve as models for America’s financial future.
Common sense and self-control are the best weapons of defense. Don’t eat so much and you won’t get fat. Don’t put the needle in your arm and you won’t become an addict. Don’t spend money you don’t have and you won’t go into debt. In America, there needs to be a greater emphasis on saving and asset accumulation rather than an emphasis on debt-financed consumption. But regardless of what is happening on a national level, the sole individual is still responsible for his or her debt.