Credit industry to sick folks: pay up!

You wouldn't think that my career in social services (or my staunch "no math is good math" approach to my own education) would lead to an interest in bankruptcy law and insurance. But it did, mostly because over and over again I saw hard-working, well-meaning families saddled by mountains of medical debt and unable to turn their lives around. Well, turns out the problem is far worse than I ever imagined.

Here's some numbers:

Every year, 2 million Americans are plunged into bankruptcy just because they get sick. Put another way, half of all families filing for bankruptcy experience a major illness, according to a new study by Harvard Medical School and Harvard Law School (see link below).

Surprisingly, most of these families seemed secure before the catastrophic illness; most filers had been to college and had homes, decent jobs and medical insurance. Still, all it took was one major illness to ruin them financially.

Apparently, the problem is getting worse. The same study found that medical-related bankruptcies have risen 2200 percent--that is not a typo--since 1981.

I think we can all agree with Dr. David Himmelstein, the lead author of the study, when he calls these results "frightening." So what should we do?

The banking industry is proposing a bizarre and self-serving solution. They've written a bill that will make it harder for families to escape crushing debt and get their lives back on track by declaring bankruptcy. Senate Bill 256, now before the Senate Judiciary Committee, is being touted as a way to curb abuses of bankruptcy by careless spenders. But by raising the costs and decreasing the protection of bankruptcy across the board, it would effectively punish everyone in dire financial straits--including the 2 million Americans who, through no fault of their own, get sick and go broke every year.

The bill ignores the fact that bankruptcy law already allows judges to punish those who abuse the system by forcing them to pay back more of their debts. (By the way, the highest estimate I know of--from any knowledgeable person not paid by the credit industry--puts the level of questionable filings at no more than 3 percent.) And the bill does nothing to curb abuses of bankruptcy law by large corporations.

This is a huge issue for every citizen, and we shouldn't allow the banking industry to take advantage of the fact that few of us are well-versed in the arcane arts of bankruptcy law and backroom political deals. Like Dr. Himmelstein says, "unless you're Bill Gates, you're just one serious illness away from bankruptcy. Most of the medically bankrupt were average Americans who happened to get sick."

Most disturbing about this bill is the willingness of some Democrats to serve as good soldiers for the credit and banking lobby. Senator Schumer has supported this bill in the past, though his addition of an abortion provision (preventing anti-choice protestors owing civil damages from escaping their legal obligation by declaring bankruptcy) in 2002 effectively killed the bill with social conservatives in the Senate. While the abortion amendment helped kill the bill, the bill itself still hurts those working families struggling with debt and Democratic supporters of the bill have chosen the credit industry over the middle class. Other members of this "credit industry corps" include Senators Akaka (HI), Bayh (IN), Biden (DE), Bingaman (NM), Byrd (WV), Cantwell (WA), Clinton (NY), Conrad (ND), Corzine (NJ), Dayton (MN), Dodd (CT), Dorgan (ND), Feinstein (CA), Jeffords (VT), Johnson (SD), Kohl (WI), Landrieu (LA), Leahy (VT), Levin (MI), Lieberman (CT), Lincoln (AR), Murray (WA), Nelson (NE), Reid (NV), Rockefeller (WV), Schumer (NY), Stabenow (MI), and Wyden (OR). Among those Senators that voted their conscience and opposed the bill were the late Paul Wellstone and Senators Feingold, Durbin and Sarbanes.

I hope you'll join me by posting about this, talking about this, writing your Senators (especially if they're on the Senate Judiciary Committee), and generally refusing to allow the credit industry to gouge families who are already sick, broke and desperate for relief. Thanks!

More info:

Read Senate Bill 256

How Senators voted on the previous version of this bill (HR 333)

The Harvard study of medical bankruptcies, published in Health Affairs

Washington Post editorial by study co-author Elizabeth Warren

Senate Judiciary Committee homepage

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