Saturday, December 10, 2005

Today's New York Times published a front-page story about credit card companies (banks) aggressively soliciting the newly bankrupt. Obviously, these people represent a potential gold mine: They're proven spenders, and revised laws prevent them from escaping debt for at least eight years. Now, I'm more than happy to castigate the banks for behaving like vultures; but there's another dimension here, evidenced by the following excerpt:
Ms. Fogle would seem to be a perfect candidate for long-term debt to credit cards. Though she works regularly as a nurse at Good Samaritan Hospital here, earning $16 an hour, and has health insurance, she said a health emergency pushed her into debt. Last year, she needed surgery for uterine cancer, which caused her to lose days of work and income. Credit cards made up the difference, and soon she was $15,000 in debt.

She filed for protection of the courts in late August, and her debts are now removed.
I sympathize with anyone stricken by illness, and I certainly don't believe a health emergency should cripple a mother's ability to feed her children. But why does Laura Fogle believe that Citibank should pay her rent? The Times portrays her as a single mother of two, caught between a rock and a hard place, bled by vicious banks that charge exorbitant interest; but it seems to me that, however she incurred $15,000 worth of debt, it was her responsibility to pay. If she objected to her interest rate or late fees, certainly she could have negotiated the terms with her bank; instead, she basically ran inside a courtroom and called, "Base!"

If a liberal newspaper wants to spin tougher bankruptcy regulations as a sinister plot to strangle the lower middle class, that's fine; but the truth is, the banks petitioned for these unfair laws because people abused the system in order to escape rightful debts. When you strip away the rhetoric and sob stories, basically these people were committing theft. They bought thousands of dollars worth of electronics, or furniture, or food or rent or whatever; and then they ducked under the wing of bankruptcy law, leaving the banks holding the bag.

There's a concept in law called "clean hands," which essentially says that a drug user can't sue his dealer for theft. That's what we have here. Yes, the banks are absolutely charging unreasonable fees, and they're employing unconscionable methods to wring dry every customer they can find. But in the weeks before new bankruptcy laws took effect in October, more than 600,000 people swamped courthouses with petitions for protection under Chapter 7. The vast majority of these people were exactly like Laura Fogle. Whether her debt was incurred by lack of discipline, a tragic setback, or a likely combination of the two, the fact is that cancer doesn't absolve her of a duty to repay her debt to Citibank.


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