Bankers and other consumer lenders are seeing such problems all around the country. While Chapter 13 provides a great deal of protection to debtors who want time to repay all or a portion of their debt, Chapter 7 cases are rarely dismissed and hold out the promise of a free ride-a discharge that substantially wipes clean the credit slate. Bankruptcy isn't even a bar to obtaining new credit after emerging from court anymore. Even as consumer credit has reached further down into the quality barrel, it has also expanded in directions never seen before. Stories circulate, for instance, of college students graduating with credit-card debt in the thousands.
Rumors fly about pre-teens going into hock with retailers.
As the chart accompanying this article shows, personal bankruptcies broke the 1 million mark in 1996, and predictions are that 1997 filings will hit even higher levels. Already, in 1996, roughly one household out of 100 filed bankruptcy in some form. The Bankruptcy Reform Act of 1994 set up a National Bankruptcy Review Commission that will make recommendations to Congress on revising the Bankruptcy Code. The group's report is due Oct. 20 and all indications are that in the consumer area the recommendations will tip the balance of bankruptcy law still further in debtors' favor. Key players on the commission staff are considered pro-debtor, as are a substantial number of commission members.