The rise in personal bankruptcies and the ease with which the system can be abused are concerns for more than the specialists in the fields of law and finance. Debts that go unpaid can raise prices for retail goods and make banking services more expensive for everyone. In some cases, they can drive small enterprises out of business, bringing undeserved setbacks to entrepreneurs and causing people to lose their jobs.
As this week's Buffalo News series by reporters Michael Beebe and Dan Herbeck pointed out, bankruptcies filed in Buffalo and nationwide have increased dramatically in the 1990s, driven by the easy availability of credit cards, pressures of a society that glories in consumer goods, and persuasive lawyers specializing in the bankruptcy field.
Meanwhile, the system is seeing increased instances of fraud along with questionable uses of bankruptcy proceedings as an easy way to escape responsibility for unrestrained spending. Every bankruptcy case has its own story. Some are sad tales of well-intended people who found themselves out of work and out of cash. Some are about people who foolishly spent above their income with no sense of how they would pay. But some are simply unsavory stories of cheaters and crooks.
The bankruptcy system needs to do a better job of detecting fraud. While bankruptcies in Buffalo have more than doubled in this decade, fewer federal staff members are scrutinizing the cases and just one FBI agent specializes in bankruptcy fraud. Under those circumstances, cases mostly spring from complaints, not investigative initiative.
The News series described some outlandish accounts of fraud that surely amazed and angered honest people. Can you really be discharged of huge debts while your spouse is the listed owner of considerable assets? Can you really get away with lying about how much money you have?
It's not hard to run up debts in our world. Everyone with a mailbox knows how easy it is to get credit cards. Offers with enticing messages come with regularity. The usual response is to toss them aside with the knowledge that one or two cards ought to suffice. But some people are lured into spending well beyond their means just because a bank has given them a generous line of credit and they cannot resist the fun of a shopping spree. High rates of interest come later.
It would help if laws put some restraints on issuance of credit cards to people with poor credit histories. It would help if card-issuers showed some restraint of their own.
It would help if our public schools did more teaching about personal finance, with special emphasis on how personal debt can get out of hand. How many of our young people are graduating from high school with scant knowledge of the traps that credit, careless spending and inadequate budgeting can lay for them?
It would help, too, of course, if people showed more self-discipline in their spending habits. It can be hard when income is low, but, given steep interest rates, it can be harder climbing out of debt.
Finally, there's the gambling question. A gambling habit may not show up in bankruptcy records, but the money gambling chews up could be the reason behind many bankruptcies. Debts piled up on the credit cards while the money to pay them was lost at a casino or an OTB parlor. A society more and more accepting of legalized gambling should also be ready with treatment and help for those who can't handle it.