Law professor at the University of Iowa, Katherine Potter’s recent text Bankrupt Profits: The Credit Industry’s Business Model for Post-Bankruptcy Lending, shows why post-bankruptcy education can be crucial for debtors.

While the General Accountability Office has questioned the value of the required pre-filing credit counseling course, debtor education is generally seen as a positive step toward helping debtors protect against falling back into financial trouble. The credit industry, however seems to be only too happy to get debtors into even deeper trouble than they were in before bankruptcy.

Salon.com reports that one year after filing bankruptcy, people receive an average of 14 credit card offers per month. The average American only receives 6 offers each month. Survey data from the Consumer Bankruptcy Project reveals that 88 percent of post-bankruptcy debtors receive offers that actually refer to their bankruptcy. Why?

Potter writes post-bankruptcy debtors are seen as cash cows for credit card companies. She says that in the first year after filing, families face financial stress. They may be slow to pay, make only small payments, incur huge fees, and may run up high credit-card balances, but they cannot seek bankruptcy relief. This Catch-22 makes post-bankruptcy families “attractive cash flows.”

Potter concludes: “If lenders’ intense solicitation of such customers indeed is driven by these families’ propensity to pay late, go over the limit, and revolve large balances, society may wish to prohibit or constrain such lending.”

Salon says that Potter’s suggestion is “what a civilized society might wish to do. What the United States will ultimately decide is another question.”

66 Percent Increase in U.S. Bankruptcy Filings Linked to Housing Market Slump & Increasing Household Debt

Bankruptcy filings in the United States increased by 66 percent during the first quarter of 2007.  An Associated Press story detailed government data showing that there were approximately 193,641 bankruptcy filings in the U.S. from New Year's Day through March 31st  of this year. Personal bankruptcy cases rose by 66 percent to 187,361 while business bankruptcy filings were up 54 percent to 6,280  in the first quarter.

Sam Gerdano, executive director of the American Bankruptcy Institute, estimated in the story that bankruptcy filings in 2007 will remain nearly 50 percent higher due to the rising numbers of foreclosures, mortgages in default and  overall housing debt in the country. Gerdano's prediction that more people with turn to bankruptcy as a means for a fresh financial start comes on the heels of recent lobbying by consumer groups calling for Congress to make it easier for people facing foreclosure to file bankruptcy and keep their homes.

If you're facing foreclosure and wondering if filing bankruptcy may help you  keep your home, call  877-349-1309, and we'll help you get in contact with a local sponsoring bankruptcy attorney who can begin to assess your current financial situation.