Credit Card Companies Doing Business With the Bankruptcy Filers They Vilified
When the credit industry went to Congress-repeatedly over a ten year period-and lamented the "fact" that the United States was full of debtors who could have paid their bills if they wanted to, but instead opted to run up credit card debt with no plans to pay and then take the "easy way out" in bankruptcy, many of us doubted their sincerity.
Unfortunately, Congress did not, and the result was a new bankruptcy law in 2005 that sought to root out those evil deadbeats who just didn't feel like paying their bills.
Naturally, credit counseling agencies and bankruptcy courts rapidly noticed that the vast majority of bankruptcy petitioners who passed through their offices and their courtrooms really didn't have any other viable option. Still, the credit industry stuck hard to the picture of the irresponsible debtor and implied that the reason courts and credit counseling agencies weren't seeing those debtors was simply that the new law had done its job.
A recent study by University of Iowa Associate Law Professor Katherine Porter provides substantial evidence that the credit industry wasn't just wrong...it was lying.
Those aren't Porter's words, of course, but her data leaves little room for other conclusion. Porter's study followed post-bankruptcy households for three years, and revealed some fascinating statistics regarding the availability of credit to families recovering from filing bankruptcy.
For instance, Porter learned that within the year following discharge, a household was three times as likely to get credit solicitations. The post-bankruptcy households Porter studied received an average of fourteen credit solicitations each month, some from the very companies they'd recently discharged in bankruptcy.
It's difficult to understand, isn't it, why a credit card company convinced that an individual was dishonest, manipulative, and committed to avoiding paying his bills would almost immediately reach out to extend credit to that very same consumer?
An honest mistake, perhaps? After all, credit card companies send out millions of solicitations-a few are bound to slip through the cracks.
It's a nice theory, but the fact is that many of the credit solicitations received by recent bankruptcy petitioners specifically state that the creditor knows the consumer has filed bankruptcy and wants to help him re-establish credit or give him a second chance.
And, in case the credit industry's credibility hasn't been called far enough into question, Porter's study also reveals that Chapter 7 bankruptcy petitioners-those who have discharged most of their unsecured debt outright-have considerably more credit options after bankruptcy than those who chose a Chapter 13 bankruptcy plan and repaid some or all of their outstanding debt over time.
The bottom line: the very companies that convinced Congress (and much of the public) that bankruptcy petitioners were a danger to our economic stability and couldn't be trusted to make sound financial decisions are actively working to put credit back in their hands as quickly as possible. Why?