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Do You Know Someone Who Filed for Bankruptcy?
I'm in the middle of listening to Elizabeth Warren's memoir A Fighting Chance and can't recommend it highly enough. Early on in her law career Warren taught, studied, and researched bankruptcy, in the days before harsher bankruptcy laws were passed under W and well before the financial meltdown and housing market collapse.
Warren looked at the precipitous rise in bankruptcies in the 90's and wanted to understand more than just the numbers. She wanted to know who the actual people were that filed for bankruptcy, and what pushed them into it. A corner of her mind wondered if they actually were the profligate spenders and deadbeats Republicans proclaimed them. Being a Democrat, however, she decided to get the facts and the information about the actual human beings involved, instead of relying on bias, anecdotes, and the banks' side of the story.
What Warren quickly found in her research was that people were afflicted with deep self-loathing and shame as a result of filing for bankruptcy protection. One man simply wrote three words on his survey: Stupid, stupid, stupid. (Yeah, how was he supposed to know he was going to lose his job of 30 years when he took out that mortgage?) These were not people who had gone on great spending sprees or had no work ethic. In the vast majority of cases one of three things had tipped hard-working people into bankruptcy: Job loss, serious illness, and divorce. Any one of those events sent people into what was usually at least a year-long struggle of selling off possessions, taking on multiple part-time jobs and running up loans and credit cards in an effort to keep their home. They inevitably fell deeper and deeper into a hole of debt so irretrievable that even if they got their old job with their old pay back they could never get on top of usurious credit card interest and penalties. When debt reached this stage people had no choice but to file bankruptcy. And, as we all know, banking deregulation led to predatory lending, high interest rates on credit cards, and lending to people who in the past would never have been considered good credit risks.
As an aside, I had a nephew who got into severe financial trouble in college when lenders kept giving him high interest credit cards, with painfully predictable results. It took him a long time to climb out of that hole and ended up being perhaps the most essential part of his college education.
As a result of her published research, Warren was invited to Citibank to advise them on how to cut their bankruptcy losses. There in a boardroom on Wall Street Warren told the assembled group that the answer was simple: People's financial lives showed easily detectable signs of severe strain well ahead of bankruptcy. People did not go run up huge bills one month and declare bankruptcy the next. They juggled mounting bills and missed payments for a year or longer before admitting defeat. All Citibank had to do was increase their vigilance in their credit checks and not lend to people already in manifest financial crisis. This simple strategy was met with murmurs around the room and a few questions which all halted when the head muckety-muck of the room quickly put the issue to rest. This was not going to happen, he said, because
"That's where our profits are."
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Mom went bankrupt in 1972, when I was fourteen and the last of the eight kids living at home. She'd gotten a job at the local high-end department store, but though she'd been promoted to Assistant Training Director she still didn't make much money. One cold late afternoon she came home to find me glumly sitting barefoot at the bottom of the stairs that led up to our apartment. The raucous carrying-on of my dad and his drunken friends above enraged her, and she stormed upstairs, threw all of them out, and shortly after filed for divorce.
Divorce could not, however, get her out from under my self-employed dad's bills, including a whopping phone bill run up by one of his buddies who obsessively called his ex-wife in Panama throughout that long debauched afternoon. The phone that had been in her name was disconnected, the car was sold, and yet his debts continued to drag her down. Filing for bankruptcy was not only necessary but a fair way to start over and finally stop paying for his irresponsible mistakes. Still, it caused her deep and abiding shame, and knowing this I never complained about walking a block to the nearest pay phone, riding my bike in 100+ desert heat, or never getting new clothes. Mom owed a couple hundred dollars for a couch she'd financed from her employer the previous year (on sale, with her employee discount), and she personally promised to pay them back "every penny" despite the bankruptcy proceedings. It was a matter of pride that her boss not see her as a person who couldn't pay her bills.
She deserved that second chance at financial solvency as much as any corporation.
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I realize this is a difficult topic. Every Thursday a regular patient of mine who is disabled asks me, "What's your question this week?" and I either try out my draft question on her or invite her to help me come up with one. Today I told her about Elizabeth Warren, who she hadn't heard of, and all the terrific work she's done on behalf of consumers, and about Mom's second chance at a self-determined future. She fell quiet while I sketched out the background, and when I asked, "Do you know anyone who's gone bankrupt?" she said quietly, "I did." The medical crisis that could have happened to anyone, the crisis that led to her permanent disability, had also led to her job loss and to being forced to declare bankruptcy after a long period of financial struggle.
"How did you feel about it then?" I asked.
"Ashamed."
"How do you feel about it now?"
She looked at me for a long moment. "Better," she said slowly.
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