Where I Stand — Brian Greenspun: Bankruptcy legislation sets its sights on misuse

Friday, June 12, 1998 | 11:42 a.m.

IT IS ABOUT time. It's not about money.

The bankruptcy-reform legislation that has finally made its way out of the House of Representatives is about responsibility and, for that reason, deserves to become law. But, like every piece of good legislation, it can stand a few changes.

I don't think there are many good, hard-working Americans who would dispute the notion that obtaining bankruptcy protection in the United States is a valuable tool in the preservation of families. There are times when circumstances grow beyond the control of decent, law-abiding people to the point where they cannot keep their financial heads above water. At those times, the bankruptcy laws provide an option to complete financial ruin.

At the same time, there can't be too many Americans who believe that the current law's best intentions haven't been subverted by those who believe that taking advantage is the best and only way to get ahead in this world. Every time we turn around, someone else is declaring bankruptcy, leaving hundreds of honest shopkeepers, merchants and other owners of small businesses in the financial lurch. What was intended to be a last-ditch effort to save honest people from the ravages of honest financial mistakes has been used by bad-intentioned people looking to work the system to their favor.

So it is about time for Congress to tighten the laws and close the loopholes that have been misused by the unscrupulous to the detriment of the honest members of our society.

I have sat with too many of my friends and acquaintances to counsel them through their own financial concerns to suggest that bankruptcy not be an option. Sometimes that is the only way to prevent people from more drastic measures designed to get their families out of financial chaos and back toward some kind of economic security. Sometimes people just get in too deep and need help getting out.

They are not the people this reform is intended to curb.

What about the millionaires who take their companies to the brink -- all the while making sure they are protecting their own net worths -- only to file for bankruptcy protection that leaves the rest of the world holding the bag and the real culprits better off than when they started? That can't be what bankruptcy is for, can it?

And what about those people who deliberately run up bills they know they can't and never will pay, only to have some lawyer take them into personal bankruptcy and cleanse their economic skirts at the expense of those in small businesses who are guilty of nothing other than taking risks on people who betrayed their trust? Clearly, the laws should not protect those with bad motives.

But there is another side to this bankruptcy business that both the legislation's proponents and the majority of the House have seemed to overlook. As long as we are talking about responsibility, isn't there some obligation on the part of credit-card companies and other financial institutions, who do everything but spend the money for the debtors, to make sure they aren't encouraging less sophisticated people to travel the road to financial ruin?

We've all seen the marketing come-ons. "Now you can have credit where none is due. It doesn't matter whether you have a job or even unmanageable debts, we will give you the credit you need to keep up with the Joneses." The sales pitches go on and on and the people sign up in record numbers. It is no wonder they awaken a few months later so deep in debt that they have no way to climb out. The law needs to recognize not only the responsibility of the debtors but also the complicity of the credit issuers in making debt too accessible for people who can't afford it.

The bill should also prioritize the various kinds of debt. I don't think any right-thinking American would want a single mother of four to have to stand in line behind some multi-billion-dollar credit-card company to get her deadbeat ex-husband's alimony or child-support payments. She and those children should have a priority on whatever funds there are in a debtor's estate. After all, we have no trouble exempting the IRS from bankruptcy laws; why not a few children who need the money far more? Simply put, if we choose credit companies over desperate children, we'll soon see those kids in the welfare system at costs far out of proportion to the support payments sought in the first place.

On balance, though, it is past time that people are held to a legitimate level of responsibility for the debts they undertake. With just a few changes to make the law work the way it was intended, I can see a time when judges, trustees, debtors and creditors all can hail a bankruptcy system that works for and not against those who deal honestly, fairly and squarely in this world of free enterprise.

It isn't about money. It's about responsibility, and it is about time.