Wednesday, July 05, 2006

The Heights of Hypocrisy

Headline: The moral burden of bankruptcy
Byline: G. Jeffrey MacDonald Correspondent of The Christian Science
Date: 07/03/2006

Jump Law Group Comment: The moral dilemma of the Christian Right is borne from the idea that debt is a moral responsibility from a type of society that has not existed in decades. It used to be that credit card companies didn't exist. Interest in excess of 12% was considered unlawful!

Your credit was extended from Bob the Butcher down the street. You knew that he wasn't trying to gouge you with interest and fees and you knew that his extension of credit was because he was interested in doing business with you and making sure you had food on the table. You also knew that if you didn't pay Bob back, Bob would be personally affected. He also had to put food on the table for his family. So the responsibility and moral burden of debt was very different in that society and rightly so.

In today's society, companies like Capital One and Mastercard are not Bob the Butcher. These companies and the christian right are trying to impose the moral values of a decades old society. It is doubtful that Bob the Butcher even needs to extend credit anymore as Capital One has made credit so easy for everyone to obtain, we can all use our credit cards when we are at Bobs. But for that matter, it is likely Bob the Butcher doesn't even exist anymore because now Safeway, Albertson's, and Fred Meyer rule the grocery world. The concept of the corner store and local merchant have gone. Now we are buried under a corporate homogeny known as Target and Walmart.

For these people to suggest a moral dilemma in filing bankruptcy is hypocrisy at its highest. Deuteronomy 15:1-11, mandates that all debts shall be forgiven every seven years. It seems that the same people who want to make you feel guilty for utilizing your right as a citizen, are speaking with a forked toungue. But I digress. Read on and judge for yourself. It is the opinion of this attorney that no guilt should be involved in choosing to file bankruptcy. It is a financial decision, pure and simple. Do you think United Airlines had feelings of guilt when they filed for Chapter 11? How about Donald Trump when he filed his casino into Chapter 11? How much personal responsibility and burden do you think they imposed on themselves?

Consumers daunted by mountains of debt face another uphill climb as they sort through mixed messages on the moral implications of filing for bankruptcy.On one side, Christian conservatives who applauded last year'stightening of bankruptcy laws are now appealing to higher authority to tweak the consciences of would-be defaulters. On the other side, voices irked by double-digit interest rates and questionable marketing tactics of credit-card issuers say debtors are often morally justified in seeking relief. The morality debate is heating up amid signs of trouble for people living on the margins:
*Even though tougher filing laws took effect Oct. 17, the number of monthly bankruptcy filings grew by more than 300 percent between November and March, from 13,758 to 49,977, according to a June report from the Administrative Office of the US Courts.
*Foreclosures on home mortgages were up 38 percent nationally in the first quarter of 2006, according to property tracker RealtyTrac Inc.
*The average American household owes more than $9,300 on credit cards, up from $2,966 in 1990, according to
Against this backdrop, advocates for and against the use of bankruptcy disagree about where to lay the blame when someone gets buried in debt. Christian personal finance guru Mary Hunt has a stern message for anyone considering bankruptcy: "It's absolutely legal, but it is not moral."

"I would say, 'You accepted these credit cards. You had the obligationto know what you were getting into,' " says Ms. Hunt, author of "Living Your Life for Half the Price." " 'You spent the money, and sure you had a big medical bill, but it probably would not have put you over the edge had you not already been deeply in debt.' " Studies show this isn't true.

To make this case, bankruptcy's critics often cite Psalm 37:21: "The wicked borrow and do not repay, but the righteous give generously." From sources such as Crown Financial Ministries and Dave Ramsey's nationally syndicated radio show, advice seekers hear they have a duty in most cases to keep their payback promises even when life throws them a curve ball. But another school of thought sees a more complex picture in which lenders also face admonitions to forgive debts. For instance, JonathanAlper, a bankruptcy attorney in Orlando, Fla., reminds distraughtclients that the American legal tradition of allowing for bankruptcystems from Deuteronomy 15:1-11, which calls for debt forgiveness everyseven years. Others agree with Mr. Alper that those who are able shouldrepay, but those unable to do so should not feel guilty.In Psalm 37, "the psalmist is talking about [cases where] borrowingmoney and not repaying it becomes a business strategy," says GaryMoore, a Christian investment adviser in Sarasota, Fla. By contrast, hesays, single women should not worry about declaring bankruptcy, forinstance, after using credit cards to feed their children."Those people ought to go to bed every night knowing that God hasgranted them debt relief," Moore says. "And they're not, because theyhear this garbage [from antidebt Christians]. That's what Jesus calledplacing heavy burdens on his flock.""May," a Virginian who requested anonymity to protect her reputation,knows the moral struggle well.For 14 years, she paid the minimum balance due until she maxed out hercredit card on routine purchases such as shoes, clothes, haircuts,gifts, and equipment for her dog-grooming business. Charges initiallyworth $5,000 resulted in a balance of $10,000, even after she increasedher payments to $150 per month. Every day, she hid the mail before herhusband could see her predicament, and she remembers wishing "I couldgo to sleep and not wake up." Yet she kept paying back her debts atclose to 20 percent interest."I did think, 'I signed up for the credit card. I used it. I have amoral obligation to pay this,' " May says. "If I didn't feel some moralobligation, I would have told these debt collectors to take a hike."But after a creditor told her she was incurring debt faster than shecould pay it down, she spoke to a lawyer, divulged her secret to herhusband, and sought protection under Chapter 7."I must have paid [creditors] way over $20,000 for a $5,000 debt," Maysays. "Knowing in my heart that I paid everybody that I owed theoriginal amount plus a reasonable amount of interest, I don't feel anyguilt about having filed bankruptcy. I wish I had done it a lot sooner."In Hunt's view, what matters in resolving the moral quandary is whetherthe borrower lived up to his or her original promise. But Alper begs todiffer because, he says, the circumstances surrounding the originalloan are sometimes suspect to a degree that they nullify a borrower'smoral duty to repay."The people [whom creditors] often solicit are high-risk customers"with considerable vulnerabilities, Alper says. "By contract, they owethe money. But what's the validity of offering a lollipop to adiabetic? Or offering a cigarette to someone who's addicted tonicotine? You're not on an equal footing," and therefore the contractisn't moral in the first place, in his view.Others might bear some blame as well, according to David Jones,president of the 177-member Association of Independent Consumer CreditCounseling Agencies. He sees bankruptcy as morally justified insituations stemming from uncontrollable events, such as a job loss ormedical emergency. But he also blames teachers and schooladministrators for failing to make credit education a part of mostcurricula."Society has failed many people because [it] hasn't provided the kindof education and help and background that they need," Mr. Jones says."I suppose you could say [some profligate spenders] are somewhat offthe hook, but I'm a little bit concerned about that because there is aresponsibility to be a good financial steward."In Hunt's view, individuals benefit far more in the long run frombelt-tightening disciplines, such as those she employed to paynonmortgage debts in excess of $100,000, than they do by filing forbankruptcy."There's a good feeling we get when we're paying back debt," Hunt says."Bankruptcy is the opposite of that."But if restoring good credit is the goal, Jones has some bad news for Hunt's theory of thrifty virtue. Creditors like to see a recent history of bankruptcy, he says, because it usually means an applicant has poor spending habits, has no debts, and is ineligible for bankruptcy for another five to seven years. In short, this applicant stands to be a near-term cash cow for the creditor. May's experience suggests he might be right. She received three credit-card offers - including one from a previous creditor - during one week in June."Somebody that has a lot of debt and is paying their debt and straining every month to do so is not nearly as good a credit risk as someone who has just walked out of bankruptcy," Jones says."I would hate to invite people into bankruptcy with that scenario, but that happens to be the fact," he concludes.

(c) Copyright 2006 The Christian Science Monitor. All rights reserved.