“Cause if my eyes don’t deceive me there’s something going wrong around here.”
-Joe Jackson (Sugar Ray)

Earlier this year, Congress made its big move mis-labled as “bankruptcy reform.” Credit card companies convinced Congress to pass laws that made it almost impossible for people to file chapter seven bankruptcies.

Instead of getting a fresh start, people are sent to mini version of debtors’ prison. They have to work out extended payment plans, go through mandatory “credit counseling” and are never really allowed a chance to get back on their feet.

While Congressmen and credit card lobbyists espouse the evils of debt, the credit card companies might as well hand out credit cards on street corners. 

It blows my mind that college students and people with no income get credit cards. Almost, every car dealer advertises how you can get a car with poor credit or bad credit.  I keep waiting for Roll Royce and Ferrari to have their “fresh restart” plans.  There is a whole world of “sub prime” lenders who will give money to just about anyone.

The fees and interests rates are scandalous and banks are raking it billions.  People who shouldn’t get credit are in way over their heads.

After giving credit to people who should never get it, finance companies were horrified that people weren’t paying it back.

My father was a bookmaker and professional gambler.   Unlike the movie stereotype,   bookmakers don’t have many options if someone skips out on a bet.   They cut the bettor off and write off the loss as bad experience.   

Bookies figured that out.   Big time bankers ran to Congress instead.

Bankruptcy reform had a place if it had been part of a bigger lending reform package.  If Congress had reined in the abusive lending, fees and collections practices of credit card companies, it would be fair to add tougher bankruptcy laws.   

That did not happen.  The debtors were punished but the creditors are still collecting high interest rates and huge fees.

It is like passing a drug enforcement law that tortures users while giving economic incentives to pushers.

Bankruptcy court has never been a friendly place.  Bankruptcy has a stigma and effect on a person’s credit for years.   My first office was in the same building as a bankruptcy court.   The people always looked beaten down and overwhelmed by life.

There are some happy people coming to bankruptcy courts.  The CEO’s of big companies.    

There is no stigma for a big company filing bankruptcy.  It has become a smart business strategy.  You look like a fool if you don’t do it.

Big airlines like Delta, United and US Air have made the rounds through Chapter Eleven.    They are using bankruptcy laws to dump union contracts and drop long term leases.

What I think is most appalling is businesses using bankruptcy laws to dump their pensions and health insurance for their retired workers.

The workers and businesses had an understanding.  The businesses told the workers that if you devote your life to our company, we will make sure that you and your families are taken care of.

Now the companies are trying to wiggle out of the deal.   Congress is letting them do it.

Those Members of Congress talking tough about debtors are a lot quieter when the deadbeat is a big coal company or airline.  

The coal companies and airlines have better lobbyists than bankrupt, working people.

There are rumors that General Motors will file bankruptcy in the next two years.  Mark my words, it will happen.   The financial markets are the ultimate game of “keeping up with the Joneses” and Wall Street sees dumping pensions and medical benefits of retirees as a place to save money, not as a moral obligation.

There was once a phrase that went “What is good for General Motors is good for the nation.”  There are people who think GM’s bail out bankruptcy will somehow make our nation stronger. 

Bankruptcy courts have become a playground for big corporations and finance companies.

If my eyes don’t deceive me there is something going wrong around here.

Don McNay is President of McNay Settlement Group in Richmond, Kentucky where we want all people to get what is promised them.  His column is syndicated on the CNHI News Service.  You can write to him at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it or read other things he has written at DonMcNay.com