Commentator and personal finance advisor Liz Pullian Weston says Congress could pass other laws that would mean fewer people would need to file for bankruptcy.
First, we need to reinstate usury laws. It seems almost quaint now. But thirty years ago a 20 percent interest rate on your credit card would have been illegal in many states. Credit card companies offer plastic to nearly everyone no matter how bad their credit. And the lenders protect themselves by charging astronomical rates. If we reinstate the interest caps, many of today's families would have less access to credit. But that's not necessarily a bad thing. If people have to pay two, three or even ten times the market rate for a loan, they probably are in no shape to afford that loan in the first place.
Another real solution to the bankruptcy crisis is a major overhaul of our health insurance system. The problem isn't just the forty five million Americans who are uninsured, three out of four debtors who filed bankruptcy for medical reasons actually had at least some insurance. One woman I talked to had a thirty-percent Copay which was fine for day-to-day medical expenses, but which turned into a disaster when she had a baby who spent several weeks in intensive care. She owed more than thirty five thousand dollars to the hospital and had no hope of ever paying the bill with her thirteen-dollar-an-hour job.
Finally, we need better consumer education. Congress should pass a law requiring credit card companies to tell consumers how long it would take to pay off their debts. Consumers should know that if they owe five thousand dollars, it could take them forty years to pay off the balance if they only pay the minimum. Getting a message like that might encourage more people to pay off the credit balances that they have been dragging around.
Capping interest rates, providing a better health insurance and discouraging credit card debts would reduce the number of bankruptcy filings. We could prevent people from going broke instead of just punishing them after the fact.
Liz Pullian Weston is the author of the book "Your Credit Score".
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