Consumer Payment Card News

Bankruptcy Reform

Whether or not the U.S. personal bankruptcy laws get changed is very dependent on who ends up in the White House. The bankruptcy reform legislation, H.R. 2415, has quietly passed both the House and Senate. The bill is backed primarily by Republicans and some Democrats. President Clinton has said he will veto the bill, but it is unclear from the election results what will happen under a new administration. But it appears that Gore would most likely veto the bill while Bush will toe the party line. The reform legislation is still attracting debate. This week the nation’s divorce lawyers banded together to lobby Congress not to give final approval to a bankruptcy reform provision that gives credit card debts the same status as child support payments. Under the new bill, the deferral or relief from credit card payments, technically known as their dischargeability, would be limited, so that children and credit card payments would have the same priority and payments would be split between them. The American Academy of Matrimonial Lawyers says another problem presented by the bill is that past due child support payments and alimony are not dischargeable, so the person who has to make credit card payments in addition to alimony and child support will keep falling farther and farther behind in his or her total payments, eventually resulting in a Chapter 7 bankruptcy filing, or total insolvency. Meanwhile, after nine months of steady decline, it appears that personal bankruptcies are about to take off again. The change is due in part to higher interest rates but may be linked to a softening economy. According to data gathered by VISA USA, personal bankruptcies have increased 10% since January, using a 12-week moving average of filings. VISA says the moving average for the week ending Nov. 4 was 24,288 compared to 22,291 for the week ending Jan. 1. According to the Administrative Office of the U.S. Courts, total filings for the 12-month period ended Sept. 30, were down 6.8% from the 1.3 million bankruptcy filings in calendar year 1999. Although bankruptcy filings are still above one million, they are on the decline when compared against the 1998 record-breaking 1.4 million filings. The drop in bankruptcy filings in 2000 is due mainly to a 6.8% decline in personal filings. Specifically, Chapter 7 filings fell to 9.2%, followed by a marginal 1.1% drop in Chapter 13 filings.

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