- Perhaps the real problem isn't bankruptcy as such, but unaddressed abuses by the credit-card industry. And perhaps those should be looked at regardless of what happens with this legislation. I don't actually think that credit card companies are evil -- the expansion of consumer credit is a good thing -- but their marketing practices are dishonest, and their complaints that their loans to poor risks aren't panning out leave me unmoved.
Maybe it's both. I know of a woman who has financed, with credit cards, over $10,000 worth of cosmetic surgery in a two month period. She estimates it will take her 5 years to pay this off.
Megan McArdle writes about medical bills and bankruptcy:
- Her academic work has the same sort of sizeable omissions that bias the results. She's the author of the recently famous study showing that 50% of all bankruptcies were caused by medical bills. You should read the Zywicki post I linked above, but to summarise here, this "finding" was generated by attributing any bankruptcy in which the filer had more than $1,000 in out-of-pocket expenses in the last 12 months to medical bills. That's ridiculously lax, and indeed, only 28% of the respondants attributed their trouble to medical problems. Given that medical bills are by far the most attractive reason to claim for your bankruptcy (compared to other major causes like divorce, compulsive gambling, and total financial irresponsibility), it seems unlikely that there's a special "hidden" kind of medical bankruptcy so subtle that the people filing don't realise that medical woes were the source of their problems. Furthermore, the study seems to have implied that medical bills were the main problem, when loss of income due to illness plays at least as great a role.