Debtor's Prison Abolished? Think Again!

Those of us who believe the draconian institution of debtor's prison was a nightmare of the past have had a very rude awakening this week, with the passing of the so-called "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" in the Senate. One has to wonder which "consumers" this new law is supposed to protect; the corporate banks and financial institutions that seek to get more customers into debt, or the average Joe who may be facing debt through no fault of his own, such as a job loss or a sudden illness to himself or a family member. Most of us strongly suspect, with good reason, that those who have been seeking to get this legislation passed are only trying to protect themselves. Which is rather an outrageous joke, considering that the banks and financial institutions offering credit cards – more accurately described as debt cards – were the culprits responsible for helping so many incur the debt in the first place.

Some may argue that I'm exaggerating, that eliminating the option to file bankruptcy isn't going to mean that the jails are going to be filled once again with people who were unable to pay their debts. But am I, really? Think about it. If Jane or Joe Average can't repay the debt for some reason, or can't apply for bankruptcy under the new law, and the creditor decides to take the hard line and file criminal charges, where is Jane or Joe eventually going to end up? You guessed it; prison. A very frightening prospect indeed.

Of course, there are those who say things like "it's about time; I'm sick of paying for these deadbeats." Or "they knew what they were getting into when they signed for the credit card; they don't get to walk away that easily." Naturally, these "blame the victim" guilt peddlers will find a way to justify their own debt if it ever happens to them, but will always be less than compassionate when financial misfortune befalls anyone else.

Let's face it; if the banks and financial institutions really wanted to protect both themselves and their customers from running up high amounts of debt, they would have taken preventive steps long ago. There are several common-sense measures credit card issuers can adopt that will stop the process of running up high debt before it becomes a financial train wreck for both creditor and debtor. For example, a first-time customer who has never had a credit card before – and no credit history for the issuer to go on – could be approved for a card, but would only have a spending limit of $500 to start. After a one-year period of regular payments and no late fees, the issuer could send the customer an invitation to raise that limit, but with two conditions. The limit would be increased to no more than $1,500 for the following two years, and only if the customer requests the limit be raised. This would mean that if the customer didn't notify the bank whether he wanted the limit raised or not, the limit would remain at $500, not raised automatically to $1,500 by the creditor. By raising limits gradually, in small increments, over a period of several years, customers could better control their spending, and wouldn't be tempted to run up high amounts of debt that they might not be able to pay back if they experienced a dramatic change in their financial lives. After all, you can't run up a debt of $5,000 if your limit is only $500.

Since the banks and financial institutions obviously don't want to adopt such simple preventive measures to keep consumers like you and me from running up high amounts of debt, it's up to us to take them ourselves. There are



several excellent books on living debt-free that have been available to all for the last few years. Unfortunately, we don't make it a point to read these books unless we have a credit problem. I speak from past experience on this one. However, if you can change your thinking to educate yourself about credit and how it works before taking on your first – and I hope only – credit card, it would be the best investment in your financial future that you could ever make.

The best books I've read on this crucial topic are as follows: How To Get Out Of Debt, Stay Out of Debt, and Live Prosperously by Jerrold Mundis, Debt-Proof Living by Mary Hunt, and Living Debt Free by Bob Hammond. All three offer practical systems for tracking your spending, and very valuable tips on alternatives for entertainment and vacations that will help you keep more money in your checking account, rather than giving it to the banks and financial institutions in the form of credit card payments with outrageous interest charges.

It is obvious that banks and financial institutions aren't nearly as customer-friendly as they all claim to be, and the way they treat credit card consumers who run into difficulty paying back their debt is living proof. So let's not rely on them to protect us from indulging our worst instincts when it comes to spending. We must take financial precautions against high spending ourselves. Begin by taking out all the credit cards you have in your wallet right now. If you have only one, good for you. But protect yourself even further. Take out your most recent statement, and find out exactly what you have spent so far, if you don't pay the full amount owed each month. If you've run up $1,000 or more, now may be the time to either cut up that card, or if you can't bring yourself to do that, at least put it in a place that is safe, but one that you're not likely to get to easily. Don't spend any more on that card until you've paid off a significant portion of that amount, or better yet, the entire sum. Do you have more than one credit card? Get your statements on each one, add up how much you owe on each, and add those sums up to determine your total debt. It's a very sobering process, no doubt about it. But it's essential if you don't want to go further into the hole. Once you have your total credit card figure, it's time to cut up all but one of your credit cards, and put the remaining one away. Then begin the slow journey to repaying the debt you owe now, rather than waiting for a possible disaster to strike later. This is where the aforementioned books will be of enormous value, and cost much less than an all-day financial seminar. By getting out of debt now, or avoiding debt in the future, you can cheerfully say "Screw you" to the folks who slammed the door on bankruptcy for the average consumer.