This afternoon the Senate is scheduled to consider a bill to tighten up the consumer-bankruptcy system.
Such reform is past due. In 1978, the year of the law's last major overhaul, about 182,000 Americans filed for bankruptcy. By last year, that number had exploded to 1.35 million cases - and this despite the longest peacetime expansion in United States history. That adds up to one in every 70 US households.
Lenders say Americans' failure to pay their debts costs the average household $400 a year in higher prices and interest rates.
The Senate bill, sponsored by Sens. Charles Grassley (R) of Iowa and Richard Durbin (D) of Illinois, would make it harder for people to file under Chapter 7. That chapter absolves a debtor from repaying his or her debt after assets are sold. Under the bill, if a debtor could pay off at least 30 percent of unsecured debt - debt for which there is no collateral - a judge could force him or her to file under Chapter 13, which sets up a program for partial repayment.
Consumer groups say creditors are drilling a dry hole. They say a typical family declaring insolvency earns less than $20,000 a year and has $17,000 in credit-card debt. Consumer advocates also blame banks and credit-card companies for the sky-high bankruptcy rate. They say companies offer too many cards with too much credit to people who can't possibly make the payments.
So, many Democrats, including Senator Durbin, tried unsuccessfully to add provisions to the bill to restrict credit-card solicitations. Some credit-card solicitations do indeed employ techniques on a par with those of drug pushers. Voluntary restraint would be welcome, and could clean up the industry's image. But government restrictions could prove about as practical as trying to limit the number of used-car dealerships.
No one, after all, is forced to accept a credit card or to use one. Generally, people have a responsibility to pay what they owe without being let off the hook for their own bad choices.
At the same time there are legitimate bankruptcies brought on by illness, job loss, or divorce.
The House already has passed a tougher bill that would require transfer to Chapter 13 if the filer makes more than $51,000 a year and can pay 20 percent of the unsecured debt over five years.
Sen. Edward Kennedy (D) of Massachusetts will offer an amendment to raise the federal minimum wage by $1.00 an hour. Under the agreement to consider the bill, if Senator Kennedy's amendment passes, the bill will be dead for the year.
In a tight labor market, a minimum-wage hike would appear to be unnecessary at this time. The bill ought to pass as it now stands, and President Clinton ought to sign the compromise that emerges from conference committee.
We also repeat a recommendation we've made here before: Personal finance should become a required part of every American high school's curriculum. That would help cut down the number of anguished Americans burdened by debt and filing for bankruptcy.
In 1978, 182,000 Americans filed for bankruptcy. Last year, 1.35 million did.