Where I Stand -- Brian Greenspun: Bankruptcy reform can't forget those who need protection

Recently I wrote a column supporting the idea of bankruptcy reform that was winding its way through Congress. I was concerned both about fraud against creditors and the ease with which large credit-card companies supply unneeded and unwise credit to people who can ill-afford the extra credit.

That column provoked a response from bankruptcy attorney Philip Goldstein which, on reflection, better states the case both for reform and for concerns that those most in need of the law not be shortchanged. We both agree that large credit-card companies have been too greedy in pushing this legislation.

To further this important discussion, I am publishing Goldstein's letter in this space. It follows:

"I read your recent column supporting the House of Representatives' bankruptcy legislation and was quite surprised by your position. Placing some blame on the credit industry is not enough reason to support this legislation as written.

"As a consumer bankruptcy attorney, I meet with at least 30 individuals a week. Mostly these are people who would rather be anywhere else except in front of me. They have faced personal and financial problems, usually at no fault of their own. Typical clients include the senior citizen who just became a widow and lost a spouse's income, the mother of three who can't pay her bills because she doesn't receive child support, the parents of the 2-year-old suffering from a terminal disease who are battling an insurance company that won't pay the medical bills, the UNLV student who can't afford the deficiency claim on her repossessed vehicle, the father being sued and having a paycheck garnished by the credit-card company because the minimum payments and interest rate and penalties kept going up, or the cocktail waitress facing an IRS levy because they 'know' she makes a lot of money.

"In almost every case, the creditors demanded full payment immediately when my clients attempted to set up payment arrangements. The creditors call during the day and during the night; they call neighbors and they call bosses, harassing individuals until they come crying into my office. If my clients have a less than perfect credit record, they routinely face higher interest rates, stiffer penalties and less chance to make their lives better. Can I introduce you to the father of three who has a 96 percent interest auto loan? How about the retired school teacher who has a 30 percent per month personal loan so she could pay her utilities? These are not the people taking advantage of the system. These are victims of the system.

"As to the fraud in bankruptcy, I will be the first to stand up and agree that it exists, but not to the extent that the well-financed legislators believe. Check a copy of the present bankruptcy code and I'll point out all of the exceptions to discharge of debt and the grounds by which creditors can and do prevail against the 'bad' filer. This city is fortunate to have two excellent bankruptcy judges who repeatedly display their fairness and common sense in dealing with debtor-creditor disputes under the bankruptcy code.

"If you want to find abusers of the system, take a close look at large business bankruptcies. Think about all of those many suppliers, merchants and shareholders who were burned by airline or casino bankruptcies. This is where Congress should look to amend the bankruptcy law.

"You are right in placing some blame on ruthless creditors, but the proposed legislation will limit an individual's ability to deal with their financial problems. Forcing partial repayment of debt is not reasonable for someone who has a negative budget. Eliminating the dischargeability of credit-card debt is unfair to people facing unanticipated family tragedies and emergencies.

"If reform is necessary, it should focus on predatory creditors, repeat filers and the large corporations who abuse the system."

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