CREDIT CARD DEBT AND THE NEWLY BANKRUPT - WHOSE FAULT IS IT?

Katherine Porter of the Iowa School of Law,  has written a law review article about the relationship between the credit industry and those who have filed for bankruptcy and have been discharged.  She explains what those familiar with the post bankruptcy world have known for a long while. If you recieve a discharge of your debt, the credit industry sees you as a potential customer...again.  It will delude you with offers to set up a new credit line.

She argues that the credit industry's claim that consumer debt is wholly the fault of the borrowing consumer who is opportunistic and seeks out the credit is incorrect.  This is clear from the amount of  marketing to the post bankruptcy community. An outtake from the article makes her point:

"Consumer credit and consumer bankruptcy filings have grown rapidly over the last two decades, and several researchers have attempted to
understand the relationship between these two intertwined features of the modern American economy. Teasing out causation is almost impossible,
as consumer advocates lay blame on the industry and the industry responds by citing the same data to show consumer misbehavior. Using a
novel vantage point, this analysis examines what the credit industry's behavior toward recently bankrupt families reveals about its internal
profit models and the likely causes of consumer bankruptcy. The empirical evidence on post bankruptcy credit solicitation belies the
industry's characterizations of bankrupt families as opportunistic or strategic actors. Original data from longitudinal interviews with
consumer debtors show that many lenders target recent bankrupts, sending these families repeated offers for unsecured and secured loans. The
modern credit industry sees bankrupt families as lucrative targets for high-yield lending, a reality that has important implications for
developing optimal consumer credit policy and bankruptcy law."

The article can be read in it's entirety HERE. (It is 64 pages, have fun) 

I do not disagree that the credit industry targets the newly bankrupt.  I also agree that  debtors are not as opportunistic as the credit industry would have everyone believe. 

However, I oppose more government regulation to rein in new solicitation.  Many believe that the consumer is incapable of protecting himself or herself.  I disagree.  The real solution lies with the consumer.  The consumer has some power and that power lies in the ability to say no.  

My simple advice to clients post bankruptcy,  and the real solution to the problem of new debt after bankruptcy:

1.  Throw all solicitations in the trash, i.e. destroy them.

2.  Don't ever borrow money from a credit card provider again, unless you have a real emergency.

3.  Live below your means.