This chapter tackles the myth that debtors are, by the standards of the "past" when people always paid their debts, immoral. At least a few conservatives claim that debtors do not pay because they do not want to and then use bankruptcy as a "get out of jail free" card. This chapter delves into detail whether American debtors seek to "cheat the system."
The numbers do not corroborate the prevalent public opinion. Of the 1.5 million families that filed for bankruptcy in the year they studied, 16 million more who could have significantly benefited from filing were trying to get by without it. In addition, the people who had filed for bankruptcy reported being extremely embarrassed and shameful after filing for bankruptcy. They filed because they had to, not because bankruptcy isn't a big deal anymore.
Financially and emotionally, bankruptcy is still a huge deal. Though the debtor is granted a reprieve, it is at a high price. Most of their assets are lost, their entire financial record is divulged, they are supervised by the courts for many more years, they will be forced to pay more for many common loans, and their bankruptcy will always show up when they apply for jobs. Though many may think that bankruptcy is now just an easy way out, that just isn't true. Families today are much father into debt (150%+ of income) and have struggled for much longer with debt than families of the past before filing for bankruptcy.
The authors further strengthen their claim by examining the issue of bankruptcy filers commuting fraud. It is nearly impossible for the average bankruptcy filer to even have to skill to commit fraud so competently that they can get away unscathed. The numbers simply do not support the idea that bankruptcy filing has increased simply because fraud has increased.
The authors now explore why so many families are in such dire financial straights. Though there are a number of different minor reasons, the most common reasons were job loss, medical problem, or divorce. These reasons explain almost 90% of the people who apply for bankruptcy.
The authors now revisit once again how families with two incomes are at a higher risk. Since the families have two workers, the risk that one of them will get laid off or become unable to work is doubled. In addition, the chance to become unemployed has doubled since the last generation. In the recent decade, the costs of medical expenses have increased while the number of people with the health insurance to cover it has decreased sharply. On top of this, many more elderly and sick patients are forced to rely on their families for care. Finally, families that have a working mother are 40% more likely to break apart than families who have a stay-at-home mother. It is much more likely for one of the incomes in the the two-income trap to walk out the door. Finally, it is extremely possible for all three of these major disasters to happen to a family in combination, leaving them completely unable to cope with their unexpected expenses.
The authors suggest that the Immoral Debtor myth persists only because families find it much more comfortable to think that they have managed to stay out of dire financial straights because they are "better" rather than that they are just lucky. The authors then cover the story of a family that managed to stay out of bankruptcy when faced with medical bills and a leave of absence from a job--but only just barely. The authors attribute the family's success to their health and disability insurance. The authors suggest that to decrease the number of bankruptcies, the government should reform the Social Security Disability Insurance to apply to many more people and give them a safety net. They end the chapter with a plea to bury the myth that debtors are somehow immoral people.
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