Credit cards serenade the newly bankrupt
When a person who’s just filed for bankruptcy begins to get credit cards by the dozens, there’s definitely cause for worry. As increasing numbers of people fall into irreversible debt traps and file for bankruptcy, a disturbing trend is emerging. There are more companies that now want them as customers. From Citibank to MasterCard, all of them have propositioned the newly bankrupt. So what is it that draws the banks to these cash-strapped people?
An open secret in the financial community — these newly available customers are charged some of the highest interest rates — some banks charge nearly 20% and more as interest rates. Also, the new bankruptcy law makes it harder for debtors to free themselves from the yoke of credit card debt. Once you have filed for bankruptcy, you have to wait a good eight years before you can liquidate new debts through bankruptcy again.
These two points make newly bankrupt people a great source of revenue for banks. The old debts are all cleared now and any new debts will have to be paid back for at least 8 years! And the worst part? Under the new law many of those who file for bankruptcy again, have to pay their previous credit card bills — bills that may have been excused under the old law.
But bankers beg to differ. They believe that by providing the newly bankrupt with credit cards, the banks are offering them a chance to start anew, afresh. But the argument sounds flimsy when faced with the ire of consumer groups who believe that this will only create a continuous and irreversible debt loop for millions of Americans.