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Bankrupt in AmericaA History of Debtors, Their Creditors, and the Law in the Twentieth Century$
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Mary Eschelbach Hansen and Bradley A. Hansen

Print publication date: 2020

Print ISBN-13: 9780226679563

Published to Chicago Scholarship Online: September 2020

DOI: 10.7208/chicago/9780226679730.001.0001

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PRINTED FROM CHICAGO SCHOLARSHIP ONLINE (www.chicago.universitypressscholarship.com). (c) Copyright University of Chicago Press, 2022. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CHSO for personal use.date: 24 May 2022

The Triumph of the Consumer Creditor

The Triumph of the Consumer Creditor

(p.128) Chapter Six The Triumph of the Consumer Creditor
Bankrupt in America

Mary Eschelbach Hansen

Bradley A. Hansen

University of Chicago Press

Bankruptcy rates rose after 1978. The debtor-friendliness of the 1978 changes set the stage for a new bankruptcy crisis, but the increasing importance of banks that issue credit cards was the most important force. The Supreme Court’s 1978 decision in Marquette National Bank of Minneapolis v. First Omaha Services Corp. led directly to the growth in the market for credit cards. Banks could now profit from offering cards to high-risk consumers, and this put more people on the path to bankruptcy. Card issuers used some of their profits to lobby for changes to bankruptcy law. Studies by creditor-funded organizations, such as the Credit Research Center, supported a narrative in which lax bankruptcy law and lack of stigma led households to file for bankruptcy even when they could pay, imposing a so-called bankruptcy tax on honest debtors. In 2005, Congress passed a bankruptcy reform bill supported by banks and credit card companies, over the objections of many legal professional, scholars, and even some creditors. Today personal bankrupts must use Chapter 13 repayment plans unless they can show that they do not have sufficient income to repay. Credit card issuers won the argument that retailers began in the 1930s.

Keywords:   Marquette National Bank, credit cards, Credit Research Center, Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), Strategic bankruptcy

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