The new women's issue: bankruptcy law

Family and medical leave. Equal pay. Sexual discrimination. Harassment. These always have been "women's issues," and defined that way, they have become focal points for this country and its progress.

Yet there is a new "women's issue" that will dramatically affect almost three-quarters of a million women this year: bankruptcy law. Congress is about to take a step backward on that issue, stripping economic protection away from many of America's most vulnerable women.

How could something as complex, arcane, and ostensibly neutral as a bankruptcy law be a "women's issue"? Despite gains by women in the workplace, a growing number of households headed by women are facing economic stress, a fact echoed in the bankruptcy data.

In 1981, married couples and men filing alone accounted for about 80 percent of all bankruptcies. Today, households headed by women account for about 40 percent of all bankruptcies. Since 1981 their numbers have grown from about 69,000 to 538,000, making the rate of growth for women more than twice the rate of men filing alone, and more than triple the rate of married couples filing joint petitions. Yet bankruptcy laws were amended in 1984, and again in 1994, to cut back debtor protection.

Meanwhile, women are having more trouble making ends meet. According to a new study from the Census Bureau, 28.5 percent of women heads of household have trouble paying for rent, utilities, or health care during a given year. That's almost twice as many as their male counterparts. For those who can't pay for two or more of those basic needs in a given year, the gap is equally wide: 16.2 percent of women versus 8.4 percent of men.

Next week the Senate is scheduled to take up a bill to reduce consumer protection in bankruptcy laws again. The bill would give lenders more leverage to pressure troubled families for repayment.

This bill would fall hardest on women who are at the bottom of the economic ladder.

Women who file for bankruptcy are disproportionately divorced, separated, and widowed. A divorced woman, for example, is three times as likely to file for bankruptcy as her married sister.

The credit industry says the legislation pending in the Senate won't affect many women. Their research shows that households headed by women in bankruptcy are poorer than those headed by men, which means the one provision based on family income would affect fewer households headed by women.

True enough, but that's only a small part of the story. While the public-relations campaign proclaims this bill is trying to make those debtors pay who can afford to pay, more than 100 pages of provisions make financial rehabilitation harder for every household.

Two provisions illustrate the devastating effects of this bill, regardless of the debtor's income.

More debts would survive bankruptcy. This problem hurts financially troubled women in two ways. It gives them and their families less protection when they file for bankruptcy. Unlike present law, the new measure would leave them saddled with credit-card debts that cannot be discharged. And credit-card companies would be able to continue raising interest and penalties and trying to collect forever.

Even for women who manage to stay out of bankruptcy, the provision is a disaster. Alimony and child support have long had protected status as two of the very few debts that survive a bankruptcy filing. This bill would elevate a portion of credit-card debt to the same status. So when a woman's ex-husband files for bankruptcy, she would have to compete against big lenders and their collection departments.

This provision will affect an estimated 200,000 women a year above and beyond the half-million who file for bankruptcy.

At a time when most divorced mothers cannot collect more than 40 percent of the child support they are owed, this provision is shameful.

Options for repayment would decrease. The bill increases the amount of money that car lenders and some other creditors can demand when a debtor tries a bankruptcy repayment plan.

According to a study by the National Association of Chapter 13 Trustees, this provision alone would prevent about a quarter of all debtors who try to repay from doing so under the protection of the bankruptcy court.

For the 1 in 3 bankrupt women (and 1 in 2 bankrupt couples) trying to save their homes by paying the home mortgage in full, losing the opportunity for a court-protected repayment plan means they lose their last chance to avoid foreclosure.

While these and other provisions hammer away at families trying to get by on less than $25,000 a year, the bill continues protection for million-dollar homesteads. The well-heeled who want to put their assets into trusts also will be fully protected.

There is a need for bankruptcy reform, but not reform that puts struggling households in the cross hairs while letting the rich off the hook.

Make no mistake: The bill will also be harmful to households headed by men. For families filing for bankruptcy after a layoff, or trying to recover from the devastation of uninsured medical debts or a failed small business, this bill removes the middle-class safety net. But for women trying to stabilize their economic fortunes following the breakup of their families, and for those trying to provide for children on small incomes, the proposed changes to bankruptcy law would be a particularly hard blow.

Is bankruptcy a women's issue? Rep. George Gekas (R) of Pennsylvania, sponsor of the House bill, proclaims that he "helps women with this bill." Lobbyists flatly proclaim, "There is no women's issue."

But 30 women's groups, along with Consumers Union, Consumer Federation of America, and Mothers Against Drunk Driving oppose the bill, while a creditors' lobby, spending a reported $61 million, continues its push for greater opportunities to squeeze hard-pressed families.

At a time when more women than ever are finding themselves with no option but filing for bankruptcy, the Senate should not take that option away.

*Elizabeth Warren teaches law at Harvard University, in Cambridge, Mass. She is an adviser to the National Bankruptcy Review Commission.

(c) Copyright 1999. The Christian Science Publishing Society