The skyrocketing bankruptcy filing rates of recent years are well known. Last year over 1.3 million families filed for bankruptcy. Amazingly, that figure actually represented a slight drop from the previous year. Anxious to deflect blame from an overly generous bankruptcy system or a decline in the shame and stigma traditionally associated with filing bankruptcy, opponents of bankruptcy reform have fingered promiscuous lending practices by credit card issuers as the primary culprit in the bankruptcy boom. In particular, it is charged that, spurred on by high profits, credit card issuers have extended increasing amounts of credit to ever-riskier borrowers.

If this is so, then the credit card companies have no one to blame but themselves when these borrowers default on their obligations, file for bankruptcy, and impose losses on lenders. For similar reasons, some bankruptcy judges have frowned upon dischargeability objections by credit card issuers. Moreover, it is said to be the height of hypocrisy for these same credit card issuers to then turn around and demand tighter bankruptcy laws to bail them out of this problem of their own making. Finally, it is argued that because these losses simply come out of the “profits” of credit card issuers, bankruptcy simply results in a wealth transfer from lenders to borrowers and no resultant efficiency loss for other consumers.