The Two Faces of
The American Prospect
By Robert B. Reich Web Exclusive:
It used to be that people who couldn't pay their debts could
go into personal bankruptcy and start over. Their future credit
rating would suffer, of course, but at least they'd be able to
come out from under compound interest charges that were eating up
their paychecks and forcing them into ever deeper debt.
No longer. At the behest of banks and credit-card companies,
Congress has passed and the president has just signed new
legislation making it much harder for many Americans to start
Meanwhile, many of America's corporations are using corporate
bankruptcy to stay in business while being relieved from all
sorts of contractual obligations. Several major airlines, for
example, are in bankruptcy, but they continue to fly. And
bankruptcy judges have ruled that these and several other
bankrupt companies no longer have to pay the health or pension
benefits of retirees, which they once agreed to, or that they're
released from paying their employees the wages they once
So even as filing for personal bankruptcy becomes more
difficult, corporate bankruptcy increasingly offers corporations
a way to unburden their obligations. This, while more and more
Americans are being forced into personal bankruptcy because
they're losing the jobs or wages or health insurance they were
counting on. According to recent estimates, usually it's these
sorts of unexpected events concerning jobs or health that force
people into bankruptcy.
Get it? Life is more precarious for many individuals in this
economy, in part because the companies they work for can no
longer be relied on for steady jobs, steady wages, and health
insurance, as they could be relied on decades ago. And the
increasing ease with which companies can rid themselves of such
commitments by declaring bankruptcy or even threatening to
declare bankruptcy makes employment even more precarious.
This doesn't make a lot of sense. A sane society presumably
would give people somewhat more economic security against
unforeseen events, while requiring that corporations fulfill
their commitments to their employees before all others. But we're
going in just the opposite direction.
Robert B. Reich is co-founder of The American Prospect. A
version of this column originally appeared on Marketplace.
Copyright © 2005 by The American Prospect, Inc. Preferred
Citation: Robert B. Reich, "The Two Faces of Bankruptcy", The
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