Will 2010 be the year of the woman? We asked prominent thinkers to discuss women’s changing roles in the economy. How has the crisis affected them? Are women the key to reform? What economic impact will they have going forward? We’ll explore all this and more in a special ND20 12-part series. Elizabeth Warren explains the pernicious effects of bankruptcy on middle class women.
Why is bankruptcy an issue of equal justice and fairness to women?
Bankruptcy exposes the economic vulnerability and insecurity of middle class women. The women in bankruptcy, like the men who file for bankruptcy, are a fairly representative cross-section of the American middle class. Their education levels are slightly higher than the population generally, with women in bankruptcy more likely to have attended college than their counterparts. Most are employed when they file. They work in a representative cross-section of industries and occupations. More than half are homeowners. By the most overt criteria, the women who file for bankruptcy are, as a group, solidly middle-class. But at the time they file for bankruptcy, their incomes tend to hover only slightly above the poverty level, and they are deeply mired in debt. The women who file for bankruptcy played by all the rules, but they are still in economic freefall.
How has the financial crisis impacted women experiencing debt and insolvency?
Based on projected figures, more than a million women will find their way to the bankruptcy courts this year-more women than will graduate from college, receive a diagnosis of cancer, or file for divorce. The numbers are staggering.
How do current bankruptcy laws place special burdens on women?
For many women, the on-time payments of domestic support obligations are essential to economic survival. Until 2005, the bankruptcy of those who owed the obligations actually helped women because the bankruptcy wiped out credit card debts and other obligations, while leaving domestic support obligations intact. This gave women a clear field to collect from their ex-husbands. But the credit card companies got the laws changed in 2005, making it harder for these men to declare bankruptcy and harder to discharge credit card debt. That puts women trying to collect domestic support obligations and credit card companies in direct competition for the ex-husband’s resources. Credit card companies can hire lawyers and develop extensive debt collect departments, something that is really tough for women. When the credit industry controls the bankruptcy rules, women lose.
Twenty-nine women’s groups-a diverse collection that included the Y.W.C.A., Hadassah, American Association of University Women, Church Women United, the NOW Legal Defense Fund and the Feminist Majority-publicly opposed the bankruptcy legislation.
What groups of women are especially at risk?
Women with children are particularly vulnerable, both because of the economic challenges faced by single-parent households and because bankruptcy now gives credit card companies greater capacity to compete with women in collecting past-due debts.
How can women protect themselves from bankruptcy?
Most women file for bankruptcy in the aftermath of a serious medical problem, a job loss or a family break up. It is hard to protect against those. But women can help themselves if they keep their fixed expenses (rent, car payment, student loans) to half of their incomes, and if they put aside some savings. My daughter and I wrote a book with more detailed advice, called All Your Worth, that some women have found helpful.
What legal reforms are necessary moving forward to ease the burden on women?
Anything that eases the burden on hard-working, middle class American families will provide great help to women. One thing the financial crisis taught us, though, is the extent to which the broken consumer credit market has fueled the insecurity of the middle class. Today, lenders operate in what is really a Wild West environment. They face little regulation, and they can get away with almost anything that pushes up profits. In the years leading up to the crisis, the broken market affected women disproportionately. Women were 32 percent more likely than men to have received subprime loans and 41 percent more likely than men to have received higher-cost subprime loans, regardless of income.
There are a number of causes of the rising insecurity of the middle class, but one of the biggest problems right now is that the largely unregulated consumer credit industry has preyed on customers by burying tricks and traps in the fine print and concealing true costs. This is why I believe it is so important for Congress to act on the President’s proposal to create a new Consumer Financial Protection Agency. We need to make the market competitive again and to get rid of the tricks and traps. This will empower families to make good choices and will increase their economic security.
Harvard Law School Professor Elizabeth Warren is currently chair of the Congressional Oversight Panel created to oversee the banking bailouts and first proposed a new federal agency for consumer financial products in 2007.