Making Bankruptcy Pay

Once upon a time, when both morals and money were harder, bankruptcy was bad. Wastrels used to be bailed out by their better-off relations in order to save the family name from the stigma. But in these days of looking-glass economics, bankruptcy is growing more and more fashionable as a way to settle one's debts and land some more credit.

During the past decade, the national bankruptcy rate has risen dramatically. In 1952, there were 34,873 bankruptcies, of which 28,331 (81.3%) were personal; in 1962, the U.S. total jumped to 147,780, of which 135,125 (89.5%) were personal. Bankruptcies are highest in states that permit creditors to garnishee a hefty slice of debtors' salaries and where there has been an influx of newcomers to the cities, looking for the good life and unaware of what the carrying charges for it will amount to. California, Illinois and Ohio, which have the highest bankruptcy rates in the country, are no strangers to the shyster who tells a beleaguered debtor: "Don't worry about a thing, buddy. I can get you declared a bankrupt for $75, and you can pay me on time. Now what you want to do is to go out and run up $5,000 in debts, which we'll get the court to forgive."

The situation has bred a new type of retailer, who caters to bankrupts and habitual bad debtors. Some of these retailers may be motivated by genuine solicitude for a man who has fallen on bad times. But many are taking calculated advantage of the fact that no bankrupt can go bankrupt again for six years. This means that in case of default, they can garnishee his salary (or repossess the purchase) without danger of being frustrated by a new bankruptcy action or forced to settle for a fraction on the dollar. In Chicago, where personal bankruptcy cases have risen from 1,048 in 1952 to 9,832 last year, the newly bankrupt is likely to be flooded with form letters bearing such chirps of cheer as: "Bankrupt? $25 down for an auto." "Sorry to hear about your bankruptcy. Here is a $10 gift certificate at our jewelry shop. Please drop in.'' ''Stop worrying! Up to $7,000, one-day service. No co-signers. No collateral. Free parking." Responsible credit managers are concerned at the spread of the new. easygoing attitude toward what was once a disgraceful last resort. "Bankruptcy is like cancer," says Executive Vice President Carl S. Hobbet of Illinois' Cook County Credit Bureau. "It's growing, and we've got to look for the trouble wherever it exists--in consumer attitudes or retail practices. It may sound oldfashioned, but we still think the basis of the credit industry is character."

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