30
SMR Research Corporation,
The New Bankruptcy Epidemic: Forecasts, Causes, and Risk Control
(Hackettstown, NJ, 2001), pp. 14, 94. Credit card debt calculated as revolving credit per adult divided by income per adult. The earliest year in which consistent data on both credit card debt and savings rates are available is 1981. We note, however, that by beginning in 1981, we understate the magnitude of the change over the past generation. In the early 1970s, credit card debt for the average family was even lower. In 1968, for example, total revolving credit outstanding was just $2 billion, compared with $626 billion in 2000. Durkin, “Credit Cards,” p. 623.
31
The difference between median income of single mothers and married couples with children calculated from U.S. Census Bureau, Table F-10, Presence of Children Under 18 Years Old by Type of Family and Median and Mean Income,
1974 to 2000. Available at
http://www.census.gov/hhes/income/histinc/f10.html
[3/27/03].
32
Pamela J. Smock, “The Economic Costs of Marital Disruption for Young Women over the Past Two Decades,”
Demography
30 (August 1993): 359.
33
Never-married women constitute 37 percent of all divorced, never married, separated, and widowed mothers in bankruptcy, compared with 43.2 percent in the general population. Jason Fields and Lynne M. Casper,
America’s Families and Living Arrangements, 2000.
Bureau of the Census, Current Population Reports P20- 537 (June 2001), Detailed Table F61.
34
About one in seven never-married mothers specifically identify the reason for their bankruptcy as “divorce/family breakup.”
35
Federal law restricts wage garnishment for child support at 50 percent of disposable income when the payer is supporting another spouse or dependent child, and 60 percent of disposable income when, as in the case of Brad, the payer is unattached.
Consumer Credit Protection Act
(CCPA), 15 U.S.C. 1673(b)(2) (2003).
36
Calculated from data in Daniel R. Meyer, “The Effect of Child Support on the Economic Status of Nonresident Fathers,” in
Fathers Under Fire,
edited by Irwin Garfinkel et al. (New York: Russell Sage Foundation, 1998), p. 87; see also Cynthia Miller, Irwin Garfinkel, and Sara McLanahan, “Child Support in the U.S.: Can Fathers Afford to Pay More?”
Review of Income and Wealth
43 (September 1997): 274.
37
Sanford L. Braver,
Divorced Dads
(New York: Jeremy P. Tarcher/Putnam, 1998), p. 33.
38
Irwin Garfinkel, Sara S. McLanahan, and Thomas L. Hanson, “A Patchwork Portrait of Nonresident Fathers,” in
Fathers Under Fire,
p. 52.
39
Miller, Garfinkel, and McLanahan, “Child Support in the U.S.,” p. 274.
40
Garfinkel, McLanahan, and Hanson, “A Patchwork Portrait,” p. 54.
41
Braver,
Divorced Dads,
p. 33.
42
Weitzman,
The Divorce Revolution,
p. 391.
43
See, for example, Miller, Garfinkel, and McLanahan, “Child Support in the U.S.,” pp. 261, 274, and 276.
44
Elaine Sorensen, “A Little Help for ‘Deadbeat’ Dads,”
Washington Post,
November 15, 1995.
45
Ann Crittenden,
The Price of Motherhood
(New York: Metropolitan Books, 2001), p. 153.
46
Under a typical support arrangement, Justin would pay roughly 18 percent of his income, or $7,020, bringing his income to $32,000 while Kimberly’s rises to nearly $36,000. This would put Justin at 3.6 times the poverty level, while Kimberly and her two children would live at 2.6 times the poverty level. Under the Share-the-Pain approach, in order for Justin, Kimberly, and the children to all live at the same level (roughly three times the poverty level), Justin would need to pay $12,400 in child support,
so that Kimberly’s income (including child support) would rise to $41,200 while Justin’s would drop to $26,600. See note 29 above for additional information about these calculations. The poverty level is calculated from Bureau of the Census, Table 21, Poverty Thresholds by Size of Family and Number of Related Children, 2000. Available at
http://ferret.bls.census.gov/macro/032001/pov/new21_000.htm
[3/22/03].
47
Under the Share-the-Pain approach, Kimberly’s postdivorce discretionary income would be $7,770. See notes 29 and 47 above and “Typical budget, four-person family” for “Justin and Kimberly” in note 121, chapter 2 for additional information about these calculations.
48
Sally C. Clarke,
Advance Report of Final Divorce Statistics 1989 and 1990,
Centers from Disease Control and Prevention, National Center for Health Statistics, Monthly Vital Statistics Report 43, no. 9 (Hyattsville, MD: NCHS, March 1995), Table 19.
49
Lisa Kocian, “Father Continues His Quest to Reform State Custody Law,”
Boston Globe,
March 17, 2002.
50
In one-third of joint custody cases, no child support is ordered, compared with only 11 percent of cases where the mother is awarded legal and physical custody. Eleanor E. Maccoby and Robert H. Mnookin,
Dividing the Child: Social and Legal Dilemmas of Custody
(Cambridge, MA: Harvard University Press, 1992), Figure 6.11, Child Support Orders by Custody Arrangement.
51
Garfinkel, McLanahan, and Hanson, “A Patchwork Portrait,” p. 49.
52
Elaine Sorensen, “A National Profile of Nonresident Fathers and Their Ability to Pay Child Support,”
Journal of Marriage and the Family
59 (November 1997): 785-797, Table 1.
53
The limitations of the data make it impossible to calculate a precise filing rate for nonresident fathers. The Consumer Bankruptcy Project asked petitioners to identify whether they owe “child support or alimony.” Unfortunately, accurate data on the number of people obliged to pay alimony in the general population are not available. In addition, some men with informal support arrangements might have answered yes in the bankruptcy questionnaire, although they would not appear in other reports on the number of men in the general population who are legally obligated to pay support. If the number of men who say that they owe support (including alimony and informal arrangements) is compared with the approximate number of men in the population whose ex-wives and ex-girlfriends report that they are owed child support (usually through a formal arrangement and excluding alimony), the filing rate for men paying child support would be 22.5 per 1,000. The number of men in the general population who owe child support is estimated at 7.1 million, which is the number of custodial mothers who were owed child support in 2000. Timothy Grall, “Custodial Mothers and Fathers and Their Child Support, 1999.”
Chapter 6
1
Elizabeth Warren, “Bankrupt? Pay Your Child Support First,”
New York Times,
April 27, 1998. See also Elizabeth Warren, “In Serious Jeopardy; Lies vs. Unadulterated Statistics Muddle Bankruptcy Reform,”
Chicago Tribune,
March 19, 1998.
2
Katharine Q. Seelye, “First Lady in a Messy Fight on the Eve of Her Campaign,”
New York Times,
June 27, 1999. In her book, Mrs. Clinton writes: “Proposed bankruptcy reform moving through Congress threatened to undermine the spousal and child support many women depend on.” Hillary Rodham Clinton,
Living History
(New York: Simon&Schuster, 2003), p. 384.
3
According to Seelye, “[Mrs. Clinton] wrote dozens of personal notes to law-makers last year as the [bankruptcy] bills made their tortuous way through the Congressional process. And she, along with Senator Edward M. Kennedy, Democrat of Massachusetts, played what the bill’s opponents say was a decisive role in helping to kill the legislation last year.” Seelye, “First Lady in a Messy Fight.”
4
Corporations do not contribute directly, but their employees make coordinated contributions. The
Philadelphia Inquirer
reported: “By orchestrating mass contributions from its employees, the Wilmington-based company has become Bush’s single largest source of campaign money. MBNA employees have given more than $250,000 to the Republican’s presidential bid, an Inquirer analysis found.” Robert Zausner and Josh Goldstein, “Bush’s Largest Funding Source: Employees of Credit Card Firm,”
Philadelphia Inquirer,
July 28, 2000, p. A1.
5
Senator Clinton claimed in her press release that she supported passage of the bankruptcy bill because “I have worked with a number of people over the past three years to make improvements.” She then cited a provision that moved child support claims higher in the distributional pecking order in bankruptcy, by permitting single mothers to stand first in line for distributions from the liquidation of an ex-husband’s assets. Office of Senator Hillary Rodham Clinton, “Senator Hillary Rodham Clinton Statement for the Record,” news release, March 15, 2001. While this amendment may have provided some political cover, it offers virtually no financial help to single mothers, since the overwhelming majority of ex-husbands don’t pay anything in distributions during bankruptcy. Of far more importance was the fact that the bill would permit credit card companies to compete with women
after
bankruptcy for their ex-husbands’ limited income, and this provision remained unchanged in the 1998 and 2001 versions of the bill. Senator Clinton claimed that the bill improved circumstances for single mothers, but her view was not shared by any women’s groups or consumer groups.
6
Alexander Bolton, “Bankruptcy Bill Is Conflict for Daschle,”
The Hill
, March 14, 2001.
7
Consumer nonrevolving debt grew from $500 billion in 1993 to $1 trillion in 2002 (not adjusted for inflation). Federal Reserve,
Consumer Credit Historical
Data,
Federal Reserve Statistical Release G.19 (January 8, 2003), Table, Consumer Credit Outstanding, Nonrevolving. Available at
http://www.federalreserve.gov/releases/g19/hist/
[1/28/2003]. Mortgage debt as a share of disposable personal income grew from 39.6 percent in 1973 to 73.2 percent in 2001. Lawrence Mishel, Jared Bernstein, and Heather Boushey (Economic Policy Institute),
The State of Working America: 2002-2003
(Ithaca, New York: Cornell University Press, ILR Press, 2002), p. 296, Table 4.14, Household Debt, by Type, 1949-2001.
8
By 1997, the outstanding home equity debt of American homeowners had reached one-third the size of total nonmortgage consumer debt. Glenn B. Canner, Thomas A. Durkin, and Charles A. Luckett, “Recent Developments in Home Equity Lending,”
Federal Reserve Bulletin
74 (April 1998), pp. 242, 248.
10
Among first-time home buyers a generation ago, 70.9 percent reported that their down payments came entirely from savings, and 20.4 percent said they also had help from relatives. U.S. Bureau of the Census, Data User Services Division,
Statistical Abstract of the United States 1982-83
, 103rd ed. National Data Book and Guide to Sources, compiled by Glenn W. King under the direction of Paul T. Zeisset (Washington, DC, 1982), p. 762, Table 1367, Recent Home Buyers—General Characteristics and Downpayments, 1976 to 1981.
11
Chris Pummer, “GOP in Danger of Misreading Election ‘Mandate’,” in
CBS-Marketwatch. com
, November 6, 2002.
12
See, e.g., Kathleen C. Engel and Patricia A. McCoy, “A Tale of Three Markets: The Law and Economics of Predatory Lending,”
Texas Law Review
80 (May 2002): 1255, 1271-1279, in which the authors describe the mortgage market of the 1970s as a limited steady business, not aimed toward attracting high-risk borrowers.
13
Diane Ellis, “The Effect of Consumer Interest Rate Deregulation on Credit Card Volumes, Charge-Offs, and the Personal Bankruptcy Rate,”
Bank Trends
, no. 98-05 (March 1998). Available at
http://www.fdic.gov/bank/analytical/bank/bt_9805.html
[3/3/2003]. See also Christopher C. DeMuth, “The Case Against Credit Card Interest Rate Regulation,”
Yale Journal on Regulation
(Spring 1986): 200-244.
14
The Supreme Court ruling in
Marquette National Bank of Minneapolis v. First of Omaha Service Corporation
in 1978 allowed a Nebraska bank to export credit card rates to Minnesota. 439 U.S. 299 (1978). The federal government approved this reinterpretation of the McFadden Act in 1983. Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), U.S. Code, vol. 12, sec. 1831d (1994).
15
In the late 1970s, the usury cap in New York was 18 percent on the first $500 and 12 percent for loans above that amount. Robert D. Manning,
Credit Card Nation: The Consequences of America’s Addiction to Credit
(New York: Basic Books,
2000), p. 88. For a review of the calculations behind and evolution of New York’s usury statute, see New York,
General Obligations Law, Compiled
(Bender 2002), sec. 5-501.
16
Manning,
Credit Card Nation,
p. 94.
17
For example, Citibank moved its credit card headquarters from New York to South Dakota in 1981. Manning,
Credit Card Nation,
p. 89.
18
Credit card delinquencies were at or below 3 percent for most of the early 1980s, compared with more than 4 percent in 2001 and 2002. “Delinquency Tumbles,” in
Cardweb.com
,
September 30, 2002. Available at
http://www.cardweb.com/cardtrak/2002/september.html
[2/12/2003]. Even as delinquencies climbed, credit card lending has remained about twice as profitable as other forms of lending.
The Profitability of Credit Card Operations of Depository Institutions,
Annual Report submitted to Congress (2002). For longer-term profitability trends, see Lawrence M. Ausubel, “Credit Card Defaults, Credit Card Profits, and Bankruptcy,”
American Bankruptcy Law Journal
71 (Spring 1997): 258-260.