Paper: New York Times, The (NY)
Title: Newly Bankrupt Raking In Piles Of Credit Offers
Date: December 11, 2005
By: Timothy Egan (NYT)
TACOMA, Wash., Dec. 9 -- As one of more than two million Americans who rushed to a
courthouse this year to file for bankruptcy before a tough new law took effect, Laura Fogle is
glad for her chance at a fresh start. A nurse and single mother of two, she blames her use of
credit cards after cancer surgery for falling into deep debt.
Ms. Fogle is broke, and may not seem to be the kind of person to whom banks would want to
offer credit cards. But she said she had no sooner filed for bankruptcy, and sworn off plastic,
than she was hit with a flurry of solicitations from major banks.
"Every day, I get at least two or three new credit card offers -- Citibank, MasterCard, you
name it -- they want to give me a credit card, at pretty high interest rates," said Ms. Fogle,
who is 41 and lives here. "I've got a stack of these things on my table. It's tempting, but I've
sworn them off."
If it seems odd to Ms. Fogle that banks would want to lend money to the newly bankrupt, it is
no mystery to the financial community, which charges some of the highest interest rates to
these newly available customers.
Under the new law, which the banking industry spent more than $100 million lobbying for,
they may be even more attractive because it makes it harder for them to escape new credit
card debt and extends to eight years from six the time before which they could liquidate their
debts through bankruptcy again.
"The theory is that people who have just declared bankruptcy are a good credit risk because
their old debts are clean and now they won't be able to get a new discharge for eight years,"
said John D. Penn, president of the American Bankruptcy Institute, a nonprofit clearinghouse
for information on the subject.
Credit card companies have long solicited bankrupt people, on a calculated risk that income
from the higher interest rates and late fees paid by those who are trying to get their credit
back will outweigh the losses from those who fail to make payments altogether. The companies
also directed many of those customers toward so-called secured cards, which require a cash