By Sandra Guy
Thursday, October 27, 2005
Women file for bankruptcy in greater numbers than men and face higher barriers to financial security. As a result, advocates say, women have more to lose under the new bankruptcy law enacted last week.
(WOMENSENEWS)--This year, more than 1 million women are expected to file for bankruptcy, outnumbering men by about 150,000 if trends hold.
Critics say that means the new U.S. bankruptcy law, which makes it harder for filers to expunge debts, is particularly onerous for women.
They expect the Oct. 17 law to saddle women with higher debts for longer periods and erode their economic security and ability to recover from financial crises not of their own doing.
"Filing for bankruptcy is the financial equivalent of going to a medical emergency room," said Karen Gross, president of the New York-based Coalition for Consumer Bankruptcy Debtor Education. "The new law significantly increases the barriers of getting in, the costs once inside and the hurdles of leaving."
New provisions of the law are designed to discourage filings under Chapter 7 of the U.S. Bankruptcy Code--which expunges debts--and steer more filers toward Chapter 13, under which they must repay at least some of their debts.
Higher costs for filing bankruptcy under new provisions of the law are also bad news for women, say advocates, because women are less likely to have the savings to pay them.
One new provision of the law, for instance, requires bankruptcy attorneys to verify that they have investigated the debtor's information and believe it to be accurate. This added attorney time is expected to drive up filing costs, on average, by between $1,000 to $2,000. The actual filing fees with the court will also rise slightly along with the amount of time a lawyer will take to prepare a bankruptcy petition, said Howard Ehrenberg, a lawyer and Chapter 7 court-appointed bankruptcy trustee for the Central District of California.
In order to emerge from bankruptcy, filers must attend mandatory credit counseling and debtor education. While some of these courses are free, they can cost as much as $50 for a 90-minute session.
People may obtain a waiver of those fees if they are destitute but the new law makes it harder for filers to prove they are unable to pay.
In April, a nationwide survey by Visa USA and the Consumer Federation of America found that 42 percent of women who responded had less than $500 in emergency savings, and 55 percent of women age 25 to 34 did not maintain an emergency savings account of at least $500.
Also hurt will be filers whose domestic partners die suddenly because a new means test used to determine who is eligible for bankruptcy protection applies only to personal income, not household income, Ehrenberg said. This means that people who depended on a partner's income cannot show that loss. Since women are more likely to survive their husbands, this new "means test" will more likely affect them.
Gross said women's higher number of bankruptcy protection filings reflects a complex set of social barriers to financial security: lower earnings, less education about money and, often, sole responsibility for raising children.
By 2010, 1 in 6 single mothers is expected to file for bankruptcy.
"When people wonder why women are in more financial trouble, it's because they earn less, they live longer, they get less support, they get sick, and they have huge obligations to their children," said Gross, a professor at New York Law School.
Jill Miller, president and CEO of Women Work!, a nonprofit network in Washington, D.C., dedicated to women's economic security, said the vast majority of women who file for bankruptcy do so out of dire need. Miller was also honored as a Women's eNews 21 Leader for the 21st century in 2003.
"Nine of 10 times, women file for bankruptcy because they've lost their jobs, experienced a medical emergency or because of divorce or separation. The facts belie the myth that women are filing because they are irresponsible and frivolous spenders. That's just not the case."
Advocates for women's economic security support a wide range of legislation that would help women become financially self-sufficient and protected from bankruptcy.
Those policies include paid family medical leave, benefits for part-time workers, increases in the federal minimum wage, and more funding for job training and education programs that help women advance in the workforce.
"There are many systemic issues, such as how bankruptcy affects women, which one should think about at the macro level," Gross said. "Most require seismic shifts. Some less seismic suggestions are to increase women's and girls' financial literacy levels, address their fear of numbers and improve their comfort levels with quantitative skills."
Miller criticized the bankruptcy law for focusing on a debtor's personal responsibility while ignoring credit card companies' marketing campaigns and exorbitant interest rates. "It does not address corporate responsibility," she said.
At the same time, advocates said the new law heightens the urgency of improving women's financial education.
"Girls are not being provided the kind of financial information and education that they need, either in school or while they are growing up," said Miller, whose organization conducted 15 focus groups on the subject of work-force challenges facing women in 12 states last summer. "Women told us they had to learn about finances by the seat of their pants."
Some women imperiled by the new law are not those seeking bankruptcy protection themselves. Instead, these are women who are struggling for back payments of child support from men facing financial pressures.
In the past, Miller said, filers were required to honor their child support obligations while being allowed to write off other forms of debt. But under a new provision of the law, credit-card claims are put on equal footing with claims for back child support.
Now that women will have to compete with well-financed credit-card companies for the assets of the same men who have filed for bankruptcy, Miller expects them to have a harder time collecting. Last year, $95 billion in child support went unpaid overall.
Sandra Guy, a 22-year veteran journalist, is a business reporter at the Chicago Sun-Times. She has covered business, politics, education, technology and peace issues, and served as a former president of the Chicago chapter of the Association for Women Journalists.