A Fighting Chance

As my search got under way, I found two terrific partners. Terry Sullivan, a newly minted PhD, was a bright young star in the Sociology Department at UT. (Terry went on to an amazing career, winding up as the first female president of the University of Virginia.) Jay Westbrook was already a bankruptcy expert, and by the time we met he had practiced law for eleven years. (Jay has also had a remarkable career; he is a renowned bankruptcy scholar and the hands-down expert on international business law.) But back then we were just three young professors who were excited about putting together the kind of study that legal experts almost never did. We decided to collect hard data about families that went broke.

Terry led the way as we developed a sampling protocol, drew up a list of the data we wanted to get, copied cases, recorded numbers, and began to create a database. I’d never been involved in a project like this—a careful, systematic collection of information that would form a picture of the people who filed for bankruptcy. It was the statistical equivalent of building a giant mosaic, one tile at a time.

During the data collection phase, I visited an old paneled courtroom in San Antonio. It was summer, and the air-conditioning was cranked down to freeze-your-toes-in-one-minute-or-less. Back then, people still had to come before a judge to get a decree forgiving their debts. (Nowadays, the process usually happens by mail.) I sat in the back, shivering.

The judge sat higher than everyone else, although I barely noticed him and he didn’t pay any attention to me. My eyes were on the people who moved in and out of the courtroom. I guess I had so completely absorbed the prevailing wisdom that I expected people in bankruptcy to look scruffy or shifty or generally disreputable. But what struck me was that they looked so normal.

The people appearing before that judge came in all colors, sizes, and ages. A number of men wore ill-fitting suits, two or three of them with bolero ties, and nearly everyone had dressed up for the day. They looked like they were on their way to church. An older couple held on to each other as they walked carefully down the aisle and found a seat. A young mother gently jiggled her keys for the baby on her lap. Everyone was quiet, speaking in hushed tones or not at all. Lawyers—at least I thought they were lawyers—seemed to herd people from one place to another.

I didn’t stay long. I felt as if I knew everyone in that courtroom, and I wanted out of there. It was like staring at a car crash, a car crash involving people you knew.

Later, our data would confirm what I had seen in San Antonio that day. The people seeking the judge’s decree were once solidly middle-class. They had gone to college, found good jobs, gotten married, and bought homes. Now they were flat busted, standing in front of that judge and all the world, ready to give up nearly everything they owned just to get some relief from the bill collectors.

As the data continued to come in, the story got scarier. San Antonio was no exception: all around the country, the overwhelming majority of people filing for bankruptcy were regular families who had hit hard times. Over time, we learned that nearly 90 percent were declaring bankruptcy for one of three reasons: a job loss, a medical problem, or a family breakup (typically divorce, sometimes the death of a husband or wife). By the time these families arrived in the bankruptcy court, they had pretty much run out of options. Dad had lost his job or Mom had gotten cancer, and they had been battling for financial survival for a year or longer. They had no savings, no pension plan, and no homes or cars that weren’t already smothered by mortgages. Many owed at least a full year’s income in credit card debt alone. They owed so much that even if they never bought another thing—even if Dad got his job back tomorrow and Mom had a miraculous recovery—the mountain of debt would keep growing on its own, fueled by penalties and compounding interest rates that doubled their debts every few years. By the time they came before a bankruptcy judge, they were so deep in debt that being flat broke—owning nothing, but free from debt—looked like a huge step up and worth deep personal embarrassment.

Worse yet, the number of bankrupt families was climbing. In the early 1980s, when my partners and I first started collecting data, the number of families annually filing for bankruptcy topped a quarter of a million. True, a recession had hobbled the nation’s economy and squeezed a lot of families, but as the 1980s wore on and the economy recovered, the number of bankruptcies unexpectedly doubled. Suddenly, there was a lot of talk about how Americans had lost their sense of right and wrong, how people were buying piles of stuff they didn’t actually need and then running away when the bills came due. Banks complained loudly about unpaid credit card bills. The word deadbeat got tossed around a lot. It seemed that people filing for bankruptcy weren’t just financial failures—they had also committed an unforgivable sin.

Part of me still wanted to buy the deadbeat story because it was so comforting. But somewhere along the way, while collecting all those bits of data, I came to know who these people were.

In one of our studies, we asked people to explain in their own words why they filed for bankruptcy. I figured that most of them would probably tell stories that made them look good or that relieved them of guilt.