John Oliver explains the problems with Americas broken bankruptcy system – Boston.com

Even though filing for bankruptcy is a legal tool that can be used by any individual or business including a former U.S president there is a negative social stigma around it, according to John Oliver.

The HBO host devoted the latest episode of Last Week Tonight to examining why modern-day bankruptcy has become a boon for credit card companies and other intermediaries while hurting individuals trying to get a fresh start.

Oliver called out media personalities like Shark Tank host Kevin OLeary and former CNBC host/personal finance expert Suze Orman for demonizing bankruptcy filings on their shows.

Bankruptcy is not solely caused by bad decisions, its often caused by bad luck, Oliver said. Unavoidable challenges like job loss, divorce, surprise medical bills, or perhaps even, you know, a once-in-a-century global pandemic.

Oliver then delved into the history of bankruptcy law in the United States, focusing on notable changes to the law in 1978 and 2005.

Our modern bankruptcy code was enacted in 1978 interestingly, around the same time that the credit card industry began to enjoy a period of steady deregulation, Oliver said. That worked out very well for them, because they marketed themselves aggressively, and during this time, consumer debt began to sharply rise. And what the industry clearly wanted was people stuck in a lucrative cycle of minimum payments, late fees, and interest hikes. What they didnt want spoiling that was people cutting the cycle short through bankruptcy.

In 2005, meanwhile, lobbyists for credit card companies pushed Congress to pass the Bankruptcy Abuse Prevention and Consumer Protection Act, which made it more difficult for individuals to file for bankruptcy. It also led to a rise in lawyers pushing clients away from the less-expensive Chapter 7 bankruptcy and instead filing for the more costly Chapter 13 bankruptcy.

In archival footage, Oliver showed Elizabeth Warren, then a Harvard professor studying bankruptcy, testifying before Congress about how medical debt ruins peoples lives. In the clip, she receives pushback from then-U.S. Sen. Joe Biden, who, as Oliver explained, was one of the bills biggest backers.

Joe Biden is from Delaware, home to some of the biggest credit card companies, and his support was crucial to getting the 2005 law passed, Oliver said.

In the clip, Biden kept shifting focus from individuals who were ruined by medical debt back to the poor creditors who wouldnt get their money, as Oliver put it.

Oliver ended the segment by noting that while Biden has broadly supported Warrens proposed Consumer Bankruptcy Reform Act, it is unlikely to pass, with zero Republicans supporting it.

The fact is, something big needs to happen here, Oliver said. Because we badly need to get our broken bankruptcy system working again for people who desperately need a lifeline.

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John Oliver explains the problems with Americas broken bankruptcy system - Boston.com