John Oliver explains personal bankruptcy, how credit card lobbyists and lawyers make it much worse

Bankruptcy, especially as portrayed by bankruptcy lawyers, promises "a fresh start from your debts," John Oliver said on Sunday's Last Week Tonight. Between 800,000 and 1.5 million Americans file for bankruptcy each year, "and many worry that once the current pandemic assistance stops, more and more people will need the type of help" bankruptcy offers. The process gives people a chance to dig out from under a mountain of debt, but it does hit your credit score, and it carries a "completely misguided" social stigma, he said.

"Bankruptcy is not solely caused by bad decisions, it's often caused by bad luck — unavoidable challenges like job loss, divorce, surprise medical bills, or perhaps even, you know, a once-in-a-century global pandemic," Oliver said. But absurdly, "a lot of people can't afford to go bankrupt," quite literally.

"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 didn't want spoiling that was people cutting the cycle short through bankruptcy."

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The credit card industry lobbied Congress aggressively, and a 2005 law made it harder and more expensive to file for personal bankruptcy, Oliver said. He explained the two kinds of personal bankruptcy, Chapter 7 and Chapter 13, and noted that many lawyers steer clients to the more expensive option, Chapter 13 — especially if their clients are black. "Even bankruptcy discriminates against Black people," Oliver sighed. He illuminated why people might have to file for bankruptcy twice — not, as Suze Orman suggests, "recklessness" or "moral failing" — and blamed "much of what is wrong with our current bankruptcy system" on the 2005 overhaul.

If you paid attention to the 2020 Democratic primaries, you already know President Biden was a big backer of the 2005 law and clashed with Sen. Elizabeth Warren (D-Mass.) over it — and if you weren't paying attention. Oliver offered a recap. Warren now has an overhaul bill that Biden broadly supports, but it is unlikely to pass if 10 Republicans need to sign on to thwart a filibuster, he said. Oliver closed with a NSFW animated summation of his argument that also pillories mandatory credit counseling. Watch below. Peter Weber