"Card slave," a term coined in Taiwan to refer to people who can only pay the minimum balance on their credit card debt every month, has been hogging the news for months now. Interestingly, a slave by definition means "one who is forced to work for someone else."
The question is who forced these so-called card slaves to work? Statistics show that seven in 100 workers fall under this card-slave category. However, the statistics do not indicate how many people pay off their card debts on a regular, if not on a monthly, basis. More importantly, the figures do not show how or why the card slaves ended up with massive debts in the first place.
Watching the local news can give one a pretty good idea of the reasons why. Many are card slaves who have reached their credit card limit on luxury items.
For instance, there's the worker at a Taipei court house who used her credit card to buy her husband a Mercedes Benz in an attempt to salvage her marriage. Another card slave appeared on a TV talk show and said that she used her credit card to support her entire family, but at the same time also used it to buy Louis Vuitton bags, clothes and other luxury items. Appearing on the same talk show is another card slave who said he reached his credit limit to invest in stocks.
The only thing that these people have in common is they cannot afford to pay off their credit immediately.
I really don't think it is the exorbitant interest rates on credit cards or the banking industry's lax practice of awarding credit cards to many that has given rise to the problem of card slaves. These people have not been forced to work for anyone other than their own spending habits.
People who choose to buy items that they cannot afford only have themselves to blame.
In the US, people who cannot pay off their financial obligations are declared insolvent.
A person who is insolvent may choose to file for bankruptcy to discharge his/her debts. Once a bankruptcy petition is filed, this person is called a "debtor in bankruptcy."
However, the US Bankruptcy Code has anti-abuse provisions and bankruptcy judges have the discretion to dismiss a case due to abusive financial practices. As such, a debtor must have a legitimate reason to file for bankruptcy.
A bankruptcy petition creates a bankruptcy estate that includes all of the debtor's legal and equitable interest as of petition date. The estate will pay off the debtor's creditors.
Another significant Bankruptcy Code provision is the appointment of a trustee to administer the estate and seek recovery of fraudulent transfers of the debtor's pre-petition transactions.
As provided in the Bankruptcy Code, a trustee can generally go after any transfer by a debtor in the four years prior to the petition date. Anything recovered will be used to payoff creditors.
In a Chapter 7 Bankruptcy, a debtor liquidates his/her assets to pay off outstanding claims. In return, the debtor is discharged from bankruptcy.
Under the code, card slaves have to sell their Louis Vuitton, Christian Dior, or whatever luxury items they have to pay off their debts. Moreover, any gift made in the previous four years will be recovered by the trustee to pay off creditors, so say goodbye to that husband's Mercedes as well.
Just like many other areas of US law, the Bankruptcy Code focuses on what is a reasonable and fair result that balances different interests.
While we are sympathetic to those who need to file for bankruptcy or who rely on their credit cards for family emergencies, we are unsympathetic to those who abuse the system and then seek judicial or government intervention to bail them out.
A US study found that most people file for bankruptcy following a divorce, loss of job, a major medical condition or injuries from an accident. The law should protect these people. But I honestly see no reason why Taiwan should enact laws that will encourage the abuse of financial transactions. If anything, each case should be reviewed individually and the court should determine how the money was spent.
It is only fair that card slaves pay their own debts because most people do pay their financial obligations when they are due.
A credit card is no different from any other contract. Banks promise to extend a certain amount of credit, and cardholders promise to repay the amount. Since banks fulfill their end of the bargain by extending credit, cardholders should be held accountable for their actions.
To say otherwise is to undermine our monetary policy and financial system because no one will honor his/her promises anymore.
There are no card slaves but only cardholders who cannot meet their obligations.
They are not slaves. If anything, they are both masters and slaves of their own actions.
And don't tell me you did not read the contract before you signed it. Good luck in using that argument before any judge.
Mingyi Kang is a second-year law student and accountant and a US Bankruptcy Court intern.
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