Matthew Dunaway November 2018

www.matthewdunaway.com · 205-705-3590

November 2018

A DEAL WITH THE DEVIL The American Economy and Bankruptcy

Why is there more bankruptcy in America today than anywhere else in the world? As a bankruptcy attorney, I have been asked this question many times. Every year, hundreds of thousands of people find themselves in a situation so overwhelming that they have to declare bankruptcy in order to have any chance of getting out from beneath their crushing debt. I believe this troubling trend has to do with the fact that our economy is consumer-spending driven. As a culture, we have made a sort of deal with the devil in regard to our economy. Yes, by driving our economy higher with consumer spending, the American economy has become the largest in the world — sitting tall at $20.4 trillion. But the boost in consumer spending we’ve seen since the

1980s comes from the fact that we have made it easier for people to spend money they don’t have. This is all thanks to consumer financing. The trade-off of easier consumer spending is more consumer debt. When more people are in debt, more people get themselves into trouble. Sometimes this trouble is self-inflicted carelessness, and sometimes it’s brought on by a series of unfortunate events. No matter the situation, the end result is the same: bankruptcy. It makes no professional difference to me whether someone is filing for bankruptcy because their child got sick and the medical bills became too much to bear or because they’ve maxed out a hundred credit cards buying smartphones and video games. My job is to get my clients out of a bad situation and help them keep from ending up in that place again. The first part isn’t terribly difficult, but that second step requires careful attention. Our economy is built on people buying stuff, or more accurately, using credit to buy more stuff. Everywhere you look, department stores are urging you to sign up for their store card, car dealerships brag about how easy it is to get approved for a brand-new sports car, and credit card companies offer $100,000 lines of credit to teenagers. It takes a lot of effort to navigate our society without acquiring unnecessary debt. To be clear, some debts are necessary. If your car breaks down, a car loan can come in handy to make sure you’re still able to get to work. Likewise,

business debt is about making an investment today in order to make more money in the future. But too often, consumer debt is only about spending money you don’t have in order to buy more things. After World War II, the American economy was booming because it produced things other people wanted to buy. Today, the economy bankruptcy. We can’t snap our fingers and go back to being a society built on production rather than consumption. But as individuals, we can make the conscious decision to say, “No, Target, I don’t want to get 10 percent off my purchase today by signing up for your credit card.” I know the odds are stacked against us. Freeing ourselves from the cycle of debt so prevalent in our society is far from easy, but I do believe there is a light at the end of the tunnel. Things have become so over-the-top that people are finally saying enough is enough. They don’t want to go with the flow anymore, so they’re searching for another choice. That’s the first step. When individuals start to change their habits for the better, they’re able to transform their economy and society as a whole for the better, too. is built on us consuming goods produced elsewhere. With this change came more

Our economy is built on people buying stuff, or more accurately, using credit to buy more stuff.

–Matt Dunaway

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