“The theory is that people who have just declared bankruptcy are a good credit risk because their old debts are clean and now they won’t be able to get a new discharge for eight years,” said John D. Penn, president of the American Bankruptcy Institute, a nonprofit clearinghouse for information on the subject. …

But the new law makes for an even better gamble for lenders, consumer groups say. It not only makes bankrupt debtors wait eight years to clear their debts again, but it also requires many of those who do go back into bankruptcy to pay previous credit card bills that may have been excused under the old law. …

Nearly 60 percent of all credit card holders, about 85 million Americans, carry a balance — that is, they do not pay off the entire debt, according to the bankers’ association.

The average debt among those with a monthly balance is $9,000, said the Consumer Federation of America in a recent report. Paying just the monthly minimum — usually 2 percent of the balance — on $9,000, it would take 42 years to pay off the debt, at a typical 18 percent interest rate, the consumer group calculated. Since that study, some banks have raised the minimum to 4 percent. …

Americans owe $800 billion in credit card debt, more than triple the amount from 1989, and a 31 percent increase from five years ago, according to a recent report, “The Plastic Safety Net,” by the Center for Responsible Lending, and Demos, a research group based in New York.

The study found that a third of low- and middle-income American households used credit cards for basic expenses — rent, groceries and utilities — in any 4 of the last 12 months.

–Timothy Egan, Newly Bankrupt Raking In Piles of Credit Offers

I’ve been there. It is so easy to slip into. I became debt-free (except for my student loan and a car loan) without going the bankruptcy route. Banks are charging usurers’ rates and creating a truly Faustian situation. Try to avoid it if you can!