Progress Illinois

As mortgage and medical costs skyrocket, unemployment rises, and wages stagnate, it's not surprising that more families are falling into the debt trap. In 2007, personal bankruptcy filings in the United States jumped 40 percent and in the first six months of this year, they rose 30 percent as compared to the same period in 2007.

In an economic speech this morning, Barack Obama laid out a plan to help ease the financial strain on struggling families by promising to push for amendments to the 2005 bankruptcy bill. That measure made it tougher for people facing personal bankruptcy to discharge debt by mandating an income test to measure a debtor's ability to repay obligations. The changes proposed by Obama include offering relief to families who defaulted because of high medical costs (which account for about half of all personal bankruptcies), making it easier for the elderly to keep their homes if they are facing bankruptcy, and creating a "fast-track" bankruptcy process for military families that get behind on expenses because of long deployments, repeated moves, or predatory lenders.

It's about time the Democrats attacked John McCain and his party for the lobbyist-penned travesty that was the 2005 bill. A pet project of credit card companies and other consumer lenders, banks claimed hundreds of thousands of debtors were frivolously filing for bankruptcy -- thus discharging the debts they owed to the banks -- when they had the means to cover the unpaid sum. In reality, the purported crisis was entirely invented by the banks. The nonpartisan American Bankruptcy Institute estimates that only three percent of filers were able to discharge debts they could actually afford to pay off. The vast majority were stuck in an endless cycle of debt and high interest.

Politically, this is a great move by the Obama camp. Sensible reform is needed now more than ever and McCain provides a clear contrast, having consistently sided with the banks throughout the 2005 debate (a good rundown of each senator's voting record on the issue can be found here). And as Ed Kilgore writes at Salon, this could help ease tensions with Obama's new critics in the netroots:

I doubt Obama deliberately timed this speech to coincide with the beginning of Senate consideration of the FISA reauthorization, where his position supporting ultimate passage, even with telecomm immunity, has hung fire in the progressive blogosphere. But depending on the details of his bankruptcy proposal, it might give some pause to all the "move to the right" talk about the current phase of his campaign.