According to a recent published report in the Wall Street Journal business bankruptcies increased 23% in the year 2001. Of course that figure only represents publicly held or large private firms. It does not take into account proprietorships, more often than not filed under Chapter 13, partnerships and small to mid-size corporations.

On the other side of the aisle, consumer bankruptcies continued to increase as more and more individuals used the law to shed credit card debt.

Meanwhile, the banking and business credit associations continue to urge our legislators to pass bankruptcy reform to stop the wholesale reduction of legally owed debt.

Is there something wrong with this?

During the holiday while channel surfing for a bowl game I came across an episode of Judge Judy. I’m sure many of you are familiar with this cantankerous jurist who dispenses justice based on her like or dislike of the participants regardless of law but that’s OK because it’s not about law but rather arbitration and it is, after all, TV.

Briefly, the case involved a young lady who was suing her ex-boyfriend for money that she allegedly lent him while they were together and he never paid back. I think these are the most popular cases. The reason she gave for lending him the money was the ex had bad credit, no gainful employment and was having difficulty getting a job because he was a felon convicted of theft.

Upon hearing the testimony of this pitiful young lady, Judy responds with, “what do you expect me to do, justify your stupidity?” “You knew he had bad credit, was a thief, had no means to repay you and yet you still gave him money and now you want the court to make everything right.”

Wait a minute; does this have a familiar ring? Businesses and bankers have knowingly provided money, services or products to businesses and individuals who are less than creditworthy. Then when the debtor finds a way not to pay for what they have received the creditor goes to the legislature and says help us. Is this not unlike the young lady going to Judge Judy and asking the judge to punish her ex-boyfriend because she used poor judgment?

Even after experiencing losses the banking industry has not slowed down in its solicitation of its credit cards services.  Is it not time to stop making excuses, blaming others and asking for tougher laws to justify the results that we are responsible for making?

Implementing the simple basics of credit: Character, Capacity and Capital will bring bad debt back as an exception rather than the norm. It will strengthen balance sheets and restore profits to income and expense reports. And most importantly it will, in time, reduce the number of those seeking protection under our bankruptcy laws.

As credit professionals it is time that we take a stand and educate our organization as to where the real problem exists. To paraphrase the old comic strip character Pogo, “I have identified the problem and it is us.”

In the year 2002 will we continue to be the problem or will we begin to make the changes necessary to be successful?

I wish you well.