Granby High students cash in on financial literacy seminar

By TOM SHEAN
The Virginian-Pilot

NORFOLK - A bankruptcy judge's warning about becoming trapped by rising credit card debt registered with Alecia Brown.

After hearing about the damage that careless use of credit can cause, the 16-year-old junior at Granby High School said, "I might not get a credit card."

If she does, it will be important to pay off the monthly balance as it comes due, she said.

U. S. Bankruptcy Judge David Adams, with help from a Justice Department officer who oversees bankruptcy filings and a consumer bankruptcy lawyer, launched a local financial literacy campaign at Granby High School on Wednesday with an hour-long discussion about credit cards, checking accounts and budgeting.

"There may be times when you need to use credit, but plan it out before doing it," Adams told about 100 students. If you seriously misuse credit, "it will have an effect on your emotional state, your pride and your relations with others," he cautioned.

By promoting teaser interest rates and other inducements, credit card issuers make it easy for individuals to become overwhelmed with debt that will be difficult to repay, Adams said.

One person who appeared before him in U.S. Bankruptcy Court in Norfolk, he said, had accumulated 17 cards and more than $250,000 of debt but had no assets left.

Debera Conlon, assistant U.S. Trustee in Norfolk, told the students to carefully read credit card contracts when shopping for a card. They should pay particular attention to the grace period available before a monthly payment is due because these periods, she said, have been steadily shrinking.

In addition, card issuers have been raising the minimum monthly payments that card users must make from 1 percent of the balance to 3 percent, Conlon noted.

Mark C. Leffler, a consumer bankruptcy lawyer from Virginia Beach, cautioned the students not to co-sign loans, including car loans, for friends.

"The car often lasts longer than the relationship" with a girlfriend or boyfriend, he said. "If she takes off with the car, the lender will look for the co-signer" to honor the loan.

The presentation to Granby students was modeled on a program created by a federal bankruptcy judge in Rochester, N.Y. Bankruptcy judges and bankruptcy lawyers in Richmond and Harrisonburg began using this Credit Abuse Resistance Education Program, dubbed CARE, at high schools in those cities last year.

The program is aimed at high school students, especially seniors, because they will be inundated with credit card offers when they get to college, said Alison Scott, coordinator for the CARE program in Richmond.

She and Conlon, whose Justice Department office oversees bankruptcy filings in Hampton Roads, said they hope to bring the financial literacy program to other high schools in this region.

The heightened efforts to prevent credit abuse come in the wake of a massive change to the nation's consumer bankruptcy law and a falloff in the number of bankruptcy filings. The decline is due partly to the surge of last-minute filings before the new law took effect in October, Adams said before speaking to the students.

However, the volume of consumer bankruptcies is likely to climb, he said, because of the continued increase in interest rates and the heavy indebtedness of many individuals.

Meanwhile, the higher cost of legal counsel for a consumer bankruptcy has prompted more individuals to try to handle bankruptcy petitions on their own, which can be time-consuming for the court, Adams said.

Lenders, especially credit card issuers, lobbied aggressively for years to make it more difficult for individuals to liquidate their debts through a Chapter 7 bankruptcy filing if they had the resources to repay at least part of what they owed.

"The purpose of the new law is totally appropriate," Adams said.

However, imprecise language in the law has made it more difficult to resolve many bankruptcy cases, which has led to a greater volume of litigation, he said.

Bankruptcy judges sought to advise members of Congress when they were writing the law, but "we were never invited to the table," he said.

There's no sign of legislative relief. Bankruptcy judges, said Adams, have been told that it may be six years before Congress tackles the law's problems with a technical-amendments bill.