The Associated Press has done an analysis of bankruptcies and discovered that five states have significantly lower rates (-40%) of bankruptcy: Pennsylvania, North Carolina, South Carolina, Texas and Florida. All of the states have laws that limit wage garnishment to collect debt.
States that allow debt collectors to seize consumers’ wages have sharply higher bankruptcy rates than neighboring states that prohibit or strictly limit the practice, an Associated Press analysis has found.
This link highlights a dilemma for credit-card companies and other debt chasers: By going after wages — an increasingly popular maneuver since the recession began, lawyers say — they risk pushing consumers into bankruptcy court, where judges can reduce or wipe away all sorts of financial obligations.
This looks like a classic case of the rule of unintended consequences, yet it makes sense. People with a lot of debt generally try to balance which bills get paid but wage garnishment severely restricts this.
I hope Delaware will seriously look at these findings and adopt a law similar to the one in Pennsylvania.