A Step Ahead Of The Creditors

A month before going bankrupt, Leonard Massie went on a shopping spree on his American Express card. He rolled up $670 in restaurant charges, used his credit card to repair his Lexus and purchased $4,600 worth of airline tickets to Aruba.

One week after charging the airfare, Massie and his wife filed for Chapter 7 bankruptcy, reports CBS News Correspondent Wyatt Andrews.

Joe Bellinger, a bankruptcy trustee, was appointed to investigate the case. He found the Massies, both school administrators, together made $180,000 a year and live in a $350,000 home in the Baltimore area. He said the couple had "around 25" credit cards.

But they were deep in real estate debt and had racked up $100,000 in credit card charges.

Still, under the current rules for Chapter 7, the bankruptcy was allowed and the Massies were essentially able to walk away.

Three years into the surge of bankruptcies, Congress believes high-income Americans are partly to blame - consumers who use Chapter 7 not to bail out of bad luck, but to finance a free-wheeling lifestyle.

"We are preaching personal responsibility," said Rep. George Gekas, R-Pa.

Gekas has pushed a bill through the House that would establish the first income test for bankruptcy. Basically, Gekas believes that any bankrupt family making $51,000 a year should pay back something.

"If we determine that there's a capacity to repay, why should they not repay some of the debt over a period of time?" Gekas asked.

But consumer groups have called the $51,000 test cruel, and they point to cases like Steve Bonwit's.

Bonwit, a Miami accountant, lost a son, Justin, to sudden infant death syndrome, and after months of depression and no income went bankrupt. "My life was completely turned upside down," Bonwit recalled. "I went to work everyday. My wife was a nurse. She went to work everyday. One minute we were a normal, everyday family and the next minute our lives were destroyed."

He argues that any income test that doesn't count hardships like lost jobs or medical expenses is unfair.

"I just believe in that second chance. That second chance gave us a whole new life," Bonwit said.

Consumer advocates also charge that the big credit card companies - the same ones pushing this reform -- don't need it to go after the rich. The law lets them do that already.

"They are going to try to pursue the people who are weak to try and recover from them, rather than from the people who have the big money," said James Miller, a bankruptcy attorney, referring to credit card companies.

The Massies, meanwhile, kept the house, kept their cars and agreed to pay American Express. The Massies released a statement to CBS News, blaming their debts on unexpected expenses for a nursing home for a relative. But the statement said nothing about the tickets to Aruba.

Like many Americans, the Massies were pushing credit to the edge, living a Lexus lfe and fueling it with plastic.