In this article here, a tougher bankruptcy law pressures Americans to pay toward consumer debt (like credit cards) than to other debts instead of witting them off. Homeowners are now less able to meet mortgage obligations which increases the likelihood of foreclosures.
The entire credit crunch problem that we are facing is a dirty and ugly situation without a clean and clear resolution. The justice side of me wants to make all consumers suffer and pay for all the debt that they accrued, as well as get after the credit institutions that created and promoted the environment that got us here. But nobody likes to kick families out in the cold dark street, it just seems so inhumane. So what is to be done?
I am a strong believer in the free market and the invisible hand. I think there will be many short-term and some long-term losses, but overall the market and consumers will adapt, and there won't be throngs of homeless scouring the streets of homes they once occupied. Hopefully this is a lesson learned for consumers to not live on the edge of their financial limitations, as well as a lesson to lending institutions to be more selective when handing out money. The truth of the matter is, there is no winner in this type of situation, and we will all suffer or feel the pinch in one way or another.