Not anymore. And you know why we don't put them in prison anymore, or why it is we don't put them in some kind of social servitude? We really want people out there working. We really want people to have a stake in their own futures. And the founding fathers, even before the Bill of Rights, put in a provision that says Congress will have the power to establish a uniform law of bankruptcies. ... It was all about how we want to make sure that people have ... the enthusiasm, the incentive, to get out there and try.

For the same reason, we have a lot more businesses start up in the United States than we have in Europe. Entrepreneurs can get out there and borrow a little money and ... start a hot dog stand or go into consulting. ... They can take those risks, knowing that there is some safety on the other side. It's a big form of social insurance, not for the poor, but for the middle class, for people who are starting businesses, ... people [who] are trying to hold together their families, their jobs; hardworking, play-by-the-rules people. Those are the people ultimately who end up in bankruptcy; people who took the risks we wanted them to take, but for them, it didn't work out.

Here, unlike Europe, until very recently, we've had a huge consumer credit economy, because people could afford to take the chance. They could afford to get out there and spend next month's paycheck, knowing at some underlying level that if they got laid off or if they got too sick or got hit with big medical bills, that there really is ultimately a way out, that the creditors can't come, strip you down to naked, throw you back into poverty, leave you in the gutters; ... that there is some safety net.

And so they founded this nation, and when they got into financial trouble, you know what they did? They moved west. And they moved west, and they moved west. And by the end of the 19th century, there was no place else to move, and creditors could pretty much reach their debtors ... anywhere around the country, and that's when we finally put our first national bankruptcy law into effect. And we've had one ever since. It's the way that people say: "I got out there; I borrowed the money; I did my best; I used that money to start a small business or to keep myself going in my job. ... You rolled the dice with me. ... It didn't work. You can have most of what I own, and that's it, though. We'll stop there. We'll declare the default. You write off the part of the debt I can't pay, I'll take my human energy ... and go right back into the game again." That's the whole premise behind bankruptcy. It's about death and rebirth.

Because bankruptcy is about financial death and financial rebirth. Bankruptcy is the great American story rewritten. We're a nation of debtors. Why do you think people left Europe to come to the United States? They left because they were in debt. We like to describe it as, "Oh, it was about religious freedom." No, it was about debt. They were looking for a way to escape their debts.

A professor of law at Harvard University, Elizabeth Warren is an expert on bankruptcy and an outspoken critic of consumer lenders. She is the author of several books including, most recently, The Two-Income Trap: Why Middle Class Mothers and Fathers Are Going Broke. Here, she discusses the range of deceptive and unfair practices she says the credit card companies try to hide in the fine print of card agreements and she lays out the remedies that should be put in place to protect the consumer. She is especially outraged by those who argue that the debt problem facing Americans is really a tiny fraction of the overall economy and that such consumer spending has helped keep the economy afloat. "Seventy percent of American families last year said that they are carrying so much debt that it is making their family lives unhappy," says Warren. "Middle-class Americans, hard working, play-by-the-rules Americans, Americans who lost a job, who don't have health insurance, who are in the middle of a divorce -- those are the Americans who are carrying enormous credit card debts." This interview was conducted on Sept. 20, 2004.

» "The Cement Life Raft" In this excerpt from Elizabeth Warren and Amelia Warren Tyagi's book , The Two Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke , the authors lay out their argument against the "predatory" lending practices of the mortgage and credit card industries and their effect on American families.

There is no problem if they would do it on terms that are fair and if they would make their contracts transparent so that the person who's borrowing the money is borrowing it in a way that he or she understands and appreciates the risks.

So the credit card industry says ... "We provide the credit, in many cases, for people to start businesses ... to buy more, to live a better life, to do things that they could never do any other way." So what's the problem?

So bankruptcy was a way to take the human beings who had gambled and lost and get them back into the game. Better that they be back in the game, working and starting their businesses, so that they earn taxes that help all of us. Better that America believes in a business sense, in rebirth, than in ... the taint of debt ... and some form of death following that.

The notion was anyone whose complete income was going to be seized by his creditors, anyone whose farm was all going to be taken away, anything that was produced, wouldn't have very much reason to get up and go to work, wouldn't have very much reason to plough the fields .