Actually, if slightly rephrased, it could be part of the solution.
In particular, right now people who are deemed to be poor credit risks are often assigned extremely high interest rates based in part on the fact that the larger a person's balance when they declare bankruptcy, the greater a fraction of their assets the creditor will get. If someone carries dept for four years at 18% and the creditor ends up getting 50 cents on the dollar, the creditor will almost break even. Had the debt been at 5% interest, however, the creditor would stand to lose a lot of money.
So if the effect were to reduce the interest rates that were charged by sub-prime lenders, that could make it easier for people to work their way out of debt.
Fundamentally, the goal in a fair and just bankruptcy system should be to make it so that bankruptcy is bad enough that nobody will willingly let their debt spiral out of control if they can avoid it, but not so severe that people's life is forever ruined. Very tough balancing act.
that's swell, but a little beside the point.
creditors are currently deliberately extending lines of credit to folks who are still wet behind the ears, don't know squat about resource management, have no idea what they are going to do for a career, etc... in order to hook them into revolving debt on a high APR.
I was one such hapless moron, and it has taken years of busting my hump to claw my way out of debt. There are many who are not so brutal as I am. This is why "debt consolidation" is now a huge business (and, often enough, a fraudulent business itself).
This crap needs to STOP.
If it were to stop, yes: the consumerism base of our economy would take a massive hit. GOOD. Because the CAPITALIST base would surge back into primacy - where it ought to be.