In October 2005, substantial restrictions were enacted by Congress on the ability of individuals to escape debt in bankruptcy. These restrictions had been long championed by the banking industry as a way to decrease their losses. But now...

...by making it harder for consumers to escape their debts, the new law dramatically reduced lenders' losses from default and bankruptcy. As a result, they started lending more, even to consumers with bad credit. Credit card debt increased more quickly during the past two years than at any time during the previous five years.

Consumers should have responded to the new harsher bankruptcy law by borrowing less, which would have lowered their risk of getting into financial distress. But not all consumers behaved in this rational way. Instead, many behaved shortsightedly and took advantage of the greater availability of credit to borrow more than they could easily handle --- ignoring the risk of financial distress.

I think we can all predict where this is headed. From the National Bureau on Economic Research

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