US bankruptcy bill faces rough ride

FT
By Holly Yeager in Washington
Published: February 27 2005 19:38 | Last updated: February 27 2005 21:37

Bill Frist, the Senate majority leader, appeared before the US Chamber of Commerce this month, boasting of the actions made possible by the Republicans' strengthened majority.

Celebrating the passing of a bill to limit class-action lawsuits, he told the business group: "We can deliver on issues that in the last Congress were tough."

On Monday, Mr Frist is hoping to deliver on another, as the Senate begins debate on bankruptcy legislation that has vexed Congress for years.

The measure, first considered in 1997, would make it more difficult for consumers to wipe out their debt by declaring bankruptcy. "Instead of falling back on bankruptcy as an option of last resort, more Americans misuse it as a financial tool to wipe away their debts altogether," says Chuck Grassley, author of the bill.

http://news.ft.com/cms/s/1b5919ec-88f4-11d9-b7ed-00000e2511c8.html

Our representatives in Congress are the "haves" and many of their constituents are the "have nots."

They don't give one hoot about the poor or the suffering, and neither does any Dem who votes for this.

Their time will come standing against that cold wall with their blindfold on thinking about how things might have been different......never hearing the bang. What a thought provoking piece of fiction, huh?

it's baaaaaaad news for regular human beings. A very large proportion of the people who file bankruptcy do so after serious medical catastrophes.

This is no way to run a country.

I believe that it's about 1/2, actually, of all backruptcies (due to medical stuff). But no, health care in this country is fine, why do you ask? Grr.

and planning to file bankruptcy. It's all an evil scheme.

that I believe is still in this one, is that the prioritizing of debt is changed. If a man owes child support and has credit card debt, the card company has equal standing to go after the money in court. In other words the people with the most legal firepower prevail.(their answer is usually that the poor mother can have her day in court, she just has to hire an attorney). This is one of the issues the financial institutions really want. As with the class action suits, it's all about helping the big guys and pissing on the citizens.

The reason is that in most Chapter 7s there is no distribution to anyone as they are 'no asset' cases. Most people will have to file a chapter 13, and instead of getting priority payments for child support, (as it now stands), they will get equal billing with credit card companies.

Cute little trick they are trying to use to make it sound family friendly, when it is NOT.

Added up our uninsured medicals for 2004 = $12,000!
:(

I think this may sail through and this bit about it being a rough ride is to get the opposition's (our) guard down, so people don't call in to their reps.

This is the first time it has a real chance of making it with little opposition. I think it'll be enacted under the radar while everyone is focused on Social Security.

You don't suppose the fact that several major credit card companies are based in Delaware has anything to do with it?

He's a whore.

in 2001, only 13 Democratic senators voted nay: Corzine, Dayton, Dodd, Durbin, Feingold, Harkin, Kennedy, Kerry, Nelson (FL), Reed, Rockefeller, Sarbanes, and Wellstone . . . all the rest -- including Senators Biden, Cleland, Clinton, Daschle, Edwards, Feinstein, Leahy, Levin, Lieberman, Mikulski, Murray, Schumer, and Sarbanes -- voted for it (except Boxer, who did not vote) . . . here's the tally, along with how much each received from the credit card industry . . .

http://www.opensecrets.org/news/BANKRUPTCY/senate_vote.htm

these people should be ashamed of themselves . . . and I repeat my previous pledge . . . any Democrat who supports this travesty will lose my support forever . . . that includes my senators, Clinton and Schumer, whether they run for re-election or for higher office . . . I will wash my hands of them, and actively campaign against them if given the opportunity . . . that's how strongly I feel about this issue . . . and about credit card companies . . . and about chickenshit Democratic senators who are nothing but BushCo enablers . . .

The longer he's in office and the more I know about him, the less I like him.

Bob Graham, who retired recently, voted for it, but at least he didn't take a crapload of money for it.

EDIT - Sorry, I looked at the wrong Nelson. I still don't like a lot of what I see from Bill Nelson (FL), but he DID vote against this. And he DID snag some contributions from the industry.

According to the Open Secrets site, he voted NO. He's usually reliably liberal and principled in his votes.

Even though months have gone by since the election, the more I learn about John Kerry, the more I like him, and the more I feel like we missed out on having a true leader for the people of this country.

Pricks, one and all.

This bill is baaaaaaad. Very very very bad. Screws lower middle class to the fricking wall and will gain nothing except for usurious interest rate used car lenders and some slight increase in payback to credit card companies.

It will drive these folks underground and out of the tax base if they can't get a fresh start

Objectively I know he has his uses, but that grandstanding, self-absorbed halfwit has no room in his head for thoughts of anyone but himself.

I was embarrassed by his questioning of the lawyer who argued against the bill.

I wouldn't support him for dogcatcher.

I call him "He Who Loves To Hear Himself Talk"

Worthless cad.

...it's hard to know where to start.

This bill will do more to hurt middle-class families than any other single legislative initiative currently being proposed.

Making it difficult for "financially irresponsible (!!!)" people to file bankruptcy is only the tip of the iceberg, folks.

The financial disservices industry has been drooling and slavering over this one for years. Starting with the repeal of the usury laws in the 1970s, they have been working to overturn all of the restraints that began with the big anti-trust laws at the end of the 19th century, and that came to a head with the financial collapse that precipitated the Depression of the 1930s.

Remember the old song?

"Saint Peter, don't ya call me, 'cause I can't go... I owe my soul to the company sto'..."

The financial disservices industry wants your souls, your lives, and your total personal incomes for infinity. They want NO restrictions on their ability to manipulate you through deceptive, shoddy, unethical credit practices. Bankruptcy protection is one of the few remaining barriers to this goal.

They have used every underhanded, sleazy, manipulative stratagem they can invent to push American families into massive debt, and now they stand back and whine "Those fiscally irresponsible people are cutting into our profits! Make them stop!"

The overwhelming majority of consumer debt results from a hyperinflated housing market and the artificially-supported "bidding war" that has driven the cost of housing beyond the ability of middle- and working-class families with one income to afford. That situation is directly attributable to the de-regulation of the credit markets in the 1970s 80s.

If you examine the budget & expenditures of an average middle-class American family, you will find that today's families are spending about the same on "gadgets and luxuries" as the previous three generations. The notion of Americans going into debt for consumer self-indulgence is a myth. The changing ratio of costs for food, furnishings, clothing, insurance, transportation, entertainment etc., results in a net parity between the "discretionary" spending of our grandparents and the current generation. And that, mind you, in a generation where the proportion of households relying on two or more full-time incomes is much larger!

The overwhelming majority of bankruptcies is precipitated by two things: Job loss and catastrophic medical expense. Neither of these things can be avoided by "more responsible spending decisions" on the part of American households. This bill will simply take away one of the last remaining threads of the safety net for American families, and make the inevitable consequences of job loss and/or catastrophic medical expenses misery, homelessness, and (ultimately) death. The costs to society in escalating crime rates, orphans, uncompensated medical care, decaying urban and suburban infrastructure as tax revenue is lost, etc., will far outweigh the spurious "benefits" of increasing the financial disservices industry's profits.

I cannot BEGIN to come up with enough bad things to say about this, because if I begin, I'll probably end up tombstoned for profanity and/or hyperbolic threats.

But my fantasies about what should happen to every legislator who votes in favor of this bill would outdo anything Stephen King or H.P. Lovecraft could come up with.

outragedly,
Bright

"Instead of falling back on bankruptcy as an option of last resort, more Americans misuse it as a financial tool to wipe away their debts altogether," says Chuck Grassley, author of the bill.

Yeah, that's right, Chuck. I know a lot of people who, at the end of the month, giggle and chortle about filing bankruptcy instead of paying their bills. Just like I know of several women who, upon hearing they got pregnant during their last wild-party weekend, simply say, "Oh, I'll just have an abortion on the way to work."

Chuck, you're an asshole. These decisions are made after long and hard emotional endeavor. These decisions try the mind and soul of those making them. They are not made frivolously and for you to imply that makes you a despicable person. You remind me a lot of that Republican who stated during the health-care debacle that we, Americans, need to start paying more for health care so we would know just how much it really costs. In fact, maybe you were that Republican?

Chuck, in the words of you Vice President: "Go fuck yourself!"

Grassly's statement could not be more asinine and false. I practice in this area and in my experience approximately 5% of the cases could be considered abusive. What I do see in descending order of occurence is divorce, illness, injury, layoffs and entrepreneurial failure causing Chapter 7 bankruptcies. When people are put in a position that either their debt principle can never be paid off, or cannot be paid off within a reasonable period of time, from disposable income, then what would you have people do? Go underground? Forever not operate effectively in the economy? Discharges and fresh starts benefit the macroeconomy, even the short sighted credit card companies though their short term greed blinds them to it.

I have practiced bankruptcy for 12 years and in my view the bill is awful. It will have the aggregate effect of reducing debt discharges. While about 5% of the cases I have seen could be considered abusive, the balance are caused by divorce, illness, accidents, layoffs, and some entrepreneurial failure. Why the hell would Congress want to punish these people and shift the playing field further in direction of credit card companies who have recently enjoyed record profits and market strongly right now to parties with marginal credit.

I've seen many articles about the bill, but absolutely none go into specifics.

I hate forming knee-jerk opinions without understanding the issues. Any insight would be appreciated.

will use an arbitrary IRS income standard (standard wasn't created as something to do with bankruptcy) to means test whether or not people can file a Chapter 7 Liquidation. If their income exceeds the standard then they would be barred from a CH7 and forced to file a Chapter 13 which is a wage earner plan. Its my understanding as a practical matter that unless you are poor or lower middle class (with only one income) you will be above the standard. Right now Chapter 13's should only be used on an as needed basis because their transaction costs are substantially higher than Ch7's (more than 3 times or even more), take 3 or more years before a discharge occurs, involves 3 years or more of monthly payments of disposeable income that often simply doesn't exist, and have a substantially high failure rate (in which case no discharge is ever obtained). Ch13's are currently good for curing home defaults, dealing with certain non-dischargeable debt, and keeping certain non-exempt assets usually necessary for one's trade. Unless one has a specific reason for doing a 13 a 7 is usually better. The higher transaction costs and failure rates of 13's will operate to effectively bar substantial numbers of people from discharges and force them from the above ground economy. This bill will have more real time damaging effect on Americans economic lives right now than anything else Congress/President are doing including Social Security Reform.

There are other bad things but this is the worst. My bretheren are bitching about provisions that will in effect force lawyers to be unable to represent debtors anymore (there are provisions that force lawyers to swear to the truth of representations made by debtors regarding their financial condition which no ethical lawyer would be able to do). Quite frankly that provision may do me good by putting me out of my misery on these consumer cases and let me work on more profitable matters.

If you want any more details or want to know about any more bad parts let me know.

More propaganda con...

Can you imagine not having a job for 2 years and then getting ill
with medical bills and the credit card companies say you cannot
wipe out your debt?

That's what they are trying to do. Credit card companies
are basically loan sharks. They sell a revolving loan
and change the terms...just like that. How many other businesses
can sell one thing and change it to another and not get sued?

So, now we have on top of that...debtors prison in essence, without
the bars. Somebody in dire straights is going to get their social
security check or meager paycheck garnished now?

Biden -- defending the interests of the banks HQ'd in his state -- told her that maybe she should be focussing her efforts on usorious interest rates rather than on making sure people can take advantage of bankruptcy to protect them from their debts.

This was after the prof gave the example of people going into debt on $2,000 in purchases, which are topped off by almost $5,000 in fees and interest.

Her response was basically, what the hell? She would love to go after the banks on that issue too, but so long as Congress is not going to do a damn thing about that, she's going to speak up for the consumers' last line of defense against the avarice of big banks, which is bankruptcy.

Biden was left almost speechless and stupid. He said, "oh, you're good."

My response: Joe, if you don't want to know the obvious answers to your dumb questions, you're probably better off not asking the question in the first place.

...but I have no idea how stale a story has to be before NPR doesn't treat it as news. It could have been any time in the last week.

And bill that immediately, dramatically, and negatively impact the lives of millions of Americans quietly glides through Congress towards the President's desk.

if people have to sell their houses to pay off their credit card debt.

It could become the thing that pops the real estate bubble which so much of the rest of the house of cards sits upon.

Or could it? I'm sure the banks have thought about this too -- they wouldn't want to pass a bill that puts a glut of homes on the market, because that's the other consumer debt they make so much profit off of.

And that's not the case. The credit card companies are pushing this and it will increase their short term leverage before people drop out of the above ground economy. I am unaware of mortgage companies being involved in this. The only end game that makes sense is for the credit card companies is that they see this Bill as a device to push more customers towards their covert (they don't use their names)and usurious payday lending operations that use state law usery exceptions (they lobby for) and state law criminal penalties (for nsf post-dated checks they require for the paydays) to provide additional leverage and squeezing power on the middle class.

Do they WANT a sudden wave of bankruptcy filings? Do they WANT millions and millions of people, suddenly aware of swiftly approaching and exceedingly unpleasant changes in bankruptcy law, filing all at once?

Yeah, that'll do a lot for the all-powerful consumer confidence index and real estate sales and all that important bullshit . . . :eyes:

That is where I think they may want things to go. And if that comes to pass our economy (and the distribution of wealth) will become extremely polarized. It will start to have a Mexican feel to it.

provide the funding for the payday lenders that lend at usurious under different names than the CC companies. These payday lenders obtain usury exceptions from state law by lobbying at the state level. The payday lenders fund the lobby effort. These payday lenders also use criminal law coercion against debtors by requiring post dated checks for repayment at the time the loan is made. Then a default triggers NSF check criminal laws and sanctions. All this makes Biden's actions at this hearing, and his position on the bill, even more sickening.

this bill from being passed. At the very least, we need to try to get one of our reps/senators to at least introduce an exception for medical bills, since that is the reason for a little more than half of bankruptcy filings and mostly by middle-class families who are NOT irresponsible deadbeats! Why in the hell people should lose their houses and assets to the ever-greedier health care system just to fight cancer and other illnesses they or a family member may get is simply beyond belief.

My parents are on the verge of bankruptcy after over forty years of hard work and responsible financial management due to a horrendous increase in their health insurance premiums that eat up almost an entire retirement check a month. They're on the verge of losing their house of thirty years, too, and these rich, privileged fuckers in congress who have the best health care program in the country courtesy of the TAXPAYERS who often DO NOT have that luxury need to get on the ball and make an exception for medical bills. There was just a study out that showed that even middle-class families with insurance are hit hard by illnesses, and that that is the main reason for bankruptcy filings.

And he's still a billionaire?

I think the problem with most Americans who file bankruptcy is that they don't understand the finer points of law.

The way the bill is written, if you owe LOTS of money and can't pay back more than 20% you still get to do a Chapter 7. convenient, no?

Anyway, Trump's Chapter 11's were for his companies which he had no personal liability on the debt, so that example is not comparable for middle class folks who get in a bind and need a fresh start.

Its my understanding that an entity (bearing the Trump name) in which he holds equity filed for bankruptcy. Its also my understanding that under a proposed plan of reorganization Trumps stake was reduced in favor of some creditors but he would continue to receive not insignificant compensationt to continue to run the thing. The plan was a prepack negotiated and drafted prior to filing. I do not know if it was confirmed or not yet. Its my understanding other equity holders may have objected. Usually equity holders' objections don't carry much wait if no creditor's objected.

Have you seen the part of the bill that allows those who owe boatloads of money to do a Chapter 7 if they can't pay more than 20% back through a Chapter 13? Nice for the zillionaires who go broke, no?

Have you spoken to others in your area about what they plan to do on "certifying" the financial condition of their clients? Maybe hire an investigator to look search for hidden assets? The RW is getting pretty clever at drafting legislation to destroy parts of the constitution they don't like.

Wanna file a bankruptcy petition? Hah, you can't get a lawyer!!

I stopped looking at the changes in the bill about a year ago...waiting until it passes (Bush's reelection assured that would happen).

Gonna be a donneybrook.

well healed debtors who receive in effect a pass on the Ch 7 prohibition. I'll look for the additional loophole you pointed out. The bottom line is if you are a two income lower middle class family through upper middle class this bill will most likely bar you from a Chapter 7 filing. My fellow lawyers have represented that they will not represent debtors anymore. I think the investigator is good way to get around that problem and we will force debtors to pay for one before we agree to be counsel and the result will be debtors who have the resources for this will get represented and those that do not won't. Normal consumer debtors will not be able to do this. They will have to represent themselves or use document/paralegals who I am sorry to say are often incompetent/or scam artists. Great bill.