I see that the Republicans in Congress are teaming up with the big banks to try to rewrite the bankruptcy laws. Their goal: to prevent consumers from ridding themselves of credit card debt. (Perhaps not coincidentally, banks, savings and loans, credit card companies and other consumer finance companies spent some 6 million dollars on political contributions in the first half of this year.)
Clinton is opposing the Republican bill, as Gore would undoubtedly do. Bush would be just as certain to sign such a bill into law. (And by the way, the folks who keep saying that there’s no difference between Bush and Gore really need to pay closer attention to things like this.)
What’s the problem with tightening the bankruptcy laws, you say? Well, as y’all know, credit card companies charge exorbitant interest rates. Their excuse for doing so has always been that it is to compensate for losses in bankruptcy court. In other words, they already take bankruptcy into account in their business plans, and are still making huge profits. Fair enough. But to then eliminate the possibility of bankruptcy creates, in effect, an enormous windfall for the banks. Do you think they’re going to lower their rates if this law gets passed? Pfffftttt!!
It boils down to the credit card companies using the government to change the rules in the middle of the game. Does anyone else have a problem with this?
I don’t know enough abut the issue or the specifics of the bill to comment on that. Maybe someone has a cite.
You mean the interest rate the consumer who CHOOSES to use the card AGREES to pay with the assumption that they will pay it back? If you have a good credit rating or a good risk you almost certainly can get a card without an “exorbitant” rate
Their excuse for doing so has always been that it is to compensate for losses in bankruptcy court. In other words, they already take bankruptcy into account in their business plans, and are still making huge profits. Fair enough.
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Fair enough, agreed.
Unprovable hypothesis which I can only counter by saying I can easily see how this would lower interest rates.
I object to the idea of “changing the rules of the game” idea. Laws are constantly being written and changed. Like I said I don’t know what the specifics of the law are. You keep saying it will eliminate bankruptcy options for credit card. That may be, I would be surprised and suspect it makes it harder to declare bankruptcy on your credit card debt. But I cannot really say whether it is good or bad.
I would wonder, though, how someone under the old bankruptcy laws, still unable to pay under the new bankruptcy laws would be able to pay. I mean you cannot just legislate that problem away. Also, I have no sympathy for the banks who issue credit cards to high risk folks. A lot of those people they take a chance on, charge high rates make them money, like you said. The banks took a risk and should deal with it.
I am $26 grand in debt, all from credit cards. I am currently in debt management (counseling) to pay off the debt. I pay roughly $700 dollars a month. It will take 5 years to get out from under it.
I considered declaring bankruptcy, and discussed this with my sponsor and some friends. I decided against it because:
a) It’s hard, but I can pay the 7 bills a month
b) I spent the plastic money
c) I knew the score going in it
d) it was important that I take responsibility
I have no problem with the Government tightening up bankruptcy laws. Some people get crushing debt through no fault of their own, and bankruptcy should be an option for them. It should not, however, be an easy way to escape responsibilty. It’s being used as such a little too often.
Banks extend credit. We are under no obligation to accept it. If we do, we should live up to the terms of the agreement. But, that’s just my opinion.
The last time Congress babbled about curtailing bankruptcy, Chief Justice Rehnquist (in his role as supervisor of the federal judiciary) spoke out against it. He pointed out that the proposed revision would force most people who now file Chapter 7 (discharge) into Chapter 13 (restructuring) instead. Chapter 13 filings require substantially more judicial resources than Chapter 7 filings (they also cost the debtor about twice as much in fees), and it was Rehnquist’s opinion that the proposed “reform” would cripple the bankruptcy courts, which are already operating very near if not at capacity. Rehnquist also blamed credit-offering businesses for being too cavalier in who they offer credit to and basically said that if they don’t want people defaulting, don’t give credit to people who will default.
Of course, I don’t know if the “new” reform is any different than the last one (which failed to pass the Senate). Having the Chief Justice tell you that your idea sucks is not good for you politically.
I should not have used the word “eliminate.” The bill certainly makes it more difficult to escape credit card debt, but I do not know that it makes it impossible.
Yes, the consumer entered into the credit agreement voluntarily. So did the credit card company. And they did so knowing that bankruptcy was going to be an option for some consumers. Now they want to use the government to restrict that option. That doesn’t pass a fairness test IMHO.
Tretiak wrote:
If you are unable to discharge the debt in bankruptcy, it could potentially stay with you for the rest of your life. It makes it much harder for someone who has made foolish financial decisions to change their course and get back on their feet. Not much chance of that if the credit card debt is going to continue to hang over their heads, drawing those big credit card interest rates from now on.
Everyone knows that laws can and do change. A case could probably be made that the current laws are not appropriate to the current situation. If that is true, then by all means the law should be changed. If the law gave an unfair advantage to the credit card companies, would you still advocate keeping it the same, so as not to change the rules of the game.
The law should be either changed or not changed based on its merits, rather than a misguided notion that consistency is important. All laws change the rules of the game in some way. The point is to try to always change them for the better.
Yes, and I’m sure that all of the campaign contributions from the credit card banks were just gestures of civic pride. After all, why try to influence legislation with money, when the merits of the matter are so clear? :rolleyes:
I wasn’t arguing either way on the proposed legislation, as I really don’t know exactly what it entails. I was just saying that the line of reasoning you followed to reach your conclusion was not valid.
Even if you posted an incredible argument in favor of your conclusion, I would still probably not enter into a debate with you, as I know we disagree about how to evaluate the appropriateness of laws. I base my opinions on the extent to which the law prevents the initiation of force and fraud. You base your opinions on what is good for society as a whole. Neither is necessarily incorrect, but the difference in premises would make debate a rather futile exercise.
I actually went and looked at the text of the bill. It’s a bit hard to follow and I could be wrong, but the biggest thing I see is that the trustee in a Chapter 7 case is required to assume that the debtor is making an “abusive filing” in the event that the debtor has more than $250 per month left after paying “living expenses” and making all payments on secured debts and priority debts. Secured debts, for individuals, are virtually always real estate mortgages, usually the primary residence. There are a variety of types of debts that are priority debts, but the most common would be alimony and child support.
So, basically, if you can tighten the belt and pay $250/month toward your nonsecured, nonpriority debt (while maintaining full payments on the secured and priority debts), you would be required to go through Chapter 13. Whether this is a good thing or not, I’m not sure.
This bill does NOT make consumer debt nondischargeable; what it does is keeps people who have enough income to at least make reasonable payments on their consumer debt out of Chapter 7.
Now there are amendments to Chapter 13 as well, and those amendments might tend to prevent people from getting discharge under Chapter 13 as well. Those amendments are just plain too confusing to make sense out of, and I’m not even going to try.
There’s also a strange bit at the start of the bill about methamphetamines which has nothing to do with bankruptcy. Don’t you just love riders?
Don’t even try to make sense of this unless you are either familiar with the Bankruptcy Code or have a copy handy. Many of the changes are written as “by striking the word X and inserting Y” and if you don’t have a copy of the current statute, it will be extremely hard to follow.
An objection to this legislation from women’s groups is that it would make it more difficult to recover child support from bankrupt former spouses. Under the system as it now stands, child support is a priority debt which survives bankruptcy. So a debtor can rid himself of credit card debt and then focus on paying child support.
Under the proposed new system, as you describe it, that spouse is still obligated to pay child support, but now he will also have to devote a portion of his income to repaying the credit card debt through a Chapter 13 trustee. This leaves the bankrupt debtor spread thinner, and arguably means that the former spouse and child will be competing with credit card companies for the resources of the debtor. No longer will the debtor be able to focus exclusively on child support and mortgage payments.
I would like to see the bill, if anyone can come up with a link, to see what else is going on here.
It looks to me that the bill actually seeks to make it harder to avoid child support claims, rather than easier. (All section references are to the bill’s text.) “Domestic support obligations” would be moved from seventh to first priority, with amounts due to the individual actually supported having priority over those amounts due to a state agency (§ 212). Failure to maintain current status on support obligations would be grounds to deny approval of a reorganization or restructuring plan (§ 213). Support enforcement actions would be exempt from the automatic stay (§ 214). A current exclusion to nondischargeability for certain debts arising from property distribution in dissolution would be revoked (§ 215). A transfer of property to satisfy a support obligation would not be avoidable (§ 217). When child support is involved in a bankruptcy, the trustee would be required to notify the recipient of support and the appropriate state child support enforcement agency that a petition for bankruptcy has been filed, and then to again notify them when discharge is granted, including in these notices a considerable amount of information about the debtor (§ 219).
I don’t think women’s groups are likely to oppose this legislation, except insofar as these provisions may make support obligees less likely to file bankruptcy at all, leaving them with less ability to pay their support obligations.
Another point on the child support issue: a Chapter 13 reorganization plan may not require less than full payment on debts for domestic support unless the debtor’s entire disposable income is being assigned to those debts. So the contention that the beneficiary of domestic support would be competing with other creditors in proceedings under Chapter 13 is incorrect.
Here’s another interesting inclusion: this bill would make bankruptcy entirely unavailable to any person who has ever been convicted of either (a) any violent crime or (b) any drug trafficking offense (§ 102 of the bill).
Debtors will be required to go through credit counseling before they can file and must obtain instruction in personal financial management before discharge or reorganization, or restructuring may be granted (§ 106 of the bill). A fee may be charged for these services, and the inability to pay the fee is not grounds for excusing the obligation to take the course in personal financial management. First traffic school, now bankruptcy school. What will they think of next?
Well, the folks do not always “voluntarily” enter into it. I helped one poor woman- her CC co was charging her a $29 late payment fee (even when she mailed the payment in timely, until she started mailing them certified), which triggered a $29 “overlimit fee”, and doing so every month. The “overlimit” was entirely do to bogus fees they had added. One of the CC co that was doing this was slapped by the FTC, but they were completely blatant about it. This womwn complained to the FTC- nothing. Well, I had their office # (unlisted), and I called. Seems that (Republican) Congress had cut their staffing down to the point were they could only investigate big, blatant cases. He said that sort of stuff went on all the time, and they did not have the staff to do anything about it. Becuase I asked him to, he did sent a form “inquiry” letter, and that CC co reversed most of the bad charges, but that was for ONE of their millions customers. And one who had a freind who had an “in”.
So, the Companies commit fraud on their customers, and do so because the Republican Congress (after getting their brib… er…contributions) cut all the guts out of the FTC, and THEN they want that same Congress to take away those defrauded customers Constitutional right to declare bankruptcy! :rolleyes:
The bill is opposed by the National Women’s Law Center and the group Common Cause. Quoting the AP article from which I drew this thread: “Women’s groups…oppose the bankruptcy legislation because they contend it disproportionately harms women and children. They maintain that as written, the legislation’s bars against using bankruptcy to erase certain credit card debts would force single mothers and children to compete with big banks in collecting child support payments owed by bankrupt fathers.”
I haven’t had time to examine the bill in detail since you linked it (it is a convoluted mess, isn’t it?), and am tied up with work over the next couple of days. I will try to get into the thing in more detail over the weekend.