I have a friend who works for a bank in the mortgage, collection department. He said that often times when people get in financial trouble they will let the credit cards go but pay the mortgage. Eventually, when they are getting sued they file chapter Sevens, but keep paying and reaffirm most of the time on their mortgage. However, the new BK law will require that most people instead file a Chapter 13 time BK where they make payments on their credit card debt. He thinks that this will push many people on the edge into foreclosure. Could this be the bad news that bursts the bubble on FANNIE/FREEDIE mortgage backed securities not to mention FHA loans?
Credit cards are evil. If it weren’t for credit cards, I wouldn’t have any debt (except for that school loan looming overhead :dubious: ) and my credit rating wouldn’t be in shambles. I can honestly say that when I took on the credit cards I had no idea the ramifications of obtaining (and using them).
I can’t help wonder at the immediate destruction the changes in bankruptcy will cause. Odd, how it’s being pushed by the credit card companies.
I don’t see the connection here. If they file a 13, the plan would use income that exceeds expenses to pay toward the credit card debt. If they file a 7, the money they would have otherwise put toward that credit card effectively becomes discretionary income.
How does decreasing pocket money force people into foreclosure?
Because what the court figures as extra income and what really is are two entirely different matters. I’m not sure about this BK bill, but the last one which didn’t quite get passed used same tables that the IRS uses to calculate non garnishable income and they ain’t generous. In the past when people were pinched on cash they quit paying their credit cards, then they were eventually sued and garnished which ultimately led to them filing Chapter Seven BK’s. The credit card companies wrote the bad debt off of their taxes and then often issued the same blokes more credit a year later (at much more onerous terms). It is a happly little chain letter of debt that has been keeping our economy floating despite historic levels of consumer debt. Now, people will actually have to pay that debt even when it hurts over a period of three or more years. This means they won’t be able to go get more credit and start spending again for a much longer period of time. It may also mean that more people (especially those who have large medical debts) may slip under the financial waters and start going late on the homes that were probably too expensive for them to afford in the first place. Remember the difference between a rapidly growing economy and a severe recession is only about three percent growth per year. This bill has the potential to bring consumer spending to a halt.
There is also the psychological impact of knowing that you can’t just spend a great deal of money and then file a Chapter Seven. I know of two people who lived on their credit cards for about a year in one case and two in another when they lost their jobs. One racked up about 30 thousand in credit card debt and actually stated that he could always file a bankruptcy if he couldn’t find another good job. I’ve talked to bankruptcy attorneys who say that its not uncommon for people to rack up over $100,000 in consumer debt and then file a BK after letting the debt age a few years to avoid allegations of fraud. That game of essentially legalized theft is now over. People may think a little harder before buying their next plasma TV screen or computer on credit. Of course our economy depends upon people being proflagate fools with their money.
Oh well, I’m sure we can just buy and sell more from China to make up the difference.
So the cards forced you to spend more money than you made and rack up an obscene amount of debt? Man, that’s a powerful card. My cards have never made me do that. My credit cards are merely a tool I use to spend the money I earn; they don’t force me to be irresponsible with it. If you could please tell me which cards forced you to be irresponsible, I’ll make sure and watch out for them.