A federal cap on interest rates which had any effect would likely curb legal loans to high-risk borrowers. Some of them would stop borrowing. Others would turn to the casual credit sector, eg loan sharks and pawn shops. Furthermore, I believe that credit card companies already face some sort of interest rate cap, though I may be mistaken.
Still, I agree with your timeline and would add that credit card companies have vastly increased their lobbying efforts in Washington in recent years. For example, as pointed out by Arianna Huffington , MBNA’s political contributions increased from some $740,000 in 1996 to a cool 3.5 million during the 2000 election.
I don’t see that the fact that some people declare bankruptcy due to unforseen circumstances necessarily means that bankruptcy laws deserve to be lax. Firstly, anticipating unforseen circumstances is part of being responsible. But beyond this, even if someone took reasonable care and was victimized it does not follow that other people should be made to bear the brunt of his tragedy.
As bashere pointed out, the Republicans are trying to keep an unlimited house exemption (e.g. Burt Reynolds $2.5 million). A sop to their rich buddies possibly, but as doreen has noted, 125K does not buy a whole lot of real estate in many parts of the country. My position is too bad - live cheaply. In fact, I personally would support eliminating the house exemption altogether. Many fine people rent houses or apartments. Go do this before you avoid paying back money that you owe. But I can see the point of having some small exemption.
redtail23
I absolutely agree with you that corporations should not be treated any better than individuals. I am not aware that this is the case, however. According to another article in the Friday Times, the bill would have an affect on businesses as well.
Disagree completely. Suppose there was an intact family and they had debts. Would you say to cancel them so that the kids’ standard of living shouldn’t drop along with the rest of the family? I don’t think so. There’s no difference between these kids other than the fact that they happen to be children of divorced parents.
What I do agree with is that the child support (and alimony) should not be completely cut off in favor of other debts. But the rationale for this is not that kids cannot be allowed to suffer any consequences for their parents’ actions, as you seem to be suggesting. Rather, just as a person or family filing for bancruptcy should be allowed by the courts to shield enough to live a basic lifestyle, so too a child or ex-spouse dependent on this person should also be allowed to continue to live a basic lifestyle before other creditors get paid.
But based on this rationale, there is no reason to allow other debts to be wiped out sompletely through bankruptcy while child support and alimony go on as if nothing had happened. What should be done to accomodate this is that the judge should consider, in ruling on the bankruptcy, that he must leave enough money over for child support and alimony to be paid at a basic level.
This sounds like blaming the victim to me. Who forced you to walk into that neighborhood wearing fancy jewlery? Hey, if a company is foolish and irresponsible and goes bankrupt itself due to over-aggressive lending practices, then that bankruptcy is a product of the company’s irresponsibility. But I don’t see having laws around to allow people to not pay back money that they owe simply because “you should have known that I might not pay back”
Zumba The Cat
It is for this reason that I am inclined to oppose it. But I think the reason for this amendment being inserted is because I think it is a specific strategy of many anti-abortion extremists to make themselves “lawsuit proof” by using the bancruptcy laws. So there is some rationale for distinguishing abortion clinics. (OTOH, I am not sure if all these people sued for violence against abortion clinics are really doing anything than standing too close etc. I may be wrong about this).
tracer
What could possibly give you that idea? A court supervised plan would take into account what amount of debt the person’s assets were sufficent for, and eliminate your scenario. (The only people who get put in prison for debt these days are “deadbeat dads”, and I am under the impression that this is under a contemt of court justification).
flowbark
(Spoke- also made this point). I think the bankruptcy rules may have loosened up in recent years. That or people have started taking advantage of them alot more. (I know they are heavily promoted by lawyers). Either way, there has been a shift in the climate in recent years in the direction of more bankruptcies, and the bankers are trying to drag it back to the old situation.
I suspect (or at least hope) that current changes in the law will cause people to be more careful about going into debt, once they hear some more bankruptcy scare stories, instead of thinking that worst come to worst you can always declare bakruptcy. (There’s a lawyer in my area adverising “declare bankruptcy before it’s too late…”).
Spare me. If anything, it is more difficult to discharge debts in bankruptcy now than it was, say, 20 years ago. Banks are not trying to drag anything back to some imagined “old situation.” They are trying to create a new situation, more favorable to their interests and less favorable to consumers.
flowbark wrote:
The problem is that the banks are trying to have it both ways. On the one hand, they are saying, “We have to charge high interest rates because a certain percentage of our card-holders go into bankruptcy, and we have to make up those losses.”
On the other hand, they are working very hard to restrict those bankruptcy options.
Well, if bankruptcy is not going to be a viable option for eliminating credit card debt, then the banks no longer have a justification for the outrageous interest rates, right?
I say leave the system alone. If the banks want to stop losing money in bankruptcy court, they need to stop making poor lending decisions. Ah, but they won’t do that because it’s more profitable to go ahead and make the high-risk loans, and then get Uncle Sam to help them shut down bankruptcy options.
On the whole, I think loan sharks are in a morally superior position to these parasites.
Can spoke- or anyone provide any support for this statement. Based on my personal experience it seems incorrect. I’d be interested to see if anyone has any evidence that points to discharge of debt through bankruptcy being more difficult now than it was 20 years ago.
Twenty Years in the Banking Industry. Much of that working with risk management. My experiences may differ from the norm as I have always worked with smaller community Banks.
I do follow Bankruptcy filings on a national level. Going back to 1980, these are totals for Chapter 7 filings:
1980 – 213,983
1981 – 226,595
1982 – 212,657
1983 – 196,205
1984 – 195,826
1985 – 237,637
1986 – 324,073
1987 – 362,605
1988 – 399,128
1989 – 439,127
1990 – 506,940
1991 – 617,359
1992 – 643,538
1993 – 568,415
1994 – 537,551
1995 – 597,048
1996 – 779,128
1997 – 956,607
1998 – 1,007,471
1999 – 909,719
2000 – 838,576
Chapter 7 filings run pretty consistently as about 70% of total non business filings. The growth in these filings, on the surface at least, do not indicate a an increasing difficulty in the discharge of debt through bankruptcy.
Those figures, I suspect, reflect a change in the amount of debt carried by the average citizen over the past twenty years, which reflects the fast-and-loose manner in which banks have given consumers access to credit cards during the same time frame.
What it most certainly does not reflect is any change in the bankruptcy laws making it easier to file for Chapter 7 bankruptcy. (Which was the implicit assumption of IzzyR.)
In fact, the last major bankruptcy legislation was the Bankruptcy Reform Act of 1994, one express purpose of which was to make it more difficult to file Chapter 7 (liquidation) bankruptcies, while making Chapter 13 (repayment plan) bankruptcies a more attractive option. See the overview of bankruptcy history here
If bankruptcies have increased over the past twenty years, it is because banks are making poor lending decisions. Discharge in bankruptcy has only become more difficult, not less difficult, during that time span.
I don’t know which was more powerful, the 1978 act or the 1994 one. Unless you provide specific details, it is unclear whether the 1994 act completely counteracted the 1978 one or left the impact of old act still in place. In any event, I did not state definitively that the increase is due to laws. What I said was
Your subsequent statement that
is baseless. My point is that bankers would like to bring the levels of bankruptcies back to levels that they had historically been at.
BTW, it would appear, from doing a little further reading on the subject, that the main impact of the new law on individuals is to force more bankruptcies into Chapter 13 over Chapter 7 (I guess, continuing the direction of the 1994 Act).
And I suspect they have to do with the death of Monarch butterflys in Mexico. At any point are you going to back up assertions that you make in this discussion?
My response was to your statement that it was now more difficult to discharge debt. While IzzyR referenced a possible loosening of bankruptcy law (which I agree hasn’t happened) he did leave the door open to the increase coming from a greater number of people simply taking advantage of the laws that exist.
In Fact, you are wrong. There is nothing in the Bankruptcy Reform Act of 1994 that makes it more difficult to file Chapter 7. There are incentives related to curing mortgage defaults that can make Chapter 13 more attractive. Since the passage of the 1994 reform act there has been no change in the ratio of those filing for Chapter 7 as opposed to 13.
Continuing to repeat an assertion does not make it true.
I’ve never seen a bankruptcy petition from a cat, dog or moose. Children are generally not liable for debt they incur under credit agreements.
So I would say that issuing credit cards to children, dogs, cats or moose have not increased the bankruptcy rate.
Greenspan may be percieved as some to speak as an authority on fund flows and interest rate management, but he has very little experience in credit risk management.