The GOP had a triumph yesterday when the Senate passed bankruptcy legislation. Read about it here. Did tying it to anti-abortion protestors doom it to passage? Should we be thanking Charles Schumer or throttling him?
Is this wise legislation or another example of the government making life harder for the working class? Paul Krugman had an enlightening editorial the other day (registration required). If you’d like see how your elected representative voted, you can check it out here.
I tend to agree with Krugman on this issue. Most personal bankruptcies are linked to medical catastrophes or divorces and I don’t think giving those people more hoops to jump through to survive is wise or effective. Why don’t the credit agencies do more thorough credit checks?
I caught the Krugman piece. Personally, I think “sharecropper society” has a better ring to it that “debt peonage society” even if the latter is more accurate.
Why people continue to believe the Republicans can help the poor and working class, I will never know.
Anyway, no progress will be made against poverty in this nation until every single person has health insurance. Most bankrupcies are caused by health care costs, and until the poor have some protection from getting bills in to the tens-of-thousands for inevitable and neccessary-for-living services, they will suffer and be trapped in poverty. This bill is just adding insult to injury regarding what is one of the biggest problems in America today.
Everyone’s aware that anyone who makes below his/her state’s median income is exempt from the means testing which might otherwise push them from a Chapter 7 filing to one under Chapter 13, right?
Which specific provisions do you think are too draconian? What additional protections should have been added?
I’ll start. I think Congress erred by not making it easier to break an Asset Protection Trust. The reasoning, I believe, is that bankruptcy judges already have sufficient latitude to break such trusts if they believe they were entered into fraudulently or in a specific effort to hide assets from a soon-to-come bankruptcy. That’s true as far as it goes but It’s my opinion that judges have used their discretion too much to the benefit of borrowers and not sufficiently to the benefit of lenders and additional instruction from Congress would have tipped things the other way.
Yes, surely it’s only medical, and has nothing to do with political manipulation of property values through planned gentrification, or arbitrary moralistic legislation of a vast sector of the market. I don’t think giving everyone health insurance is the answer. That’s just redistributing the wealth from the middle 80-30% to the bottom 30%. That’s more lowest common denominator thinking IMO.
Here’s a bit from the NY Times article on it (registration required).
Now, this is just about the only set of facts I’ve seen about this bill, everything else is jawing back and forth about how “horrible” or “wonderful” it is.
Peronally, I think if you’re making more than $65K per year and can put aside $100/mo, you should do something to pay back the people who loaned you money. Is a payment plan such a horrible thing to impose on a debtor?
Assuming repayment plans are reasonably structured and allow the debtor to go on with their lives, I’m in favor of them. Evidence to the contrary would be appreciated.
BTW, the Democrat response, trying to shoehorn in an amendment to deal specifically with abortion protesters, is laughably stupid.
Here is the text of the bill
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (Introduced in Senate)
Since the average household has over $7,000 in credit card debt, $100 won’t even cover the interest and service charges. A debtor could pay $100 a month for the rest of his life, and when he died, his debt would be higher than when he started.
Fear Itself, is that how they set up a payment plan? Pay $100 a month (or whatever you have left over after expenses) forever?
I’m posting from a fairly ignorant stance, not having gone bankrupt myself, but a payment plan suggests to me that there will be an affordable defined plan after which your debt will be absolved. Not paying every spare cent in perpetuity. I would also hazard a guess that your creditor will be happy to get $6,000 over 5 years rather than nothing, even if it doesn’t fully pay off the debt.
astro, your link has gone dead, but that site allows a search for the title you provided, and boy is this thing a doozy, my head is spinning and I’ve only touched the surface!
Part of the problem currently is that credit card companies charge extremely high rates on poor credit risks, and raise the rates on anyone in trouble. When they do this they often push people over the financial edge.
Let’s take the example of someone who owes $5,000. A healthy sum, but many of us would consider it managable at first glance. Now let’s suppose the credit card company is charging 29.95% interest because they have determined this someone is a credit risk. Now let’s also suppose this person has committed to paying $125 a month (a struggle considering they are poor). How long do you think it would take to pay off the $5000? And another important question, how much will they actually have paid to retire the $5000 debt?
I am not an accountant, (please, I invite anyone who knows better to correct my numbers) but by my rough calculations the answers are:
It would take 22 years to pay off the debt at $125 every month. :eek:
The total paid to retire the debt would be $32,500. :eek:
They sure don’t make it easy do they? It’s not $6,000 over 5 years at all.
In the popular version of personal bankruptcy, your debt is wiped clean, you don’t have to pay. The credit card companies don’t like that, naturally, so that’s why their asking for the new law. But IMHO they aren’t bringing anything to the table.
They don’t have to. They own the table.
The entire thing. I don’t think bankruptcy laws should have been altered at all. Lenders know the rules. They know the statistics–they have it down to a science. They’re not having any problems making a lot of money under the current systems. I don’t believe weakening bankruptcy laws are going to have positive effect for all but a small minority of citizens. Lenders say prices will go down now that people can’t escape their debt as easily? I don’t believe that for a second–they have NO reason whatsoever to pass the savings on to the consumers and every reason to pocket it as profit.
You mean like agreeing to stop the aggressive marketing of their–ahem–services? If so I agree with you.
They’re as bad as the tobacco companies–or worse, actually, since most tobacco advertising has been squelched by this time.
Unless you can clearly explain why Chapter 13 is an unacceptable alternative to Chap 7, you have no argument.
Thus far the anti-arguments have been:
American Maid - Bankruptcys are due to medical problems, and they should do better credit checks. (why someone goes bankrupt shouldn’t matter, if you have the means to pay back your debt, you should.) No mention of how Chap 13 actually works.
even sven - This is bad for the poor (even though it only affects housholds making above the median income) No mention of how Chap 13 actually works.
Fear Itself - $100 a month won’t pay back most people’s debt, they’d be on the hook forever. No mention of how Chap 13 actually works.
Icarus - CC companies charge rates that are too high. Assumes the Chap 13 payout agreement for a $5,000 debt will be $125/mo for 22 years at 30% interest. (If this is how Chap 13 works, I will heartily agree that it’s crap)
elucidator - No mention of Chap 13.
Metacom - The laws shouldn’t be changed because the credit companies know the law and account for current law in their price structure. This is actually an argument, I don’t happen to agree, but there’s some meat at least. I would prefer to look at this law from a fresh slate, I think the general terms are reasonable when it comes to who gets a clean break and who should pay back debt. No mention of Chap 13.
Spectre - CC companies are evil. No mention of Chap 13
In all these arguments, only Icarus even attempted to look at a sample payout structure to see if it would be fair or unfair, and he admittedly doesn’t know how it all works.
In the interest of getting more info out there, I’ve searched on Chapter 13 to find out how it works, found this nice PDF
Payment plans are 3-5 years, made out of disposable income, if the plan is completed, debts are discharged. Not exactly a lifetime obligation.
Here’s an easy synyopsis of Chapter 7 and 13 . From this site, Chapter 13 allows the debtor to keep non-exempt property and they are given 3 - 5 years to pay off their debt whereas Chapter 7 is a straight liquidation that allows the debtor a fresh slate in four months. Property exemptions vary state by state. Chapter 13 also allows you to make up missed payments on mortgage or car. I hope this helps!
I read that most medical related bankruptcies did in fact have health insurance… but it either wasn’t broad/complete enough or the financial losses through uncovered extra costs and lost wages eventually took its toll. Drugs aren’t usually covered by insurance over here… its probably not in the US either.
Nonsense. Fines imposed as punishment for crime are one of the few sorts of debt that should not be dischargeable through bankruptcy (if the perp truly can’t pay, he should go to court to request an alternative punishment).
I suppose your cavil is directed to the specificity of the amendment, but that is just an example of making the perfect the enemy of the good.
To become as bad as the credit card companies, the tobacco companies would have to leave packets of cigarettes on my doorstep at random and invent some mechanism that would allow a thief to pick up the packets from my doorstop, smoke them, and transport the resulting carcinogens into my lungs.
And then pay congress to pass bills forbidding people to quit smoking.
It is the specificity that gets my goat. It’s like they’re not even going to pretend that the amendment is intended to fix a real problem. They just draft language to specifically attack a tiny segment of the population supported by the opponent.
If this is bad law, tell me why, don’t try to tack on silly amendments to make a point.