# U.S. Bankruptcy Bill’s March of Triumph **URL:** \ **Category:** Great Debates\ **Created:** [March 9, 2005, 4:07pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679 "2005-03-09T16:07:50Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![manhattan](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/manhattan/32/7_2.png) [@manhattan](https://boards.straightdope.com/u/manhattan)\ **Post date:** [March 10, 2005, 2:13pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/21 "2005-03-10T14:13:11Z")
> [@Metacom](#): > > The entire thing. Even the placement of a blanket exemption of $1 MM of retirement-related assets in front of the complicated formula that judges otherwise use to carve out retirement assets from those which a creditor can claim? Because in all seriousness, I think you’d be about the first person who doesn’t get paid to figure out and apply the forumla to object to that provision. ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [March 10, 2005, 2:52pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/22 "2005-03-10T14:52:37Z")
This legislation would be more palatable if it imposed on credit card banks a concomitant duty to lower interest rates. As it stands, it is just a big stack of cash with a ribbon on it for the credit card industry. Having made their contracts with consumers (with the prior bankruptcy laws in mind) the credit card banks are now using their clout in Congress to change the terms of the deal to the consumers’ disadvantage. I try to console myself with the knowledge that the Republicans are sowing the seeds of their own destruction. ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [March 10, 2005, 3:30pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/23 "2005-03-10T15:30:42Z")
Arianna Huffington has [a nice piece on this legislation](http://www.salon.com/opinion/huffington/2005/03/10/bankrupt/): > [@](#): > > U.S. senators are about to pass a bankruptcy bill so hostile to ordinary American families that it could only have come about in a place as corrupt, cynical and unmoored from reality as Washington, D.C. > > In a normal world, those elected to represent the interests of the people would have fought for bankruptcy legislation that would, well, represent the interests of the people. But not in Beltway Bizarroland. Instead of cracking down on predatory lending practices, closing loopholes that favor the wealthy, and strengthening the safety net for working people, single mothers and elderly Americans struggling to recover from a financial setback, the Senate put together a nasty little bill that reads like a credit industry wish list. ---
**Author:** ![Rashak\_Mani](https://avatars.discourse-cdn.com/v4/letter/r/ea666f/32.png) [@Rashak\_Mani](https://boards.straightdope.com/u/Rashak_Mani)\ **Post date:** [March 10, 2005, 6:27pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/24 "2005-03-10T18:27:23Z")
Could this stop americans from becoming so easily indebted (on purpose) ? Anyone can compare these laws to other countries laws ? Probably isn’t that bad when compared to europe where getting a loan is much harder. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [March 10, 2005, 6:42pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/25 "2005-03-10T18:42:18Z")
> [@Rashak Mani](#): > > Could this stop americans from becoming so easily indebted (on purpose) ? No, it is intended to make it easier to seize their assets when they incur medical expenses they cannot afford. ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [March 10, 2005, 7:02pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/26 "2005-03-10T19:02:05Z")
Riiiiight, by forcing people away from Chapter 7 (where they seize and sell assets) to Chapter 13 (where they don’t seize assets, but put you on a payment plan instead) Is anyone who is against this legislation going to talk about the various bankruptcy procedures, you know… the meat of the changes, or are you all just going to make unsubstantiated claims about how awful it is based on a couple of editorials? ---
**Author:** ![manhattan](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/manhattan/32/7_2.png) [@manhattan](https://boards.straightdope.com/u/manhattan)\ **Post date:** [March 10, 2005, 7:04pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/27 "2005-03-10T19:04:03Z")
Sigh. No. It is _more difficult_ to seize assets under Chapter 13 than under Chapter 7. It is intended to steer those debtors who have above the median income and disposable income after expenses to dedicate some of their future earnings over the next (maximum) five years to partially pay down the debts they have incurred. ---
**Author:** ![Kimstu](https://avatars.discourse-cdn.com/v4/letter/k/ecd19e/32.png) [@Kimstu](https://boards.straightdope.com/u/Kimstu)\ **Post date:** [March 10, 2005, 7:10pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/28 "2005-03-10T19:10:35Z")
**manhattan:** _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._ From what I’ve seen, I tend to agree. This [NYT Business article](http://www.nytimes.com/2005/03/02/business/02bankrupt.html?pagewanted=1&adxnnl=0&adxnnlx=1110482139-q2rTeiqmwViYml2vZ0adyQ) (again, free reg. req’d) from last week discusses that “asset protection trust loophole”: > [@](#): > > The bankruptcy legislation being debated by the Senate is intended to make it harder for people to walk away from their credit card and other debts. But legal specialists say the proposed law leaves open an increasingly popular loophole that lets wealthy people protect substantial assets from creditors even after filing for bankruptcy. > > The loophole involves the use of so-called asset protection trusts. For years, wealthy people looking to keep their money out of the reach of domestic creditors have set up these trusts offshore. But since 1997, lawmakers in five states - Alaska, Delaware, Nevada, Rhode Island and Utah - have passed legislation exempting assets held domestically in such trusts from the federal bankruptcy code. People who want to establish trusts do not have to reside [in any of] the five states; they need only set their trust up through an institution in one of them. > > “If the bankruptcy legislation currently being rushed through the Senate gets enacted, debtors won’t need to buy houses in Florida or Texas to keep their millions,” said Elena Marty-Nelson, a law professor at Nova Southeastern University in Fort Lauderdale, Fla., referring to generous homestead exemptions in those states. “The millionaire’s loophole that is the result of these trusts needs to be closed.” […] > > Perhaps because the current bill was written so long ago, some legal authorities say, it does not address the new state laws that have allowed asset protection trusts to flourish. > > “This is just a way for rich folks to be able to slip through the noose on bankruptcy, and, of course, the double irony here is that the proponents of this bill keep pressing it as designed to eliminate abuse,” said Elizabeth Warren, a law professor at Harvard Law School. “Yet when provisions that permit real abuse by rich people are pointed out, the bill’s proponents look the other way.” […] > > Asset protection trusts have become increasingly popular in recent years among physicians, who fear large medical malpractice awards, and corporate executives, whose assets are at greater peril now because of new laws. The Sarbanes-Oxley legislation, for example, requires chief executives and chief financial officers to certify that their companies’ financial statements are accurate; anyone who knowingly certifies false numbers can be fined up to $5 million. […] > > [D]omestic asset protection trusts can be set up by the same people who plan to benefit from them. In addition, there are no caps on the dollar amount of assets they can hold and no restrictions on their purpose […] If bankruptcy reform is really needed, then I don’t see why it shouldn’t apply to the assets of the wealthy as well as the non-wealthy. At the very least, there ought to be a cap on the amount of money that bankrupts are allowed to shelter from their creditors. ---
**Author:** ![butler1850](https://avatars.discourse-cdn.com/v4/letter/b/779978/32.png) [@butler1850](https://boards.straightdope.com/u/butler1850)\ **Post date:** [March 10, 2005, 7:30pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/29 "2005-03-10T19:30:50Z")
This stuff makes me sick. If you’ve incurred debt, through your own fault (I’d be willing to let something like medical bills slide), e.g. CC debt, then you should be on the hook for that bill. Forever. I once owed $10,000 in CC debt, and was only grossing $20,000/yr. You know what I did? I learned some new skills, got a better, and higher paying job, nearly eliminated my “fun spending” and paid it all off. It took me about 4 years to do so. Though I could have just as easily “skipped” on it, it would not have been the right thing to do. If you’ve assets, and want debt discharged, sell the assets, perhaps when you have nothing, there is a conversation here. I’d also go for a return to debtors prison for the worst offenders. Just MHO. -butler ---
**Author:** ![Evil\_Captor](https://avatars.discourse-cdn.com/v4/letter/e/f17d59/32.png) [@Evil\_Captor](https://boards.straightdope.com/u/Evil_Captor)\ **Post date:** [March 10, 2005, 7:39pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/30 "2005-03-10T19:39:53Z")
> [@manhattan](#): > > Sigh. > > No. It is _more difficult_ to seize assets under Chapter 13 than under Chapter 7. It is intended to steer those debtors who have above the median income and disposable income after expenses to dedicate some of their future earnings over the next (maximum) five years to partially pay down the debts they have incurred. Yeah, so those poor starving credit card companies can make some money from those rich, high-living middle class debtors who went out and got sick in expensive ways instead of living clean or just dying cheaply like they should. Really, this is no surprise. The anti-aobrtion gucks and the “I’m so terrified by 911 I can’t think rationally even for a second” gucks voted Republican, which means they voted to get their butts reamed economically, and now they are getting their butts reamed economically. Surprise, surprise. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [March 10, 2005, 7:44pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/31 "2005-03-10T19:44:46Z")
> [@butler1850](#): > > This stuff makes me sick. If you’ve incurred debt, through your own fault (I’d be willing to let something like medical bills slide), e.g. CC debt, then you should be on the hook for that bill. Forever. And if you loan money to people you have good reason to believe to be bad credit risks, you deserve to lose your money and go out of business. What ever happened to accountability? Just MHO ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [March 10, 2005, 7:50pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/32 "2005-03-10T19:50:26Z")
Evil Captor, you’re saying it’s unfair to go around making people who earn more than average, and have disposable income, actually use that disposable income to pay back a portion of the debt they agreed to repay? ---
**Author:** ![Kimstu](https://avatars.discourse-cdn.com/v4/letter/k/ecd19e/32.png) [@Kimstu](https://boards.straightdope.com/u/Kimstu)\ **Post date:** [March 10, 2005, 7:54pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/33 "2005-03-10T19:54:25Z")
**butler:** _If you’ve incurred debt, through your own fault (I’d be willing to let something like medical bills slide), e.g. CC debt, then you should be on the hook for that bill. Forever._ However, the “something like medical bills” seems to be the chief cause of rising bankruptcy rates. As [this article notes](http://www.thenation.com/doc.mhtml?i=20050221&c=2&s=frosch), > [@](#): > > Until twenty-five years ago, filing for bankruptcy because of debts from a medical problem was virtually unheard of. In 1981, University of Texas law professors conducting bankruptcy research noticed that a handful of the debtors they were studying could never quite pay off their medical bills, but while these bills certainly didn’t help, they weren’t forcing people into bankruptcy. > > Today, by contrast, medical-related debt is the second leading cause of personal bankruptcies, topped only by job loss. And IIRC, the third leading cause is divorce. So the vast majority of bankruptcies aren’t just irresponsible people who can’t control their “fun spending” and need to learn personal responsibility. They’re people who have lost their incomes or incurred huge involuntary expenses like medical bills. ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [March 10, 2005, 8:12pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/34 "2005-03-10T20:12:15Z")
Kimstu, I thought the problem was credit card companies being predatory and lending to poor people with bad credit. Now it’s apparently unforseen events like job loss, illness, divorce and the anti-crowd still wants the CC company to take it in the teeth for someone elses misfortune? Can anyone offer a good reason why your creditor should lose all right to collect because of your unforseeable problems? Especially if you have a good base income (obviously no job loss in these cases) and proven disposable income? ---
**Author:** ![Rashak\_Mani](https://avatars.discourse-cdn.com/v4/letter/r/ea666f/32.png) [@Rashak\_Mani](https://boards.straightdope.com/u/Rashak_Mani)\ **Post date:** [March 10, 2005, 8:15pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/35 "2005-03-10T20:15:57Z")
Medical costs in the US are very high and growing… and with these higher costs you get more bankruptcies. Legal claims being a big reason for those costs… ---
**Author:** ![Evil\_Captor](https://avatars.discourse-cdn.com/v4/letter/e/f17d59/32.png) [@Evil\_Captor](https://boards.straightdope.com/u/Evil_Captor)\ **Post date:** [March 10, 2005, 8:19pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/36 "2005-03-10T20:19:02Z")
> [@Cheesesteak](#): > > Evil Captor, you’re saying it’s unfair to go around making people who earn more than average, and have disposable income, actually use that disposable income to pay back a portion of the debt they agreed to repay? No, I’m saying that such people who have been hit with major medical bills or job loss probably are having one hell of a time coping, and this seems to be a bit of piling on for the benefit of CC companies which are, by all accounts, not suffering AT ALL. I mean, do you think these middle class folks declared bankruptcy for shits and giggles, or what? Most of the time, when people declare bankrupcty, it’s because they ahve little or no choice in the matter – they are in desperate straits. ---
**Author:** ![annaplurabelle](https://avatars.discourse-cdn.com/v4/letter/a/919ad9/32.png) [@annaplurabelle](https://boards.straightdope.com/u/annaplurabelle)\ **Post date:** [March 10, 2005, 8:37pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/37 "2005-03-10T20:37:57Z")
So what is the cut-off in terms of income and assets for the people who will be subject to this new law? The wealthy still have asset protection options, and low wage earners with no assets don’t seem to be affected (if I’m wrong, please correct me). What income level will be hit the hardest by this new law? Also: Is there a debt cap for chapter 13? What happens if some new problem alters your ability to make the payments under chapter 13? Does this law increase liability for bk attnys? If so, how will this affect people who need to file? Does it affect the different homestead exemptions in the States? Sorry for not looking this up myself, but thought someone might know. ---
**Author:** ![Kimstu](https://avatars.discourse-cdn.com/v4/letter/k/ecd19e/32.png) [@Kimstu](https://boards.straightdope.com/u/Kimstu)\ **Post date:** [March 10, 2005, 8:45pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/38 "2005-03-10T20:45:40Z")
**Cheesesteak:** \*Kimstu, I thought the problem was credit card companies being predatory and lending to poor people with bad credit. \* That’s certainly a problem too. I would have a lot less problem with bankruptcy reform if it also reformed things like predatory lending practices. **Cheesesteak:** _Now it’s apparently unforseen events like job loss, illness, divorce and the anti-crowd still wants the CC company to take it in the teeth for someone elses misfortune?_ Well, as the law stands, that would still be less unfair than having unfortunate sick people living in “debt peonage”. At least the CC companies can set their rates and charges to cover the risks they take in lending to people who might default. (And they’re not really hurting on account of it, either; as the article linked below points out, credit company profits are already at record highs, and will climb further when the new bankruptcy restrictions kick in.) Again, I’d have a lot less problem with the attempts to tighten the requirements for bankruptcy if they included other reforms, such as exemptions for medical-costs bankrupts and elderly homeowners. As it is, though, the bill’s purpose seems to be to make things much more difficult for the indebted, and much easier for unscrupulous credit hawkers, lending sharks, and asset shelterers. CC companies don’t have to rein in risky or predatory lending practices, and wealthy bankrupts don’t have to relinquish their protected asset trusts. But the average individual is scolded to pay up and stop being a deadbeat, even if they’re in deep financial water through no fault of their own. They’re expected to be responsible, but the people who make money off them aren’t. That, I think, is what’s really bugging many people about the new law. It isn’t that we haven’t got a genuine bankruptcy problem that needs some redress; as [this article](http://www.prospect.org/web/page.ww?section=root&name=ViewWeb&articleId=9274) comments, > [@](#): > > During the go-go ’90s – when investment bankers were buying up equity in dots and coms, and when banks and credit-card companies were sending pre-approved credit-card solicitations to dogs and dead people – bankruptcy became, for some, just another new financial instrument; something to keep in your hip pocket just in case. We were living large and we were living on credit, and it didn’t take much for all that debt to come crashing down on a lot of pretty lives that were leveraged to the hilt. > > Then the new economy became the old economy, but the old spending habits continued, and were encouraged. Even as debt and delinquency grew, consumers were urged to spend to keep the economy going, or to end the recession, or whatever. A full two-thirds of the U.S. economy is driven by consumer spending, we were reminded repeatedly. President Bush urged Americans to go out and spend their tax cuts to jump-start the economy and provide a soft landing from the recession. > > But as the spending piled up, so did the debt. Americans were carrying about $250 billion in revolving credit-card debt in December 1990. In December 2004, that total had risen to $791 billion, and a strange thing happened: As consumer debt rose, so did the number of bankruptcy filings. > > The burning question surrounding the debate now taking place on the Senate floor is how much of the escalation is abuse, and how much of it is the result of the vagaries of an economy trying to find its way back to reality? So excessive bankruptcy does appear to be a real problem. But the present attempt at reform seems designed to put the burden of responsibility mostly on the backs of those who are already hurting the worst—whether or not they did anything to deserve it in terms of financial irresponsibility—while awarding the benefits mostly to those who are already gaining the most, as well as being the most unscrupulous in pursuit of gain. How can we defend that as fair? ---
**Author:** ![Spectre\_of\_Pithecanthropus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/spectre_of_pithecanthropus/32/12343_2.png) [@Spectre\_of\_Pithecanthropus](https://boards.straightdope.com/u/Spectre_of_Pithecanthropus)\ **Post date:** [March 10, 2005, 8:53pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/39 "2005-03-10T20:53:11Z")
> [@Cheesesteak](#): > > Can anyone offer a good reason why your creditor should lose all right to collect because of your unforseeable problems? Especially if you have a good base income (obviously no job loss in these cases) and proven disposable income? There is no good reason why creditors should be able to collect their debts. But that doesn’t mean they still shouldn’t be required to do business responsibly. Some people just _should not be extended credit_. Issuing cards to college freshmen with no real income is, in my opinion, unconscienable. It’s become way too easy. [Oldtimer rant]Back in my day, American Express marketed to graduating seniors who had the promise of a job. Now, the CC companies seemingly market to anything with a heartbeat. It’s just too much.[/Oldtimer rant] ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [March 10, 2005, 9:08pm UTC](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679/40 "2005-03-10T21:08:32Z")
> [@Rashak Mani](#): > > Medical costs in the US are very high and growing… Legal claims being a big reason for those costs… Despite the persistent, widespread belief that this is the general wisdom, there is no evidence to support it. [Previous page](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679.md?page=1) [Next page](https://boards.straightdope.com/t/u-s-bankruptcy-bill-s-march-of-triumph/293679.md?page=3)