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.
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.
Arianna Huffington has a nice piece on this legislation:
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.
No, it is intended to make it easier to seize their assets when they incur medical expenses they cannot afford.
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?
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.
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 (again, free reg. req’d) from last week discusses that “asset protection trust loophole”:
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.
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
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.
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
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?
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,
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.
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?
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…
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.
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.
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 comments,
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?
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]
Despite the persistent, widespread belief that this is the general wisdom, there is no evidence to support it.