Bankruptcy: Abused or Necessary?

[phoenixx]

I read the following Op-Ed piece in the NYT today (free registration required for viewing) and agree with the points made.

http://www.nytimes.com/2005/03/08/op...?hp&oref=login

I do think that Bankruptcy is mostly abused by the extremely wealthy and significant corporations.

I do think that this will combine with the health insurance issues this country is currently facing to make poverty the national norm.

I also think that a nation that can't balance it's own books, relying on what is basically credit from the very citizens affected by the proposed bill to pay for everything and going into debt anyway, should not make a decision such as this that affects it's citizenry in such a negative and drastic manner.

[erik_kosberg]

I also think that a nation that can't balance its own books, relying on what is basically credit from the very citizens affected by the proposed bill to pay for everything and going into debt anyway, should not make a decision such as this that affects its citizenry in such a negative and drastic manner.

Give that woman a cigar!

[Redlass]

If they wanted to make bankruptcy a true aid for the poor and financially burdened, they wouldn't exempt student loans from bankruptcies.

[phoenixx]

Redlass said

If they wanted to make bankruptcy a true aid for the poor and financially burdened, they wouldn't exempt student loans from bankruptcies.

I think one of the points the Op-Ed piece was trying to make was that the modifiers of the bankruptcy laws would like nothing more than for Bankruptcy NOT to benefit the truly needy - student or regular family.....

[Redlass]

:nod: Which is a real shame as that's who is most in need of bankruptcy.

[MrsNormanMaine[$]]

The laws pending in congress are basically to allow the credit card companies to keep enticing the public with slick mailers to get themselves into hock they can't afford and then keep them paying them back, even after the house is gone.

I know so many upper middle class people one paycheck away from insolvency due to easy credit terms. It only takes one accident, illness or downsizing to do it.

Live within your means, people!

MNM !queen

[jgibson2[$]]

My nephew was about to declare bankruptcy when he came into some money. He called the evil credit card companies and offered them about $.30 on the dollar. They were glad to get it.

I figured it was about what they deserved, considering that most of what he owed was probably interest and late fees anyway.

[frazzledspice]

Here's today's Yahoo article:

http://story.news.yahoo.com/news?tmp...brinkofpassing

Hmmmm....

Your economic policies are doing a lot of people in. (For example, ignoring the plight of the 45 million plus uninsured.) You don't want to see the number of bankruptcies rise while your party is in power, because it makes it look as if the majority of people aren't prospering under your administration.

You don't know what to do. A family earning $50 to $75K got a tax cut of $600 a year due to your enlightened policies (http://www.juntosociety.com/factsheets/taxes.html) and then they get slapped with a $50,000 medical bill they can't afford and cry poverty.

And that makes you look bad.

Obviously the answer lies in changing the bankruptcy law so that your statistics will be nice and pretty, and may even look better than Clinton's did.

The fact that they're nice and deceptive doesn't matter.

[mjfrombuffalo[$]]

Credit checks were a heck of a lot stricter when I first applied for credit, and when I worked at the bank in the auto loan department there was a lot that would get you locked out of getting a loan. It seems now the companies give it away pretty freely. Yes, there is personal consumer responsibility, but the credit card companies share some blame in this too. It's like if I knew you were a scoundrel and I lent you $100, then complained to the police when you didn't pay me back - yeah, you owe me the money, but I should have used some judgement in loaning to you in the first place, no?

[wivabef]

frazzledspice said

Here's today's Yahoo article:

http://story.news.yahoo.com/news?tmp...brinkofpassing

Hmmmm....

Your economic policies are doing a lot of people in. (For example, ignoring the plight of the 45 million plus uninsured.) You don't want to see the number of bankruptcies rise while your party is in power, because it makes it look as if the majority of people aren't prospering under your administration.

You don't know what to do. A family earning $50 to $75K got a tax cut of $600 a year due to your enlightened policies (http://www.juntosociety.com/factsheets/taxes.html) and then they get slapped with a $50,000 medical bill they can't afford and cry poverty.

And that makes you look bad.

Obviously the answer lies in changing the bankruptcy law so that your statistics will be nice and pretty, and may even look better than Clinton's did.

The fact that they're nice and deceptive doesn't matter.

I know. That Joseph Biden! What a rip roarin' butthead of a Republ...oh, wait... never mind.

[frazzledspice]

This article from Myrtle Beach Online shows exactly how rapacious the credit card companies are, and how much people's debt escalates because of fees and interest rather than overspending.

http://www.myrtlebeachonline.com/mld...printstory.jsp

The way the fees are imposed, "people would be better off if they stopped paying" once they get in over their heads, said T. Bentley Leonard, an N.C. bankruptcy lawyer. Once you stop paying, creditors write off the debt and sell it to a debt collector.

"They may harass you, but your balance doesn't keep rising," Leonard said. "That's the irony."

It demonstrates this irony with several stories of people who stopped using their cards completely whose debt doubled because of fees and high interest.

I never thought of "not paying" as a better option than "paying what you can," but if your credit is wrecked in either case, I guess it's better to find a way to pay it without keeping the meter running.

[phoenixx]

Further news on the pending Senate vote (absolutely horrifying that this has gotten this far):

http://apnews.myway.com//article/200...D88O82RO0.html

[quote]The House is expected to follow next month with approval of the legislation, which orders the most thorough overhaul of U.S. bankruptcy laws in a quarter-century. It long has been sought by credit card companies and banks yet stalled for eight years by congressional gridlock.[/b] - bold = mine

The fact that this is sought by credit card comapnies and banks and no one else (besides Bush, of course, slave to big business) should positively scream that this is not a good thing.....


:

[frazzledspice]

Another downside:

Now, credit card companies are sometimes willing to negotiate partial payment, because they figure that half a loaf is better than none (bankruptcy.)

But if they don't have to worry about the "none," where is the incentive for them to reduce interest, negotiate a partial payment, etc. Half a loaf isn't as good as getting the whole loaf plus 25% interest plus late fees....and, in all probability, someone's house!

[erik_kosberg]

Josh Marshal has a blog within his blog, just about the legislation:
http://www.talkingpointsmemo.com/bankruptcy/

On Thursday, Georgia Senators Saxby Chambliss and Johnny Isakson voted for a bill that prohibits ordinary Georgian families from restructuring and discharging their debts following medical emergencies and job losses. I wonder whether they’ll do the same for Atlanta-based Delta Airlines if and when it declares bankruptcy because of its own ineffective management. Not likely. In fact, the authors and sponsors of this bill went out of their way to ensure that only people and businesses with debts under $2 million are affected.

[wivabef]

Though I don't like the fact that airlines are poorly managed, the only problem with Marshall's line of inquiry is that many, many, many families would be effected should Delta cease to exist.

The only time personal bankruptcy pisses me off is when people run up cards on excess and then claim bankruptcy to get out of paying them off. I knew one guy who filed bankruptcy and then bought a Camaro six months later.

Other than that, bankruptcy is a painful option for people who have hit bottom...and is a humane option to debtor's prison. Shame on the Republicans AND the democrats who's pockets are lined with credit companies for attempting to make such devastating changes.

[mjfrombuffalo[$]]

http://soundmoney.publicradio.org/di...traight_story/

Today Chris Farrell on Sound Money (American Public Media) cited that 95% of bankrupcies come from misfortune - illness, primarily, but also a small business venture that went under or divorce. He also cited statistics that bankruptcies are actually DOWN about 4% this year, but that the surge in bankruptcies coincided with - surprise - the tremendous push on the part of credit card companies to "democratize" credit by offering ridiculous amounts to all and sundry.

He also pointed out that there's a little-discussed-but-huge loophole for millionaires: asset protection trusts, that millionaires used to have to do offshore, but now can be done in 5 states in the US. They don't even have to live in one of the five states, just set up the account there, and any smart Enron-type CEO would certainly be looking into that.

[realtraveller]

Credit card companies need to tighten up on who gets credit. Yesterday United Airlines sent us a credit card addressed to my 12 year old daughter.

[drmomentum[$]]

I thought you were going to say that someone gave United Airlines a line of credit.

-JP