Bankruptcy for Fun and Profit

[shostakovich]

Pretty soon there will be new bankruptcy laws that will make it harder and more costly to wash your slate clean by filing bankruptcy. I'm not totally opposed to this concept, but it turns out that most people go bankrupt because of credit cards, a concept I AM totally opposed to. Just call me antiquated.

In a Newsweek article by Jonathan Alter, he states there are some 1.5 million personal bankruptcies a year. He claims irresponsible deadbeats only account for 5% of the 1.5 million.
"Nearly 95 percent of those who declare personal bankruptcy are swamped by job loss, family breakup, medical problems, or some combination. For about half, it's the health care costs that do them in."

Well, GWB did not invent credit cards, but he's in bed with the credit card companies that break your back and the health care industry that prevents you from affording a cure. (OK, so I took a little rhetorical license.)
Anyway, credit cards erode "backbone", and the interest rates are obscene. Nothing is being done by the government to limit these bloodsuckers, nor is there anything being done about holding down medical costs. As for medical costs, the Medicare bill that goes into effect in 2006 does just the opposite.
"Compassionate conservative"??? Up HIS!!! He's certainly putting it up ours any chance he gets.
Shafted Shos (on Medicare and SS)

[dai bread]

I'm not at all surprised that medical expenses account for so many U.S. bankruptcies. However, I've said enough about the U.S. medical system elsewhere, so I'll leave it at that.

A common reason for bankruptcy here is to escape creditors. The person files for bankruptcy, then starts a new company in his wife's (or child's or friend's) name and files for bankruptcy there too, in due course.

Standard practice in the spec. building industry is to set up a company for a project and liquidate it when the project is finished. That way, no-one can get at you when the building starts rotting, and you can start another company in your own name because the liquidation was voluntary. Ain't the law wonderful?

<small>[ 04-24-2005, 02:52 AM: Message edited by: dai bread ]</small>

[bacchus]

While I have generally been conservative most of my life, my children accuse me of being a closet liberal. With that in mind, I must declare support for a National Health program of some sort. The current system in the US is absurd. No one should have to go broke paying med bills. Enough is enough!

[OperaTenor]

Hi Shos,

I posted concerning this bankruptcy "reform" bill on the "Is George Bush the right leader..." thread.
To me, it's nothing more than another dose of GWB taking care of his true constiuency - big corporation interests. The single beneficiaries of this legislation are MBNA members - the credit card companies. This has simply reduced the ability of average Americans to protect themselves from debt-related catastrophes, while doing nothing to address the predatory marketing practices of the credit card industry.

I suppose we can dig ourselves out of this mess once the GWB admin passes, but I can't help despairing over the damage already done, especially when it comes to all of the unnecessary loss of life.

[Shapley]

OT,

I posted a link to the bill on the other thread which shows that the bill has been around, and passed before in virtually the same form, longer than President Bush has been in office. President Clinton vetoed virtually the same bill when he was in office, as is noted on the link I posted.

President Bush has said he would sign the bill, but that doesn't make it "his" bill. The bill had bipartisan support in both houses of Congress.

There is a problem with bankruptcy legislation, and this bill is designed to fix it. It may or it may not, but it is time to do something about it.

BTW, Credit cards can't "suck your blood" unless you let them. They have their advantages and disadvantages. The point is, one cannot blame the credit cards for fiscal mismanagement.

Even after this bill, bankruptcy remains a viable alternative to those who cannot pay, but it offers creditors some protection against those who simply will not pay.

V/R
Shapley

[Haggis@wk]

Atlanta Journal Constitution


” A young woman in office attire was trying to hold on to her house and her car.

"Were you behind on your property taxes when you purchased the vehicle?" asked the trustee.

"Yes," she answered meekly.

Minutes later, a casually dressed, middle-aged couple took her spot at the hearing table.

They didn't say what had gotten them into trouble, but despite $60,000 in annual income and an additional $6,000 or so in estate money, they had fallen far behind on house payments and other debts. It was their second time in bankruptcy.

A trustee asked an elderly man, in his third trip through bankruptcy court, why he had racked up $18,000 in income tax debts over a period of several years.

"I forgot to pay," he shrugged”

I wonder how many bankruptcies are due to tax problems?

I agree that the new law is bad law but I agree with Shape that this can’t be blamed on Bush, just because some of you think that everything bad in your life is his fault.

“The milk’s gone bad! That’s G*****m Bush, this is his fault!!!”

I was struck by the lack of resistance by the Democratic leadership both in the house and the senate and by the fact that almost as many house Dems voted for it as house Reps.

What smells bad here is the number of house members on both sides of the aisle that are in the credit card companies’ pockets.

[piqaboo]

originally posted by Shapley:There is a problem with bankruptcy legislation, and this bill is designed to fix it. It may or it may not, but it is time to do something about it

There is a problem with bankruptcy legistlation.
We can agree on that. The current law is more punitive to those who try to repay their creditors at least a portion of what is owed, than it is to those who just bail on the entire debt and walk away.

This bill is designed to fix it. Yes, but its very very badly designed. It will make the problem worse.

"It may or may not but its time to do something about it." Um....... when there is a fire, its time to do something about the fire. Throwing the nearest liquid on the fire, just "to do something about it" is a very bad idea. The nearest fluid could be gasoline, or liquid oxygen. It would be better to take a moment for analysis and thought before "doing something".

This bad bill has bipartisan support which is very sad indeed.

Oh yeah, and by the way: My hair is going grey. Da** that man GWB! :p

[Shapley]

the problem is that, when it was last reformed, in 1978, the fix was worse than the problem. That may well turn out to be the case now, I'm not in a position to say. The fact of that matter is that anytime anyone defaults on payments they have incurred, the consumers that do pay their bills are left to pick up the tab. This is true whether it's credit card debt, medical bills, or taxes. The creditors want their money, they are owed the money, and they intend to collect it. If the courts rule that the debtor is not obligated to pay, they will raise the loan rates on the rest of us to recoup the losses. The reform package attempts to require those that can afford to pay their bills to do so. That is not, in my opinion, a bad thing.

Persons who have invested in their lifestyle are obligated to repay their debts. Persons who have invested in their education are obligated to repay theirs. Persons who have invested in their health and continued life are obligated to do likewise. It doesn't matter how you contracted the debt, if you don't pay it, we all do.

V/R
Shapley

[piqaboo]

Its not that I have a problem with people paying their bills. I think its a good thing. I find it odd how many creditors will not allow a person to set up a payment plan unless and until they file bankruptcy. And then if they go for the version that lets them pay off over time, they are punished more than if they go for the version that wipes the slate clean (longer time on the credit record, etc).

But this version requires you to pay off your bills unless you can afford to set up a personal trust to protect your assets from your bankruptcy. Unless you can afford to incorporate to protect your assets from bankruptcy, etc etc etc. In otherwords, if you are lower income, you pay. If you are higher income, you sequester your money away from the risk. Or if you are lower income, you sacrifice paying for health care, so you can pay the trust-establishment costs. oops,t hen you go to an emergency room with your fever and we all pay......

A bad fix of a bad law is worse than the bad law. Incomplete fixes are one thing - some things have to be changed incrementally for political or other reasons. But changes for the sake of change, changes that are contradictory to the intention of the law, changes that apply consequences dispropionately not to the most 'deserving' but to those who cant afford to evade them, those are bad.

Intention of the law: ooooh can of worms there. The presumed intention of a law that allows people to wipe out debt, is to let those who try hard, and thru outside circumstances fail financially, to get a new start, rather than driving them onto the streets and onto welfare.
This can be deduced from the law itself, because yes, we all pay a little when someone defaults. Just as we do when someone becomes indigent and goes on welfare &/or medicaid.

Hey ! I dont have to declare bankruptcy when my small business fails (that I was too naive or too close to the bone financially to incorporate). I can just fail, let my debts fester, and go on welfare/medicaid! Oh wait....... society would still be paying my bills...........even more of them.

[GreatCarouser]

Gee, reminds me of those old movies where the bad guys occupy a town/country and when one of their minions is killed by the resistance they execute the rest of the town/country by tens until somebody gives up the name of the killer/killers.

[mmichaelson]

While we're griping about the costs of EVERYTHING. . .have you checked the rise in college tuitions lately? Parents with more than one kid (or just one kid) can go bust trying to get their kids an education.

Sucks - especially since here in Tx they took away the tuition ceiling so that schools can charge what they want. Since I've been graduated (thank goodness!!!) tuition has close to doubled in cost.

Something MUST BE DONE!

[OperaTenor]

Gee, maybe we should just revive the institution of debtor's prison - lock these scumballs up for not paying their bills..............oh, wait, I was one of those................guess y'all better put me in jail.
I was one. I sat in bankruptcy court and watched and listened to people plead their cases. They were unanimously like mine, sad, pathetic, and desperate. Nobody looked the commissioner boldly in the eye and proudly proclaimed they were in there to shirk their responsibility to pay their bills. Quit trying to characterize something you know nothing about first hand.

7, 11, and 13 are chapters of bankruptcy protection. They are designed to provide people relief from insurmountable debt. I think the bankruptcy courts do a pretty good job of discerning legitimacy, and of helping people to find the most cost effective and workable solutions. It's not a perfect system, but it does the job relatively well, IMO.
If creditors are losing money over bankruptcies, perhaps they should exercise more discretion in handing out credit. What's wrong with practicing a little caveat vendor for a change?

Show me statistics that unquestioningly prove that most personal bankruptcies aren't legitimate. So far, besides the anecdotal examples cited above(which maybe like the few seconds of footage attempting to depict Terri Schiavo as responsive - carefully and selectively culled), I've heard nothing but broad statistics and studies claiming otherwise.

As for the amount of Dems who voted in favor of the bill, I've never claimed Republicans had the market on catering to special interests cornered.

<small>[ 04-25-2005, 01:28 PM: Message edited by: OperaTenor ]</small>

[piqaboo]

No way OT - nice try tho . If we lock you up in prison, we have to pay for your health care! !!!

[Shapley]

OT,

RE:As for the amount of Dems who voted in favor of the bill, I've never claimed Republicans had the market on catering to special interests cornered.

You did claim, incorrectly, that only three Democrats voted for the bill, over in that other thread.

Legitimate or not, bankruptcy costs us all. As for caveat vendor, isn't that what you're complaining about HMO's and PPO's engaging in? If the medical industry tries to reduce costs, they're unfair. If the creditors tried to recoup costs, they're unfair.

I'm not against bankruptcy, and neither is the President. This bill is designed to ensure that, prior to declaring yourself bankrupt, you are, in fact, bankrupt. We wouldn't anyone making false statements to the judge now, would we? I know it doesn't happen, but the possibility exists....

V/R
Shapley

[RC]

What ever happened to that free market stuff when it comes to credit card companies?

I mean, if credit card companies are complaining about bankruptcies, maybe they should be a little more careful about who gets credit. Push that doo doo right back up the hill, that's what I say.

You think I'm kidding.

If revolving credit gets so expensive that American's don't want it, is that a bad thing?

If you want legislation to fix this kind of credit abuse, how about legislating the credit issuers. It's not like they aren't passing the expense on to the rest of us anyway. They aren't losing anything.

On the other hand, if the bankruptcy law is not aimed at legislating this type of issue, what IS it about? As Shos states, there are a lot of folks out there declaring bankruptcy for medical bills. Is THAT what we're after with this legislation? If not, how about stipulating an exclusion or less stringent rules for medically associated individual bankruptcy?

Ironically, we already capped the mal practice law suites.

Look at the big picture - it is the little guy that stands to lose with bankruptcy reform, it is the little guy that stands to lose with the medical mal practice caps.

By the way, buy Long Term Care insurance please. You're going to need it.

[Shapley]

RC,

The point is that legislation has been passed to provide citizens relief from the debt they incur, should they find themselves unable, or unwilling, to repay it. Unfortunately, too many of the unwilling have used the law, to the disadvantage of us all. The creditors went to the only place they can get relief from legislative wrongdoing, the legislature, to ask for adjustment of the law to reduce the incidence of the unwilling using a law designed for the unable.

It is possible that, much like the pendulum theory, the relief has swung too far, and now makes it difficult for the unable, but I say it's too early to tell. The blame rests on the hands of the unwilling, whose abuse of the law mandated the reform.

If the original legislation had been better, the reform of 1978 (that d**n Carter again!) wouldn't have been needed. If the reform of 1978 had been better, the reform of 2005 wouldn't be needed. If this reform were better, the next reform wouldn't be needed. It's all a plot to keep the legislators in business, and lobbying funds flowing to them.

V/R
Shapley

[OperaTenor]

RC, once again, my hero.

Hi Shap,

I thought I already mea culpa'd on the other thread. If you missed it, than I again plead mea culpa.

Health care and credit are two different issues.

Show me that the "problems" that this legislation is supposed to address is prevalent in the majority of bankruptcy cases.

Our government should not be legislating to protect big business from individuals, it should be the other way around.

GWB could have vetoed this bill, but he didn't, which just shows just who his true constiuency is.

There were attempts to add exemptions for situations like medically associated bankruptcy, to make allowances for veterans, the elderly, etc. They were all rejected by the sponsors of this bill.

BOHICA

[piqaboo]

Part of the problem with creditors is that they extend credit irresponsibly. If they fail to perform appropriate due diligence before handing out the credit, they are risking default.

I had lenders try to give me higher homeloans than I could possibly service. Since my ability to service a loan was clear in the data they obtained, I can only think they were trying to clean up on a few months of 100% interest, and then force a default.

I am not relieving the debtor of responsibility for their actions. Yet, I do see credit card companies acting like the stereotyped usurious lender of legend. As soon as you are carrying a balance, new card offers (PreQualified!) pour in. Pay off monthly all balances, and get far far fewer offers. If you think you arent getting enough mail, carry a balance for a few months!

I find it interesting that the majority of bankruptcies are brought about by medical bills. These are the folks who are trying not to become indigent which would qualify them for Medicaid. Which seems to have a weird sort of endorsement from you, Shapley, as you have stated so often that Americans take care of those willing to become indigent in order to qualify for Medicaid.

Again, those who can afford to set up personal trusts can protect their funds from bankruptcy procedings. I see a profitable seminar series here: use your credit card to pay the fees to create a trust, BEFORE you get sick or run up the balance. Then, go have a medical emergency (or spending spree or malpractice lawsuit), resting assured your assets are safe.

[Shapley]

OT,

RE:Our government should not be legislating to protect big business from individuals, it should be the other way around.

Big business is not the enemy of the people. Our government should protect people and business (which is made up of people) from illegal acts by people and business, which is the idea behind this act.

Piq,

RE:Part of the problem with creditors is that they extend credit irresponsibly. If they fail to perform appropriate due diligence before handing out the credit, they are risking default.

Once again, we disagree on the root of the problem. The problem is that people undertake credit irresponsibly. If they fail to perform appropriate due diligence before assuming debt, they are risking default.

I don't endorse going indigence, I merely agree with others that we have a responsibility to our poor and infirm. The rest are on their own. If they become poor and/or infirm, they become our responsibility. You want to raise the bar, I think it is high enough already.

I'm not being cold-hearted here. I merely think that maintaining responsibility is the surest way to inspire success. People will not rise above the lowest level if the lowest level is comfortable for them. I want them to rise.

I think the difference lies in my belief that people will rise to the moment when encouraged to do so. Remove the encouragement, and they stagnate. It's really the story of America. People came here, faced hardships and overcame them. Without the threat of hardship you'll never know the measure of the man.

V/R
Shapley

[piqaboo]

We dont disagree on people rising to the occasion.
We disagree on who could use a little quiet help,
and where we really disagree:
I figure, since we are already paying out at the highest level (end stage care for example, in medical situations), we could save a little money by paying earlier on, and preventing a few endstage situations.
Its a pragmatic approach.

I agree that credit users should be responsible. Thats why I find it apalling that those who try to pay off have such a hard time of it: if they foolishly or accidentally (due to medical emergency, suicide of boss/business owner = job loss, etc) get behind, they have very little success in calling the cc compnay and saying "look, I want to terminate my account and set up a payment schedule for my outstanding balance". So they declare bankruptcy. Where they can choose: walk away from 100% of the debt, or make small steady payments (which is what they tried to do before declaring bankruptcy). Those who walk away from it all are punished less than those who take the responsible way. That's nuts.

There will always be legal con-artists: people who work the system. In some ways, those folks are the cream of the crop - they are creative, diligent and flexible in using the tools available in ways most of us would never imagine. Unfortunately, they are a bit lacking in a sense of personal responsibility.