Third Party & Independents Archives

David,

I’m not sure about your state, but most states won’t allow assets of dual ownership, ie married persons, to be seized for the debts of one party.

However this bill is voted on, by maintaining seperate credit cards for hubby/wife, most people can protect their major assets.

An honest(such as yourself) person shouldn’t ever become homeless for falling on hard times, but everyone should try to protect themselves also.

By punching in bankruptcy/ your state, most can learn about protecting their assets.

I know you’re a clever fellow, but I posted that mostly for the many that read but seldom post.

Beagle, no, thank you, I was not aware that maintaining separate credit cards offered any protection. I will check into it.

But, the language of the bankruptcy bill is applicable to all states regarding interstate based debt, which most Americans fall under. Perhaps Misha could chime in with some particulars as to how it is the federal bankruptcy laws have national override of states.

It is my understanding that despite Texas’ homestead exemption shielding one’s home from creditors, this new bill will override that exemption. That is why this bill is in fact, for a large number of Americans, going to virtually end bankruptcy protection allowing only the relief, if any, that structured payments for a number of years would provide to someone who has too little in the first place.

The current law provides a fresh start. My brother filed bankruptcy many, many years ago, as a result of a divorce which forced him to maintain two households and child support on a paycheck that was barely providing for this family under one roof. He got his fresh start and he has been just as responsible regarding debt as before the bankruptcy.

I remember however, how depressed he was for years after the divorce, facing never having enough money for Christmas presents or internet (which he still can’t afford). In just a couple more years however, his sons will be of age and he will be out from under the child support payments which he gladly pays. He now can see some light at the end of the tunnel and he has hope for his future again.

Think of how much more depressing and disincentizing it would have been had he not been able to receive bankruptcy after the divorce. His son’s would have had to do with far less, his child support payments would have had to be reduced in order to pay back the credit card companies for years after the divorce under this current bill.

It was not his fault his wife divorced him. He loved her and treated her better than any husband I know. He is a very gently and loving person. He deserved a second chance. And having received it, he has gone on to meet all his other obligations and is stronger and more hopeful of living a normal life in just a couple years. Perhaps even remarry.

According to the most recent Harvard study, roughly half of all bankruptcies are filed due to medical expenses and many of those are insured. The second leading cause of bankruptcy is divorce. So I guess that marriages and families really arent that important to Congress after all, huh?

This bill is the most anti-family pro-corporate piece of legislation I have ever seen passed through congress. Let us all pray that it is defeated in the House unlike the Senate. I’m not holding my breath, however.

For future notice btw - dont let credit card companies indirectly WRITE THE LEGISLATION! It is like having your 7 year old children decide what rules should be imposed on them for their evening activities. They will pick staying up late and eating cocoa puffs and ice cream every time.

David,

Under the existing bankruptcy law, if you and your family fell on hard times and went into bankruptcy, you could lose your home even though it has no liens or mortgages on it. States have the ability to protect homesteads, however, and they do that to varying degrees. You would have to check to see the law in Texas. Here in Delaware, for example, the state law opts debtors out of part of the bankruptcy code which could save at least part of a house. Delaware is a very business and creditor friendly state! That is why our Congressional delegation has been solidly behind this new law.

By the way, Article I, Section 8 gives Congress the power to regulate bankruptcy law; that is why it is a federal matter rather than a state matter. The bankruptcy code does, however, as I just mentioned, give states some power.

The new law is being pushed to prevent fraud, but bankruptcy fraud is rather rare, and the existing law handles it fairly well. One of the worst features of the new law is that it sets a threshold before debtors can enter into a Chapter 7, or liquidation bankruptcy. We have not had that before. Add to that the requirement that debtors seek credit counseling before filing, and it seems we have a recipe for disaster.

Troy, thank you for the facts feedback. Being a very Republican state, despite Texas’ traditional protection of family homesteads, I fear after the federal reform takes place, Texas politicians will use it as a fulcrum to deprive Texans of their homestead exemption in favor of attracting Credit capital industry to Texas.

Given a straight referendum, Texans will not tolerate weakening the Homestead exemption. It has come up before. But, with new Federal Reform, I can imagine the rhetoric that will follow, that Texas now has no choice but to comply with the Federal bankruptcy reform and must rescind or scale back Texas homestead exemptions.

Paul D., we are of like mind on this issue, without exception. Thanks for your comments.

The Bill will require those falling above the median income for their state to repay their debts. Those falling below the median would be permitted to file Chapter 7 instead of 13 for absolution of their debts.

You can find your states median income for a family of 4 at Ncat.Org .

Texas has a median of $56,278. West Virginia at $47,550. This aims squarely at middle class America, and those in the Middle Class who need to file bankruptcy, will find themselves no longer in the middle class nor able to return to it for a number of years since structured repayment will be their only relief.

So, I think I see a huge loophole. John Doe in Texas makes $60,000 a year, and his wife required heart surgery and he then needs to file bankruptcy. Under the new law he will have a little math to do. If he takes another job at $50,000 a year (putting him below the median) and files bankruptcy and is absolved of his debts, will he have more cash flow and discretionary income than if he remains at his current job at $60,000 and has to make large payments each month to pay off the debt in a structured settlement?

For many, they will be financially more capable of providing for their family if they take a lower paying job before filing bankruptcy. Is this really what these idiots in Washington intend? Forcing middle class families into lower paying jobs to deal with medical bills or divorce settlements (which would lower child support payments as a consequence).

Our Congresspersons have NOT thought this through, and millions of Americans will suffer for their lack of due diligence.

David,
I am a poor economist but this is the saddest thing I have ever seen in my life. It is almost like I can hear the passion flow right through the letter. I am calling Walter B. Jones (doubt he will do anything) and see what he can do.

Good Show, Donny. We do what we can and hope for the best.

Also of great interest is this excerpt from an article at FXStreet.com:

Corporate bankruptcy attorney James Sprayregen, a partner at Chicago-based Kirkland & Ellis, complained that from a commercial standpoint, many of the provisions, including measures related to landlords and utilities, “seem to be aimed at the perceived need for changes of a number of special interest groups.” “I look at this [legislation] as much more of a solution in search of a problem,” Sprayregen said

Amendments Democrats in the Senate sought to add protections for seniors and lower-income Americans, and also to force credit card issuers to change marketing practices. But almost all of the measures were turned back by a largely united Republican majority. The biggest obstacle to passage was cleared when the Senate defeated a controversial, abortion-related amendment that opponents said had derailed past attempts at changing the bankruptcy code. House Republican leaders had pledged to move quickly if the Senate sent them legislation with few amendments. The House has passed similar legislation in past years with wide majorities

This bill is purely a Republican assault upon hard working Americans for the benefit of their major campaign contributors.

David,
I can’t find the rollcall for what the Senator’s voted on. If Richard Burr voted for this reformation bill, I will probably sucker punch him in the face if he ever dares show up in my town.

David,
Here it is: sorry for asking, never mind.
http://www.commondreams.org/headlines05/0312-03.htm
I just had to be more specific in my search.
I am a Jean Jacques Rousseau type, being passionate and erratic. He is my favorite philosopher of all time. Without him, the French Revolution would never have spawned.
What can I get for a sentence as far as just punching a senator in the face?
I am dead serious. This is an insult to you, me and millions, I mean, millions of Americans. A statement has to be made.

Excellent article David. This is one of those issues where, the more people learn about it, the less they like it.

You’re absolutely right that the new law hits only the middle class. It also fails to close loopholes allowing corporations and those blessed with too much money to hide their assets during bankruptcy proceedings.

The GOP is just paying back the Banks for their Support. It is nice that Loyalty is rewarded after all.

I was disheartened by the vote on the bill. My husband and I have been struggling for the last year to make ends meet on one income. Credit cards provided temporary relief, but we have been considering declaring bankruptcy. As I understand it, bills become effective 6 months after passage, so anyone who is in dire straits has until October 2005 to declare bankruptcy under the old rules. Good Luck.

David,
I got a little manic last night. Sorry about that. I do want a link to the bill because of your article. For future reference, what website can I find all of the bills that get passed through or shoot down; atleast the major bills? Thanks

Donny, this Bankruptcy Finder.com is a good starting point. I saw they have the Senate version. They may also have the House version to be voted on today, dunno. Some followers say the House legislation is likely to closely mirror the Senate version to insure a fast track to the President’s desk. The President has said he is looking forward to signing this legislation.

David, great article and follow up posts.

I’ve mentioned my outrage over this bill several times in the last few months, so you probably already know that I agree with you completely.
I for one, was amazed by the insanity of seeing quite a few Democrats actually voting to approve this bill in the Senate — something I honestly never expected to see.

I find it amusing how there has been only one conservative (Beagle) who responded to this article — and then only to suggest that husbands and wives maintain separate finances, and to tell us that honest people shouldn’t have to worry about homelessness during hard times (as if we didn’t already know that). So what if people aren’t “honest” but have kids? Is it okay for children to be living on the street because their parents are screw-ups?

Anyway, where are the rest of our resident WB conservatives opinions on this bill? Really, the silence is deafening…

Thanks Adrienne for your comments. Appears to be a quicksand topic for conservatives given the amendments they shot down.

Thanks for the link for the roll call, I guess my senator chose not to represent me on this one. I guess I kept from commenting since I think Aldous nailed it… wait, wha?
Yep.

Adrienne,

“So what if people aren’t “honest” but have kids? Is it okay for children to be living on the street because their parents are screw-ups?”

Well, I guess so. After all, it’s ok for them to get crappy educations, live in lousy neighborhoods, and get poor medical care.

And, not to come to the defense of credit card companies here (they really are bastards), but this could potentially result in lower rates for others. Of course, if they choose not to lower any interest rates it could just result in higher profits for them… The bastards…

Zeek, while I agree in general with your sentiment, there is a need and much good that comes in our society from willing lenders.

I think usury is to be condemned (29% interest rates do more to foster bankruptcy than anything to offset it. But, all lenders are not, in my opinion, bastards, Credit Unions for example are for the most part an exception as are many local banks. When lending becomes corporatized and shareholder profits become the bottom line and numero uno end of lending, then bastards are plenty to be found. What is needed is good old fashioned regulation of the industry, something the current government abhors if it involves their corporate contributors.

I didn?t write earlier, because I had no strong opinion on the subject. But I checked into it and I don?t find the new laws frightening. Neither evidently do many Democrats, since about half the Democratic Senators voted for the bill.

People should be careful when they borrow money. The Harvard study That claims that claims that 50% of bankruptcy is caused by medical problems Is based on a survey of debtors that sets the bar so low that any filer With medical bills exceeding $1,000 counts as a medical bankruptcy. It also includes chronic gambling as a medical problem. So let’s dispense with that one already.

Bankruptcy has become a big problem because the incentives have changed. There were nearly 1.6 million consumer bankruptcies in the U.S. in 2004 versus only 300,000 bankruptcies in 1980, when unemployment was higher and the economy in worse shape. In fact, there are more bankruptcies per capita today than there were during the Great Depression.

Credit card companies and others are too free with their credit, but do you want the alternative? Do you want to make it much more difficult for a person with low income to get credit? Or do you want to demand that individuals use credit wisely?

The new bill does nothing egregious. It makes a means test for repayment. That is good. If a person is making more than the average income, he can afford to pay back some of what he has borrowed. It requires credit counseling before bankruptcy. No problem with this. And it requires that people document their income. About 10% of the bankruptcies are fraudulent.
Nobody wants to protect the crooks, right?

The homestead exception change is applies to homes bought with money obtained fraudulently. I don?t have a problem with this either. If someone borrows a big sum of money and then declares bankruptcy he should not get to keep his ill-gotten gains.

It should not be easy or painless to declare bankruptcy. It is a last resort. Most people will never have to declare bankruptcy in their entire lives. The statistics comparing the number of bankruptcies today with those of 1980 indicate that there is abuse. If people are abusing credit, they need to be educated, but not rewarded with what they have stolen.

David,

I fully agree. That is why I was referring to specifically credit card companies. As I’m sure everyone knows, they’re a pack of wolves. I have no issues with local banks, credit unions, and the like. Sorry for any confusion.

Zeek, my apology. I failed to recognize the specific reference to credit card companies. It was good that the distinction was made more clear though for other readers.

I hope Jack experiences what most of those bankruptcy filers experience. Then we’ll see if he curses or rallies the changes. For far too many Americans, a half million or more a year, there will be no second chance. Just lowered quality of life for themselves and those that depend on them and all the bitterness and mistrust of government that will accompany it, especially where loss of a job or massive medical bills are the cause.

And I can’t wait for the new legislation that says anyone who took a lower paying job to qualify for chapter 7 will be denied and will have to serve in our newly reestablished debtor prisons.

Jack wants folks to not lay this at Republican’s feet with his remarks about Democrats voting for it. What he doesn’t want you to know is that very likely a majority of those Democrats have investments in credit card and banking companies too or receive sizeable reelection contributions from the industry. They were certainly not putting American working families interests first, their contributors came first and that is as clear as can be.

“…Neither evidently do many Democrats, since about half the Democratic Senators voted for the bill.”

25 Dems voted against the bill.The 18 Democrats who voted for the bill may not have done so because they did not find it frightening. While most of them did not receive substantial campaign contributions from the credit card companies ($1K-$7K),8 received contributions of more than $19K from the credit card companies.

They were:Joe Biden $174K ($147/MBNA);Baucus $74K; Conrad;$74K ($17/Citigroup);Evan Bayh $47K; Reid$35K/Citigroup;Johnson $27K; Salazar$25K; Lincoln $19K/JPMorgan/Chase.

For more detailed informatio, go to opensecrets.org.

Adrienne,

I didn’t think anyone could spin giving honest advice about protecting ones assets, into an attack on poor children, but you found a way.

I didn’t know every issue had have a partisan slant in any comments about it. I’ll be more carefull in the future.

“I didn’t think anyone could spin giving honest advice about protecting ones assets, into an attack on poor children, but you found a way.”

Maybe because for me “the culture of life” doesn’t stop at the end of a feeding tube or a woman’s birth canal.

David et al

Anyone can fall on hard times and we all want to help those who have trouble beyond their control, but doesn’t it make sense to try to judge who is worthy of relief and who is not? If someone is making better than average income, he has the power to pay back some of the money he borrowed. And we shouldn’t subsidize rich lifestyles.

Didn’t Mike Tyson declare bankruptcy a year ago? How many millions did he earn from bashing in the brains of other human beings?

The same goes for fraud. If I buy an expensive home and then go bankrupt, I should have to surrender it. The same goes for my car etc. Bankruptcy should be hard because otherwise some people will use it too often. The increasing numbers seem to indicate this. One of the “outrages” of the new law is that you have to wait eight instead of six years before you can declare bankruptcy again. How unlucky do you have to be to be buried in debt twice in six years? Or maybe not only luck in involved.

We can all come up with hypothetical situations where otherwise good people are forced into bankruptcy. It can happen. The new laws will not affect too many of such people. If they are making below the average wage, for example, the means testing won’t affect them. If they did not borrow money recently to buy their home, it won’t affect them. If they don’t know how to handle money, they should go to credit counseling. And if they can pay, they should pay.

When someone declares bankruptcy, he is saying that he cannot pay back the money he has agreed to pay. He is not saying that he doesn’t want to or that it is a hardship.

When a deadbeat dad declares bankruptcy to avoid child support payments, according to what I read, he will not be able to get away with it as easily under this new legislation. This is a really good thing. Bankruptcy doesn’t only cheat credit card companies, you know.

It should be important to note that credit lenders can more or less be taken out of this entire equation. The reason being is that all of them factor risks such as a customer going bankrupt and refusing to pay debts into their interest rates. This is why credit card companies look for people with bad credit history; they are their most profitable customers.

I find Jack’s point far more valid. We should think instead of how this legislation affects Americans as a whole and not corporate America.

Some of the postings here have mentioned child support. But, under section 523(a)(5) of the existing law, debtors cannot avoid their obligations to pay child support or alimony by going bankrupt.

Other postings have dealt with corporate fraud in bankruptcy. That is largely a myth. Many bankruptcies are acrimonious. If creditors thought that the debtor was hiding assets, they would scream bloody murder. Also, the penalties for hiding assets in a bankruptcy case can be severe. For example, if a corporation is found to be committing some sort of fraud, the management will be removed (they could be removed anyway without any fraud), fined or jailed. Removal is a big deal; usually it is the managment that decides when and where to file the bankruptcy case. They choose with an eye to staying in their positions; the job prospects for managers who drove a firm into bankruptcy are, generally, not good, so they want to hang on to what they have.

Troy, you missed the point. Child Support or Alimony adds to one’s overall monthly expenses on the same income one was making before the divorce. This is what triggers the bankruptcy. My brother was barely making it when he was supporting his wife and two boys. After the divorce, he had to move from a house that was paid for into an apt. which cost him $700/month, and got hit with support for the wife and child support for the two boys.

His expenses went up by 45% while his income remained the same, and it wasn’t much to begin with (under $20,000 a year). He had no choice but to file bankruptcy.

David:

Hmmmm, I wonder if in the future the divorce rate might drop a bit.

Craig

As far as “cheating credit card companies,” considering they reaped $30 million in profits last year, and donated $7.8 million in campaigns last November, it’s hard to imagine a recently laid-off, divorced or critically ill person cheating them of anything. And as to the 10% of people who do perpetuate a fraud upon them, for one, that couldn’t possible have much effect on their bottom line, and for another wouldn’t that fall into what goes around comes around. I mean even lawyers have trouble comprehending their disclosures. Meanwhile… isn’t anybody concerned that Congress refused to fund the VA so it could support our returning veterans everyone supposedly “supports?” Or does that call for another blog?

Hmmmm, I wonder if in the future the divorce rate might drop a bit.

Doubt it, murder rate might go up however.

Chops, perhaps, but only on one side of the male/female divide. My brother’s wife divorced him, not the other way around. She got to reap the rewards of the divorce while he got to reap the ‘reward’ of bankruptcy. There is no disincentive on this side of the M/F equation.

Oh, and btw, will this new bankruptcy law produce greater crime and criminals? It just occured to me, if middle class (above median income) folks aren’t able to get a fresh start from circumstances beyond their control, how many will move to the underground cash only basis economy, beating taxes, and the structured payments.

We have a trillion dollar black market economy already thriving in this country and growing. Everything from cash only landscaping companies and water well drillers, to drug dealers and resalers of stolen goods. What percentage of those who see no hope for recovering their lives under the new law of structured repayment, will enroll in the black market economy which has the promise of reinstating their former quality of life for their children and spouse?

There are going to be unintended consequences of this new law as there is with any new legislation. I do believe we will see a repeal of this stupidly contrived legislation within the next 6 to 8 years. We needed bankruptcy reform to block those undeserving. What we got was a bill shooting down the deserving in the middle class. The middle class votes. I don’t see a long life for this law.

Perhaps divorce should be governed by the same type rule as bankruptcy, If you get a divorce you cant marry again for 8 yrs because it wont be final untill then ?

Beagle,
The state makes too much money off of a divorce but that is a little autocratic of you; don’t you think?

Donny,

I don’t see it as autocratic at all, if anything, the current divorce laws are autocratic.

Its far to easy for a judge to take everything someone owns, or will own for 15-20 yrs., and give it to someone else based only on a disinterested whim !

There are links to the bankruptcy laws and divorce, but I think that should be a seperate article/ thread.

If any of our fine editors does start a thread about “divorce” I hope its in the “green” column because it crosses all party lines and I’ll betcha it will be a lively debate!

Divorce would indeed be a lively topic.

In addition to the blackmarket David, I wasn’t be sarcastic about the murder rate. If a man can’t recover his losses because of divorce under this new law, how many will feel pushed to pull a Scott Peterson?

Making things too tough on people may result in some bad side effects.

Taylor, I know. There is quite a body of research that demonstrates high correlations between domestic violence and financial problems.

Good wrap-up David, on what is a horrendous piece of special interest/campaign contributor driven legislation - and gift to the Democrats.

Yes, there are Dems like Joe Biden who will need to answer for their support of this giveaway to the credit card companies and banks, but this walks, talks and smells like the kind of ‘compassionate conservatism’ Bush voters are angrily discovering they were duped into! Just as the Drug Prescription Bill fallout, the American people will soon become familiar with the awful details very soon.

I should not be surprised that I became angry by the TV news coverage of the passage of this bill, providing few details, while regurgitating the happy ‘talking points’ about responsibility, from administration. For the first time in nearly a decade, worker’s wages fell and the Top Ten states for bankruptcy filings are all Red.

I will keep handy, a list of the sensible and fair amendments from Senate Dems to his bill, that were rejected. I guarantee, it will become apart of the case Howard Dean wants the party to make directly to Red State voters in 2006 and 2008.

I don’t find this bill so objectionable. I understand that there are other opinions, but I really don’t understand the outrage.

Most opponents of the new law write about the problems people have paying medical bills. That is probably a valid concern. But then they start jumping on credit card companies. Which is it?

I feel sympathy for someone who can’t pay his medical bills. But if someone runs up credit card bills buying consumer items that is a different story. Make the distinction.

There are deserving people and there are deadbeats who declare bankruptcy. We should not put them in the same category. If I was forced into bankruptcy by medical emergencies, I would be dishonored to sit next to someone who declared bankruptcy because he was too into consumer electronics.

OK, Jack. I’ll make the distinction: The 4% of bankruptcy filers who abuse the system are bad and should be punished. The other 96% who face bankruptcy because of a medical crisis or job loss or being called up to serve in Iraq shouldn’t be ground into the dirt.

Bert, I couldn’t get your link to work, but here are a few of the amendments that Republicans shot down,

• An amendment by John Conyers (D-MI) protecting military personnel from predatory payday lenders
• An amendment by Mel Watt (D-NC) exempting tuition costs from the expense calculation in the means test
• An amendment by Adam Schiff (D-CA) protecting people whose bankruptcy is due to identity theft
• An amendment by Howard Berman (D-CA) protecting bankruptcy filers who file due to medical crises

Once again, Democrats are fighting for the average Joe, and Republicans are licking the boots of their corporate campaign donors.

AP

Good, but I would wonder about the numbers and circumstances.

The number I read for actual fraud was 10%. Those guys are actual crooks, so they deserve nothing except punishment.

I don’t believe that so many other suffer just because of circumstances beyond their control. Not living within your means is a problem for rich and poor. Many people have too much money, but nobody has enough.

I don’t have a problem with the purported goals of the amendments you mention, but the devil is in the details.

Mike Tyson, I guess, fits into the category of those that lost their jobs, but I feel little sympathy for him.

The predatory leading for the military is a problem, but you would be taking away a choice people want and putting loan sharks in business. I support the military, and want to accommodate their reasonable needs. But just because something is said to support the military doesn’t make it necessarily a good thing.

Besides, Conyers record doesn’t inspire confidence in his ability or integrity.

Tuition is another good thing, but it doesn’t necessarily need a special rule.

Identity theft is a fear we all have. I would like to see what percentage of bankruptcy this is. The definition of identity theft is also a little too fluid. Having someone steal and use your credit card is often called identity theft. This is a big headache, but doesn’t end up costing you anything except time and irritation. This is something I experienced.

Finally, what do you mean “due to medical crisis”. In the oft-cited study by Harvard, medical crisis included anyone who had more than $1000 in medical bills. A thousand in medical bills is a nuisance, but that alone shouldn’t drive anyone into bankruptcy. One root canal can cost that much. That same study included chronic gambling as a medical condition. That shows how good amendments might be abused.

Jack, I don’t know where you get your info, but the Harvard study uses the average figure of $11,854, not $1,000. And drug addiction and gambling constituted 3.7% of the total filers, compared to 46.2 who filed for reasons of major medical cause.

It sounds like you’re getting some bad spin. Here’s the study.

AP

Exhibit 2 in the study mentions medical bills exceeding $1000 in the last two years or an injury that caused the person to lose two weeks or more of work. I expect that many had it worse, but those are very low thresholds. The average figure is just that, the average. It can be pulled higher by a couple of very high individual cases. In the year prior to bankruptcy, out-of-pocket costs (excluding insurance premiums) averaged $3,686.

This is not small money, but it shouldn’t cause an otherwise solvent guy to go bankrupt in any but the lowest income categories. We don’t guarantee that life will be easy. Most people have to go through a time of financial struggle. When I started my first job, my wife’s and my student loan and related payments swallowed more than half of my take home pay. We ate potatoes, didn’t buy a new car and waited to have kids until our prospects improved. When you borrow money, you pay it back if you CAN, not if you want to.

Of course. The problem is, this particular bill allows the credit industry to go after you whether you can pay it back or not. That’s why Dems were working to soften the law specifically for those who have to file for legitimate reasons.

The fact is, the system we had did a pretty good job by deciding personal circumstances on a case by case basis. Now a persons fate will be decided by an arbitrary threshold.