Bankruptcy reform law

I must admit that I am somewhat stunned that noone has started a thread on this yet.

As many of you must know the president is eager to sign new bankruptcy reforms into law which may make it much harder for some people to discharge their debts. While this is a great boon to the credit card industry and may stop those who abuse the bankruptcy protections. I fail to see how it is so critical during a time when so many other issues should be at the front lines of debate.

Meanwhile: credit card companies are permitted to invade our privacy and monitor our utility bills and other expenses. Furthermore, if you forget to pay (for example)your electric bill or car insurance(even if you make good on them later) and even if you have never missed your credit card payments, the credit company can still (without warning) raise your interest rates. I read some where that credit card interest rates will average 25 % and may soon go as high as 30%.

Some of our elected officials wanted to exempt people who are serving in Iraq and Afghanistan. You know those poor souls who were working as electricians, accounts, fire fighters etc but, are now fighting overseas while there families here are forced to live on military salary which is often far less than then what they earned working here in the private sector. Unfortunately the Republicans would not allow such exemption yet they claim to support our troops!

 

I agree. This seems like a handout to the credit card companies. While I don't doubt that there ARE people who intentionally accumulate huge amounts of debt and declare bankruptcy, I don't see this as a major problem in our economy. If Congress was truly interested in fixing the problem, there are other ways of doing this that won't force down-on-their-luck individuals to live the rest of their lives in debt. Perhaps Congress could mandate stiffer penalties for abusers of bankruptcy, or Bush could have the Justice Department prosecute it more vigorously. I really don't see any benefit in the new changes to anyone except the credit card industry. But maybe I'm just missing something; if anyone thinks that the changes are a good idea, I'd like to know why.

 

Good. Lots of people abuse bankruptcy. I know of someone who went on a trip overseas, put it all on her credit card and then came back and filed for bankruptcy. Sickening. I'm sure this goes on all over too. To me, there are only rare cases when bankruptcy is appropriate. Mostly that would be due to illness or a disaster of some sort. Personal irresponsibility should not qualify.

So? No one is forced to have a credit card. You're an idiot if you don't pay off your balance each cycle.

Poor souls? Please. No one forced them to sign up for the military. Second, they make alot of money. I know people over there and they are doing extremely well financially. I don't feel sorry for them.

 

I suppose I'm still to young to understand most of this.

Let me get this straight, people used to, and still can until the enactment of this law, clear ALL of their debts through claiming 'bankruptcy'?

Perhaps I can offer a naive view to bring fresh debate to the subject.

This seems like the best capitalism has to offer. So if you fuck up and lose all your capital, you can clear it and have another go! Plus, people only make money. The bank or credit card companies might lose the money, but in capitalism someone ALWAYS makes something off someone elses loss. Money isn't actually 'lost' out of the cycle.

If this law is put into motion what will happen to those people who file for bankruptcy in the future? I was looking at CNN the other day and this exact topic came up; it seems that the credit card companies have risen their political contributions to 40 million, republican AND democratic.

Other companies have given large amount of donations in term for 'favors' once the president comes into power.

What happened to the American dream? What is going to happen to a population so used to having another 'chance' if the government suddenly drops this change on them? I really think this will not go well... Shit, i didn't even know it existed. No wonder there weren't so many people in debt!

 

I sure do. I have never declared, but I know people who needed to. Almost all of them because they couldn't afford insurance and got sick or had a baby, or got divorced or lost their job. This is just more way to kill the middle class.

Yes, some abused this Chapter of bankruptcy. I know a guy who just was a spendthrift and amassed huge credit card bills just before declaring, but most of the people who declare are down on their luck, due to illness or loss of a job. Now these people will lose their houses, their only asset and many will end up homeless.

Declaring isn't really a "free ride." You are banned from getting an other credit card, a home loan, a car loan ect for at least 7 years, even after that it is on your record and buying anything, unless straight cash is nearly impossible.

People will starve and become homeless because of this. If you have a home and children, credit cards are basically a necessity. With the ability of the CC companies to raise your APR for no reason whatsoever, you could end up very far in debt, just trying to get your head above water.

 

The thing is, companies like K Mart and United Airlines can still fuck up, have all their debts cleared and "start fresh" the next day. Only people like you and I will no longer be able to. (and in corporate bankruptcy, there are no restrictions on getting immediate credit, like there are with middle class people.)

 

Here's a good commentary on the subject from a dismayed Republican:

http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2005/04/10/EDGCSC4UP31.DTL

 

Well for most people that is not the case. The major cause of bankruptcy is: illness, lost job, and divorce. Besides the credit companies brought this on themselves. I know a person who only suffered temporary set back do to a job loss and called the banks right away and tried to negociate with the credit company but to no avail. The credit companies would not listen. In the end she was left with no choice but to file bankruptcy.

obviously you did not fully read or understand my post. The credit card companies will raise your interest rates even if you do pay on your credit cards but they will raise your rates if you miss even one payment of other bills. If you always pay off your full balance every month they will eventually cancel your card. However, if you run up credit they will also raise your interest rates. Another interesting thing to note about this is that they passed this law just before Christmas of last year! I personally do not own credit cards anymore. I cut up mine in protest to these new rules. Very soon you will be able to get better credit rates from you local loan shark than the credit card companies.

Really??? From what I understand many of our soldiers are on food stamps!! There are many people who were making a lot of money here at home but, may now loose everything they had when they return because they are not making anything on reserves or national guard pay!

Anyway, lets all cut up our credit cards and send them to the credit companies to protest this bankruptcy bill.

 

Illness and disaster aren't "rare cases." MOST bankruptcies are caused by medical bills. Bankruptcy abuse is not as commonplace as the credit card industry wants to make people believe.

I agree, but telling that to someone with an unpayable amount of credit card debt doesn't just make the problem disappear. Credit card companies know the risks associated with loaning money to consumers, and pass that cost on to their customers. There are other ways of preventing bankruptcy abuse (if that really is a problem, which I'm not so sure of) that don't involve penalizing everyone who needs bankruptcy protection.

I generally consider myself to be pro-business, but this new law is nothing but corporate welfare, pure and simple.

 

The people who declare bankruptcy are one reason rates are so high. Enough people default on debts and you have a depression on your hands. CC companies provide a service. If you don't want to abide by their terms, no one forces you to get one. Likewise, with risky investing. You know the risks. Bankruptcy was way too easy before. People SHOULD be penalized for failing to honor their debts and obligations. Back in the day they were thrown in prison. I know several people who've declared bankruptcy because of their irresponsible use of credit. Then, after a few years, they're good to go, debt free. Meanwhile, I pay my CC bills every month, pay them off. Sure, I don't have top of the line consumer electronics like they did, and still do, but my credit's good. But what difference does it make? As far as I'm concerned, they STOLE all that s*it. As for medical bills I have 2 words--health insurance.

 

In response to that I have one word for you. Ignorance

The rising interest rates is not due to "bankruptcy abuse". In fact the number of personal bankruptcies has gone down in the last year. Most people who file for bankruptcy would prefer to pay off their debts rather than go chapter 7. Unfortunately, the credit card companies will never negociate with debtors who have fallen on hard times even if it is only a temporary set back. The credit companies would rather write off the account(for which they get a tax break) than negociate. See, most people have paid for their purchases many times over so the credit card companies have little to loose by writing off the account, and taking the tax credit then, they eventually sell your account to a collection agency. It is win-win for them. They are not out a dime!

BTW- big corporations are still allowed to go bankrupt.

For the most part people who are poor will still be able to go bankrupt. It is the middle class that gets shafted by this one.

One final thing, anyone who files bankruptcy for credit card debts is crazy! Bankruptcies stay on your credit report for 10 years while the original debt only stays on for 7 and you can often get it removed before that!

 

I agree. People in America are addicted to spending, way too many Americans are in debt.
I don't really feel sorry for "poor" Americans. Even if you are poor here, you are way better off than most of the world. We need to get some perspective.

 

I'm Canadian.

This doesn't affect me, right?

 

This logic is completely false. You think it has no impact on a bank whether or not you pay back a loan?

 

Nope......

I dont know about how many people abuse bankruptcy.. But I know alot of people who have and its just unfair..... I would love to put myself in debt.. then start all over again... The people I know who have filed ended up with lots of great new toys afterward... One of my friends now owns 2 brand new motorcycles (2 months after bankruptcy) and another has a 50 or 60 inch big screen TV and a new car (about 3 months after filing) .... Must be nice

 

First you took the quote out of context.

Second, no I am not wrong. When you do the math for these people who purchase things on a credit card you find that most have paid for their purchases many times over. So, in reality the credit company is not actually out any money in most cases.

Anyway, all of that is besides the point. People would be willing to pay off their debts but, the credit companies make that impossible by refusing to negotiate. Again, I am talking about honest people here who have just fallen on bad times through no fault of their own i.e. medical disaster, divorce, lost job etc.. These are the majority of people who end up filling for bankruptcy. These people would be more than willing to settle their accounts because they know that in time things will get better and they will be able to pay. Unfortunately, the credit companies won’t negociate one inch. If they did, their would be a lot less bankruptcies. It is the credit companies that force the situation.

To put it in simpler terms: Lets say you loan an acquaintance $100.00 and he agrees to pay you back in full when he gets his next paycheck. However, 3 days later he is laid off from work so he won’t be able to pay you that $100.00. At least not all at once. Instead he goes through all his bills and figures that he could pay you 5 or 10 dollars a week until he has it payed off. Would you accept that? Of course you would. Something is better than nothing. The credit companies do not see it that way.

The way the credit companies see it: If by some chance you manage to continue paying at least the minimum balance they get even more of your money which means you may well end up paying for your purchases 10x over. By paying the minimum payment you are mostly paying just the interest and very little on the balance. If you don’t then they right it off. They already have your money and will get more as a tax credit and then selling your account.

Anyway, I think everyone should join me in throwing away their credit cards in protest. I did it a long time ago. Just after last Christmas when a friend of mine had his interest rates go through the roof even though he had never missed a payment and always payed more than the minimum. He ran up too much credit buying Christmas presents! That was when I found out about the new law that allowed them to do that. So throw away your credit cards!!! I did and I am living just fine without them.

 

Not everyone can have access to or afford health care insurance. People will STILL default on their CC bills, this law won't stop that, and the CC companies willl get their houses in leiu of payment. Nice.

 

That was a good article, Huck, Thank you! Both the Right and the Left can see how bad this Bill is.

 

I have health insurance, and am still thousands in debt from emergency surgeries I had to have last year. People that say crap like "I don't feel sorry for the poor" or "two words - helath insuance" obviously haven't experienced much of the real world, either that or had the luxury of growing up privilaged where their parents pay for college, bought them a car, and pay off their credit cards each month.

Stuff happen, people lose jobs, people have medical emergencies, divorce, house fires, pregnancies, car accidents, natural disasters, deaths in the family, and who knows what else. It happens to many people every day. And unless you are making something like six-figures or more a year, it causes debt. If you dont realize that then you havent been on your own long enough.

The main question for me is why is it that our gov't tries so hard to make sure businessess can stay on their feet, while not affording the same to citizens? Who is this gov't supposed to be here for anyways?

 

Like I said, this logic is completely false. You are saying it has no impact on a bank whether or not you pay back a loan, you have merely repeated yourself.

First of all, the "tax credit" is not a tax credit. Loan writeoffs, like any other expense (salaries, rent, advertising, phone bills, etc, everything) are tax deductible in the sense that you deduct expenses from revenues to get taxable income. They are still expenses and cost the firm money.

Number two, how much do you think $100 of defaulted credit card debt can be sold off for? $100? No way. $50? Not likely, in fact credit card companies often sell bad debt for as low as 3% of face value. This is pretty much a complete loss. Credit card lending is the riskiest lending most banks have on their books.

Number three, paying "many times over"? Yes, it can happen, although it would take years and you would have turn down all opportunties to refinance. But that doesn't describe most credit card debt. Meanwhile the bank is constantly running its own interest costs - banks don't get this money for free.