Cynical Nation

90% of bankruptcies are caused by illness, job loss or divorce. Yet, there was little written in this bill regarding the circumstance of the bankruptcy. A woman who discovers her husband has secretly driven them into debt will find her wages garnished long after the divorce. The credit card companies don't have to do anything about their abusive practices, which will most likely now grow worse now that they have less fear over whatever risk they had.

For shame, Democrats. There could have been reform that was fair to all concerned, but this bill is just a sellout. I will remember all of you.

Surprisingly, the Philadelphia Inquirer provided this:

Michael Staten, director of the Credit Research Center at Georgetown University, said the bill was neither as onerous to consumers nor as beneficial to creditors as either side argued.

"I think this is the most over-hyped issue that I've seen in a long time, frankly on both sides," Staten said. "I don't think it's going to prevent the vast majority of people who need bankruptcy relief from getting it."

The legislation sets financial limits on who could qualify for bankruptcy under Chapter 7. The bill allows bankruptcy petitioners who earn less than the median income of their state to file under Chapter 7. Those who earn more and can repay at least $6,000 over five years can file only under Chapter 13 debt reorganization, which requires some repayment.

Families with children, single mothers, divorcing spouses, displaced workers, the poor, and people with expensive medical problems, particularly seniors, make up the bulk of bankruptcy filers. The law's impact will likely be greatest in states with the highest bankruptcy filing rates, including Utah, Tennessee and Georgia, according to the American Bankruptcy Institute.

Independent studies estimate the legislation would force 10 percent of debtors to seek Chapter 13 debt relief instead of Chapter 7 protection. Those studies estimate that debt ranging from $1 billion to $4 billion would be repaid under the proposed law over a five-year period.

http://www.philly.com/mld/inquirer/news/front/11085301.htm

Don't believe the hype.

A brief review of the papers of the Credit Research Center has shown that (1) they support deregulation of the credit card industry and (2) they support cracking down on individuals they believe can go through Chapter 13 rather than Chapter 7. In short, they support the credit card industry's position.

The credit card industry is known to be the financial supporter of "credit counseling" non-profits that purport to help the individual when in fact they work for the industry. I would not be surprised if they were a major financial supporter of the Credit Research Center. The Center claims to be unbiased but does not document the funding of its project grants.

I doubt that a divorced or a sick elderly woman now forced to go through Chapter 13 rather than Chapter 7 (which in most cases just delays going to Chapter 7) will appreciate being told "Don't Believe the Hype."

Only those who have the means to pay some of their debts will be forced to file CH 13, approximately 10% of the total as was stated in the Inquirer article.

PE believes the hype. :)

Nice catch phrase, CRB. Too bad it doesn't mean anything.

CRB, I spent a couple hours yesterday reading through the (PDF) papers of the Credit Research Center. I sense a bias not only in their conclusions but in the questions/practices they don't explore (e.g., the credit card companies' recent practice of lowering minimum payments to almost nothing no matter how high the balance.)

You and I no doubt don't agree on this issue. However, your 10% figure is an estimate and it doesn't go into who that 10% will be. I have tried to find out as much as I can about this bill and frankly I think the means testing formula will be very unevenly applied. The more I understood the formula, the more I could come up with examples of people of whom I have personally known who will be affected by this bill.

So don't give me this "PE believes the hype" bullshit. Again, you and I can disagree and the two of us no doubt begin this debate with different priorities and values, but don't patronize me with your smug superiority.

PE, take a deep breath and calm down already. You take this stuff way too seriously. The bill was passed, so we will soon know exactly what are the effects of the new rules.

I hope that wasn't too patronizing.

This is bill will affect people going through serious difficulty. It will take years before we will know fully the bill's impact.

I'm having a hard time understanding the outrage over this. Since when did declaring bankruptcy and erasing all your debts (but keeping all your stuff) become one of our Constitutional rights? And believing the credit card companies are evil isn't a reason to allow people to default with little consequence.

CRB, people in a bankruptcy judgment do not get to "keep all your stuff". The exemptions vary from state to state. Here in Tennessee, you can exempt $5,000 in real estate and $4,000 in personal property. Hardly "all your stuff" unless you really were destitute.

As stated before, there are many reasons people go bankrupt, the chief ones being health issues, unemployment, and natural disasters.

I wouldn't call credit card companies "evil", but they are predatory. They extend credit far too easily, then get upset when they can't collect. They clog up my mailbox with several offers per day.

I would say that I don't agree with most states' homestead exemptions for several hundred thousands of dollars. I think, for example, if you own a $500,000 home (assume for this example that you've paid for it all, thus have 100% equity), you should be forced to sell it and surrender at least 80% of the proceeds to your creditors.