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Conservative Congress not being consistent with bankruptcy bill
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| by JODY BLEDSOE, Up & Coming Weekly, March 30 - April 5, 2005 |
March 30, 2005 |
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"People should pay their bills." Ostensibly, that is the message being repeated constantly by Senate and House Republicans working feverishly to accomplish a massive overhaul of the nation's bankruptcy laws.
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This pretty much sums up President Bush's position, too. "Bankruptcy is too easy," the Republicans say, "and if we make it harder, more people will budget better and pay their bills." If nothing else, I have to give them points for nerve. The national debt stands at about $7.7 trillion, and since 1969, not a single year has passed in which Congress has not spent more money than the government has realized in revenues - not even in the years since the "Contract with America." Paying your bills is important, as long as you're not the government.
Don't get me wrong: I think people who can afford to pay their bills should do so. Most people would agree, including most of the approximately 1.3 million people who filed for bankruptcy last year. Contrary to the spin on "reform," the overwhelming majority of people who file bankruptcy are not "free spenders." Rather, they are good, honest people who find themselves willing, but unable to pay their debts. Most have suffered some dramatic, unexpected event like a divorce, job loss or serious illness. They agonize over whether or not to file, and finally do so as a last resort to avoid being crushed by debt they can never repay.
The Republicans say these people need to be punished. That is ridiculous. They also say that abusive business bankruptcy practices should be ignored. That is outrageous.
Consider the case of a large, well-known corporation that filed for bankruptcy in Massachusetts in 2001. This company canceled health and life insurance benefits for nearly 6,000 of its employees, and stopped severance benefits for thousands of others it had laid off. At the same time, it got permission from the Bankruptcy Court to pay its senior managers about $1.5 million so that they would have an incentive to stay and fix the problems that were not fixed in the months preceding the bankruptcy. Not surprisingly, they failed. Yet these managers were rewarded with another $3 million.
Nothing in the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" would prevent this from reoccurring when the "reforms" take place. What will change is the availability and effectiveness of bankruptcy relief to the workers whose benefits were cut, and who were eventually fired, because of the business' failure.
To begin with, the costs of filing bankruptcy are going to increase by an estimated 25 to 40 percent. In many cases that will mean that debtors just won't be able to afford to file bankruptcy. Others will file, but to cut costs, they will not hire an attorney. Imagine their surprise when their case gets dismissed because they did not provide copies of their tax returns to either the Bankruptcy Court or to creditors who requested them. That assumes they even get past the new "means test," under which IRS standards might be used to determine their "ability to pay." Most people probably will not qualify for Chapter 7, but instead will be forced into Chapter 13, where they will be required to pay into a court-approved plan for a minimum of five years. Because it will be much harder to get rid of debt and to get through a five-year plan, most of the Chapter 13 cases will fail, and people will stay in debt. And without the availability of effective bankruptcy relief to level the playing field, decency and dignity will be gone, as credit card companies continue to raise fees and interest rates, and to treat delinquent debtors like criminals.
What about the "consumer protection" part of the reforms? Senate Democrats did offer a number of amendments that would have made "reform" more reasonable. For example, amendments were offered to curb credit card companies' targeting of college students, to allow older Americans and members of the military to protect more of the equity in their homes, and to set the maximum interest rate that any creditor could charge at 30 percent. The Republicans said "no." I think I'll do the same in 2006 and 2008.
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©Up & Coming Magazine 2009
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Jim Anderson |
Mar, 31 2005 |
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This bill has not addressed the primary reasons for bankruptcy nor the abuse that is so miniscule that it barely deserves attention. This could be easily found in the United States Trustee Program Bankruptcy Statistics “Significant Accomplishments” FY 2004. This reveals that 3,058 cases out of over 1.6 million were dismissed due to abuse, or less than two tenths of a percent of total bankruptcies. Only 4,753 motions to dismiss for substantial abuse were filed. Some may say that so few motions were filed precisely because there was no law to combat the abuse. However, in the debate the American Bankruptcy Institute estimated that only about 3% of filers would actually be able to pay their debts without bankruptcy. Supporters of the bill contend that figure is closer to 7%. That is still not rampant abuse that would justify a revamping the law. In 2005 after 50 years of trying, the banking industry finally succeeded in getting the type of bankruptcy reform they wanted. Maybe it is time to start teaching our children that debt is NOT necessary, and should be avoided if at all possible. Maybe we should take back our government and demand that the Federal Reserve Act be repealed and go back to a value based currency to limit the availability of credit.
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Karen Lahteine |
Mar, 30 2005 |
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The new bankruptcy bill, protecting the wealthy and destroying the hope of relief for many over-burdened and medically challenged average citizens in need of a new start, is shameful! If they had closed the loopholes for the Donald Trumps and the Conseco Inc.'s of our country, it might have made more sense.
As it is written, it's just the 'good old boys' playing more favoritism games. Money talks and the credit card companies have spent millions to get this bill passed in their favor.
We'd better find ourselves a new Mother Theresa to care for the increasing numbers of homeless and destitute, who will be living on the streets of our cities soon.
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