New bankruptcy law: winners and losers

[question everything]

New bankruptcy law: winners and losers

By Mary Jo Wiggins
April 21, 2005

(snip)

First, the winners:

Banks, credit card companies and other consumer lenders. They spent a lot of money (reportedly over $40 million) on political donations and lobbying over the last eight years, and they are likely to get a brilliant return on their investment. The new law gives creditors added muscle to collect debts both inside and outside of bankruptcy court. For example, all consumer bankruptcy debtors will now have to undergo what is called "means testing." Basically, this requires all debtors who make more than the median income in their state and who also meet certain other conditions to file a repayment plan under Chapter 13 and pay off at a significant portion of their debts over at least five years.

(snip)

Congressional Republicans. Congressional Republicans have been able to put together an impressive string of legislative victories that display their political cohesiveness, at least when it comes to business issues. For example, House and Senate Republicans joined forces to make sure that when the bankruptcy bill left the Senate, it did not contain any objectionable amendments (like New York Democratic Sen. Charles Schumer's amendment to block abortion protesters from having money judgments against them voided in bankruptcy) that would halt its progress when it got to the House.

(snip)

Now, the losers:

(snip)

Congressional Democrats. Congressional Democrats splintered on this issue, and their failure to present a unified front against the bill reflects the weak leadership at the top of the party and the lack of a coherent economic and social policy with broad appeal. Proponents of the bill were able to skillfully co-opt key Democrats like Sen. Joseph Biden, whose home state of Delaware is home to some of the nation's largest credit card companies. Other Democrats voted for the bill because they simply thought it would be seen as a "safe" pro-business vote. Whatever their reasons, the fact that so many Democrats voted for the bill makes one wonder just what, if anything, the national Democratic Party actually stands for in the post-Clinton era. (President Clinton vetoed a similar measure during his administration.)

Poor and middle class consumer debtors. Not only will this bill make it harder to get bankruptcy relief, it also will make the terms of any eventual relief much more favorable for creditors and much less advantageous for debtors. For example, the bill will substantially restrict the amount of money that individual debtors can spend on things like transportation, groceries and education. More of that money will have to go to pay creditors. It also, for example, will require debtors to repay much more than they currently do to retain an automobile in bankruptcy, even if that car has significantly depreciated since its purchase.

Bankruptcy judges. In my 18 years of practicing and teaching law, I have interacted with a lot of bankruptcy judges. I never cease to be amazed at the intelligence and integrity they uniformly bring to their jobs. It would be a blow to the system to lose even one because of this legislation.

(snip)

Wiggins is a professor at the University of San Diego School of Law.


Find this article at:
http://www.signonsandiego.com/uniontrib/20050421/news_lz1e21wiggins.html

[On the Road]

1. Comments from Clearstation.Com Message Board

Even the daytraders get it:

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From: okbyme Replying To : proshoot1 (post 397692) Apr 20 2005 3:08PM
Title: Bankruptcy Law

Can you imagine if we had this law for the past twenty years. I doubt the economy would be any where near the level it is now. I wonder if a law like this will eventually morph into chaos. If people can`t file bk any more they might just stop paying and nobody will know whats going on. Loop holes were left open so the wealthy could still move wealth off shore before filing. So we might see more rich people filing now.
http://clearstation.etrade.com/cgi-bin/bbs?post_id=6479824&Refer=

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From: proshoot1 Apr 20 2005 2:58PM
Title: Credit Crunch ?

With the new Bankruptcy Law, creditors may look at people with incomes at or below their states' average as a new catagorie of risk and jump at the chance to charge a premium for credit to those. Oh no, I can see it now. Lawyers will jump at the chance to sue creditors for possible DISCRIMINATION because of someone was denied credit due to their income was under the state average.
http://clearstation.etrade.com/cgi-bin/bbs?post_id=6479802


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From: kuldeep Apr 20 2005 4:05PM
Title: board

Well people its happened. The bankruptcy bill is now law. Its official. Now watch long stocks/bonds/and real estate values drop to an unprecedented level in the coming days, weeks, months, and years. Strong hands selling to weak hands...Now its time to guage the pyschology and sentiment. Questions, uncertainty, fear, and then panic in that order. While everyone is talking inflation, thats when deflation will rear its ugly head first starting as an innocent snowball and then turning into something much bigger. Sorry for the gloom, I would love to put some humor into this, but unfortunately, whats gonna happen ain't nothin' to laugh at. However, here and a few others luckily are prepared. History repeats itself. For those who are in their 60s and 70s, maybe ya'll can share your experiences of what the 1970s were like...and what you've learned since then.
http://clearstation.etrade.com/cgi-bin/bbs?Cmd=post&post_id=6479990&Refer=

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[realFedUp]

2. Bush's answer to 9/11...to buy, buy, buy

with credit cards might be rethought.....