Eliminating "the abuse of the bankruptcy law"???

[housewolf]

At the Judiciary Committee hearings a few weeks ago, GOP senators and their witnesses alleged that the purpose of S.256 is to eliminate "the abuses of the bankruptcy law that we have witnessed in recent years." Their underlying assumption, of course, is that bankruptcy filings are on the rise because more Americans are gaming the system. No doubt there is a small number of bad apples, but nobody, including Volokh blogger Todd Zywicki, has pointed to any empirical evidence suggesting that the barrel is rotten.

There is, however, one class of bankruptcy abuse that's both highly visible and well-documented: that perpetrated by the wealthiest filers.

Since 1997, five states have allowed for the creation of asset protection trusts, where the trust settlor is often both the trustee and the beneficiary. S.256 will further enable the use of these trust instruments by rich Americans seeking to protect high-value assets from creditors after declaring bankruptcy. What type of assets are being protected? Several months ago, professional football player - and multi-millionaire - Ricky Williams considered filing for bankruptcy in order to protect his $8.6 million signing bonus. According to a recent Times article, asset protection trusts have gained great favor among physicians and corporate executives. This sort of exploitation simply isn't an option for the vast majority of bankruptcy filers: the average filer couldn't afford the legal fees to create an asset protection trust. It's worth noting that the existence of these trusts generates big business in the states that allow them. That's why the two Delaware Democrats are supporting the bill. If Senator Biden wants to be a viable candidate for president in 2008, he ought to vote to support the American middle class rather local corporate interests.
-- Jason Spitalnick


http://www.talkingpointsmemo.com/bankruptcy/archives/2005/03/index.php#005033