Centerfield

As I understand the bill, the big problem with it isn't that it includes provisions favoring the wealthy (it doesn't) but that it does absolutely nothing to close the loopholes by which both the wealthy and corporations can currently shelter assets from creditors. And they are indeed some mighty big loopholes. By moving to a state with a 100% homestead exemption, for example, a wealthy person could buy a $10 million house for cash, leaving himself cash-broke, file for bankruptcy, receive a total discharge of debt, and then sell the house and be back at $10 mil free and clear in the bank. That's the simplest example, as I don't want to bog down in other technical moves such as trusts.

Those targeted (and that is indeed the correct word) under the bill are those taking bankruptcy whose overall income is equal to or greater than the state median income who are not wealthy enough to take advantage of the loopholes. The wealthy retain their safe havens, the lower-income bankrupt go on much as before, but the middle-income earners get a much tougher bar to leap in getting total discharge. The major winners are, of course, those corporations who make a mint off of issuing unsecured debt. Namely the credit-card companies and medical debt collectors. The bill is specifically written to give more recovery tools and posibilities to holders of unsecured debt.

They say they need this bill to keep costs down for the rest of us. Anyone want to bet on how little of those "savings" get passed on to the consumer? Don't hold your breath waiting for late-payment fees and interest rates on your credit cards to go down.

I can see some justification for the legislation, considered just by itself, and I can see how centrists could support it. But I also see the screaming inequities of the system overall, the rapacity of the credit card companies that helped create the problem in the first place, and the utter lack of reforms addressed at the loopholes enjoyed by corporations and the wealthy.

If it were part of an overall package of bankruptcy reform, it might be a good thing. As it sits, it's a giveaway to the credit card and collection companies.

I don't often agree with Tully 100%. But, on this one I definitely do.

Genuine and equitable reform I am certainly onboard for. The bankruptcy system is being abused by some. But, this particular piece of legislation is a farce of reform.

Instructive is some of the amendments that have been rejected for this bill. I my post (linked above) I link to Colonel Zall's post about bankruptcy protection for veterans which was rejected.

Also noteworthy is the same amendment which shot this same legislation down in 2002 was rejected by the Senate this time around. It explicitly disallowed anti-abortion protesters from declaring bankruptcy to avoid paying fines for breaking the law while protesting abortion clinics.

So... what we have is a loophole allowing anti-abortion protesters to declare bankruptcy, regardless of their ability to pay the fines, for breaking the law... but veterans who are genuinely cash-strapped not being given a safety net loophole.

I just don't see where the public good is in this bill.

I don't have much sympathy for people who get into deep credit card debt. I always pay off my bill at the end of the month--and it's not because I'm rich but because I don't buy what I can't afford. I know some people who consider their credit line as part of their "net worth" and who use it, for instance, to fund their low-budget movie.

I have complete sympathy for those who get into medical debt. There ought to be a way of distinguishing between these two. Except perhaps for a few plastic surgery junkies, most people do not incur medical bills because they enjoy medical procedures. Allowing them to get out from their debt would not create an incentive to get hospitalized more. I suppose it could create an incentive to pay your credit card bills first and medical bills last, but that incentive probably exists already.

Rick, you must've posted on this just as I was composing. Check the links I posted in the thread I started above for more info.

The homestead rules vary by state. I may be wrong, but in MA, as it was explained to me by my lawyer, the homestead rule protects your house in the sense that you can't be forced to liquidate this asset to re-pay debts. But it doesn't free you having it considered as an asset.

I agree with those who suspect this is something of a giveaway. But I'm sure i'm not the only one who knows someone who lived high on the hog and then got out from under via bankruptcy, and then resumed high-hog policy. We pay for that.

I'm especially skeptical of how businesses can sometimesget out from under too easily, and these types of charcters deserve scrutiny. Over the years I've read several stories about shady serial entrepreneurs who start up and run busnesses fly by night, running up orders and living like kings, and then they go out of business leaving people with $4000 visa bills and no furniture, and so on. Then they show up somewhere else with a new business 9 months later. Hanging's not good enough for that ilk.

CNN's poll today asks whether you support making it harder for people to declare bankruptcy. 57% support the idea, which tells me it's going to pass, and that many people have resentment over others who declare bankruptcy. It doesn't surprise me.

Donald Trump's properties always seem to go in and out of Chapter 11, yet he lives quite well. I enjoy The Apprentice, but still...

Another thing to note is that for a significant percentage of those who are in high credit card debt, the driving force was medical bills. It's not just yuppie spend-fests that bust the balances. The credit cards become the "health insurance" of last resort when the job falls out from under, or the medical services simply aren't covered under the insurance.

Certainly some people are gaming the system. But it was the credit card companies that made the system so easy to game, and so relentlessly push credit offers onto everyone.

I happen to know a couple where the wife is addicted to gambling. Prozac, suicide attempts and several hospitalizations later they declared bankruptcy. The judge called the gambling debt "entertainment expenses" and said it all had to be repaid.

The casinos actively encouraged her to return, and the credit card companies continued to flood them with card applications. When the husband tried to get them to stop soliciting her they told him "Hell no".

Personal responsibility is a wonderful thing, but it's a two way street. After watching all this go down I now view credit card companies as little more than drug pushers.

Now it's supposed to be harder to declare bankruptcy?

Several comments about bankruptcy and medical expenses 1) If there are large numbers of Chap 7's due to medical debt (and there are some questions regarding that) doesn't this just still come back to the large problem of the medically uninsursed. Using Chap 7 to solve part of the healthc care coverage prob is a poor solution 2) related to that, if I make the economic wager that "hey, I'm young and healthy and I don't need health insurance" and then proceed to get sick. What are the economic consequences of my "bad wager" 3) If I rack up a large debt due to the medical consequences of a "bad lifestyle" (i.e. drug abuse and secondary infections) should that be covered.

this will sound strange for a doctor to say but there's a part of me that questions whether "medical debt" is a better/more socially acceptable debt to have.

The thing is that medical debt is so often involuntary debt. No one plans to get sick, but when the choice is rack out the credit cards or, say, die, it's hard to blame them too much for choosing the debt. And when someone becomes unemployed (or just underemployed) the choice can be health insurance, or food for the family. Pray for health, because you don't want your kids naked and starving and living in shelters until you can get that better job.

With health policies running about $10K/yr for a family of four, it's easy to see how going either with or without health insurance can put a family under unless they're already pulling in good money.

I NEVER agree 100% with Tully but on this one I'm at about 99%.

However, I'm perplexed at your statement:

"As I understand the bill, the big problem with it isn't that it includes provisions favoring the wealthy (it doesn't) but that it does absolutely nothing to close the loopholes by which both the wealthy and corporations can currently shelter assets from creditors."

Huh? Okay, a literal interpretation can be made that it doesn't give the wealthy any NEW protections, but clearly it favors the wealthy while piling on punishment for those foolish enough to have been poor or average before they went broke.

While I'm sure there will be some support from a few democrats, this bill has GOP economic Darwinism plastered all over it. But I guess this is what the majority of us want.

2) related to that, if I make the economic wager that "hey, I'm young and healthy and I don't need health insurance" and then proceed to get sick. What are the economic consequences of my "bad wager"

Everything Tully said on that subject plus one other thing. Sometimes it's not an issue of lacking health insurance, but having insurance that doesn't cover what's needed, something that those not obsessed with reading the fine print, ie. most people, would not know until they need a service that the insurance doesn't cover.

I would tend to agree that this should be addressed through health care policy, but as a last resort, having bankruptcy protection in medical cases is better than no protection.

While I don't have a lot of sympathy for those who allow themselves to get into debt I have even less sympathy for the credit card issuers. The credit card companies are indeed predatory and encourage people to get in over there heads. After filing for bankruptcy the first mail many recieve are pre-approved credit card offers. Any bankruptcy law that does not address the predatory nature of credit card issuers is unfair.

Sometimes it's not an issue of lacking health insurance, but having insurance that doesn't cover what's needed...

Amen. I've heard that story from parents more times than I care to remember. They have a child diagnosed as developmentally disabled, do their research and discover the lifetime prognosis is enormously better if the child receives the appropriate intensive therapy from ages 2-8. Then they discover that therapy runs $50K a year and up, and that their insurance, if it pays anything at all, pays maybe $2-3K/yr at best.

You can fill in the blanks on how that story goes, but it quite frequently ends in bankruptcy court.