So … the new bankruptcy bill. Basically if you are above the median income level for the state you live in, then you can’t file bankruptcy and have your debts wiped clean… you have to enter a repayment plan.
This was pushed for by the credit card companies, which heavily lobbied republicans and some “pro-business” democrats.
Problems: 98% of the businesses in america are “small” businesses. the vast majority of these small businesses rely on loans that must be personally guaranteed. if your business fails, then you can forget ever starting another one, cause you’ll still be on the line for a lot of dollars. a lot of people won’t even start a business because they don’t want to risk their personal assets.
Apparently personal responsibility only applies to the people borrowing the money.
Thanks to congress, the people lending the money are now free from the responsibility of researching credit risk.
I’m not sure I understand this. what exactly is wrong with asking someone to be responsible for their debt? If you borrow money, you’re taking a risk. If your business fails before you have paid off your debts, why should you get a free pass, and the ability to screw your creditor out of their money?
What’s wrong with asking people to be responsible for their debts?
In the end, it’s good for all of us. As consumers, we pay for those who default on their financial obligations. I’m all for tightening up the rules to prevent people from stiffing others for their debts.
as an fyi to maybourne, the bill doesn’t apply to ch. 11 bankruptcies which involves business entities. only personal bankruptcies.
first, the biggest problem is that the majority of people that file for bankruptcy are middle class people that file for reasons related to emergency medical treatment. NOT for irresponsible credit card debt.
second, yes, people should be responsible. but responsibility is a two way street here. what about business responsibility and reckless lending practices? what about how the cc companies charge exorbitant rates that make it impossible for people to pay off the balance? what about sending out scads of pre-approved cc applications to people with no or low incomes–like college kids?
if there was indeed an issue, congress should have let the market sort itself out. if cc companies bottom line was being affected by ch. 7 bankruptcies, they need to change their business model: more stringent approval requirements, lower interest rates, higher minimum payoffs, etc. instead, they lined congress’ pockets and got a free pass on their irresponsible business practices.
this wasn’t about helping consumers. or the general public. it was about appeasing a very well-monied special interest group.
for adults who make some level of income, i have decidedly less sympathy if they wrack up obscene amounts of debt.
however, what about someone like a college kid? do you really think that the majority of 18-20 truly “gets” the ramifications of credit or understands the terms of the contract(i.e. interest rates, etc.).
the cc companies target the most at risk people and then run to congress when those folks are true to form and have trouble paying bills.
suppose you had a friend that kept lending money to his dead beat brother and his brother kept stiffing him on payback. what would you tell your friend?
“what about how the cc companies charge exorbitant rates that make it impossible for people to pay off the balance”
How about you don’t buy beyond your means to pay it off/
“what about sending out scads of pre-approved cc applications to people with no or low incomes–like college kids”
What about those people not signing up for stupid credit card offers?
If I’m a credit card company, i’d be pissed too if my bottom line was being affected by a law that allows people to borrow my money, and then not pay me back.
if the cc companies’ bottom line was being appreciably affected by bankruptcy laws, why not change your business model? it’s not like bankruptcy laws are new. they’ve been around since the late 1800’s.
again, congress needn’t involve themselves in this issue. the market would or should have corrected itself with the cc companies altering their business practices. or do you think a 25-30% interest rate is reasonable?
it doesn’t affect businesses which fall under chapt. 11. well, i guess there is some indirect means that a small business could be affected if the owner filed for personal bankruptcy. but again, this bill is targeted at ch.7/ch. 13 personal bankruptcies.
my feeling is that the reform is much too broad especially considering that most people filing for chapter 7 aren’t doing so because of abusing their credit cards.
Like I said I didn’t read the entire thing but what specifically is being changed. This;
“Permits the bankruptcy court to convert a Chapter 7 case to either Chapter 11 or 13 with a debtor’s consent. (Current law requires the debtor’s request for such a conversion.)”
Doesn’t seem like a bad idea. As well as a couple of other “debtor” protection titles.
I would also be intrested in your source for this statement.
“especially considering that most people filing for chapter 7 aren’t doing so because of abusing their credit cards”
Seperating out business, which IMO is a different animal than personal, I’d suspect that most people doing bankruptcy of any sort are doing so because of poor credit card or personal spending choices. I have no source for my opinion other than people that I know that have gone bankrupt. Of the people I know, outiside of business, I’d say 75% simply got in over their heads.
a harvard study of bankruptcies since '81 found that 54% were medically related. now, i haven’t read the study, but have read some articles on its methodology. this methodology will have an inflationary affect on that number. but even the national review concedes that something along the lines of 27% of personal bankruptcies are indeed medically related. that definitely puts it amongst the top single factors. and at the very least is statistically significant enough to warrant some exceptions to the reform, given that catastrophic medical concerns are one of the best reasons to give someone a “fresh start”.
Republicans don’t hate small business owners. That is a short sighted and myopic analysis of this legislation, which is long past due.
The previous absurd bankruptcy laws did not have a provision for accountability. As a result, you, the non-deadbeat, did very directly pick up the tab for the seven year wonders who could take insane risks, fail, and be off the hook in seven years. You paid for that.
In the past eight weeks in Michigan six bicycle retailers have closed their doors. Good. They deserved to. They didn’t work hard enough, they went home at night, they got lazy. It isn’t like that. Business is war, it isn’t a hand-out. There isn’t and shouldn’t be a safety net.
Sometimes people confuse a “job” for a “business”. In business, you are more than 100% accountable.
I was not behind this bill since it had been tossed about since the mid-late '90s (and probably earlier than that) because of these reasons:
The creditors have not been asked to behave, as well
Predatory lending will now even be worse than it is
I am one who says for people to live within their means. I am one who says that people should be responsible. But when the creitors are willing to contribute to a line of unsecured credit that sometimes exceeds 2-10X a person’s yearly income, one has to wonder.
I think credit should only be maybe 1/4 of a person’s yearly income, if even that. It should be law. I know, for some of you who say the government should stay out of our lives that it’s wrong to ask that; but the government will never be out of our lives no matter who is president (unless we have a libertarian).
For many people, all it takes is either a medical emergency or a change in employment (whether it be laid-off, cut-back, or business slowing) to suddenly not be able to pay their debts. I know for a fact that some people have had to use their credit to buy groceries, then buy interview clothes or pay for their car maintenance while unemployed or whatever.
Sure, people should have a year’s worth of income saved back in case of an emergency like this, but with as expensive as life is, it is very difficult.
For many people, they can climb out of credit card debt, but for a few, it can be insurmountable.
If everyone were made to play fair, I would have supported the bill, but it looks an awful lot like it was written by the credit card companies for only their protection.
Here’s the three rules to follow to avoid personal bankruptcies:
#1. Never borrow money.
#2. Never lend money.
#3. Never spend money to make money.
And Tibbs is right. As an example, a couple of years ago, our airline put a halt to all the overtime that the baggage handlers and other contract employees were making (for various obvious reasons). Some of these people had went out and secured mortgages (and shame on the lenders for even considering overtime pay as a component of salaries and wages!) based on their pay rate that included the overtime (many were making in excess of 100,000 dollars/year for handling baggage…God bless America!!) STOOOPID!! When the overtime tap was turned off, there were a bunch of guys who saw their houses go into foreclosure. Sad, but hardly surprising when you don’t live within your means.
And I think you can buy a supplemental catastrophic incident-type form of insurance for a nominal fee to protect against medical emergencies and such. Hell, if Dolly Parton can insure her hooters, you ought to be able to find insurance for other things, right?
If I’m a credit card company, i’d be pissed too if my bottom line was being affected by a law that allows people to borrow my money, and then not pay me back.
Why would you loan money to people that couldn’t pay you back?
