Cloture for Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
March 8, 2005 7:09 PM   Subscribe

A Senate bill to overhaul federal bankruptcy laws, a top priority of retailers, auto lenders and banks, cleared a key hurdle Tuesday afternoon. Sixty-nine senators -- nine more than needed -- voted for "cloture," a procedural move that limits debate. Republican leaders hope to push the bill to a final vote by the end of the week. Earlier, the Senate turned back a controversial, abortion-related amendment that has scuttled previous efforts to pass bankruptcy legislation. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was first introduced in 1998 as The Consumer Bankruptcy Reform Act.
posted by airguitar (63 comments total)
Fuckers. This from the same group who thought a 30% interest rate cap would be too restrictive on credit card companies.
posted by Gilbert at 7:23 PM on March 8, 2005

bend over, government in action
posted by edgeways at 7:36 PM on March 8, 2005

I second you, Gilbert. Except fuckers is not descriptive enough.
posted by PigAlien at 7:36 PM on March 8, 2005

This is a lot of links, but seems really interesting. Anyone willing to synopsize the above issue?
posted by xammerboy at 7:55 PM on March 8, 2005

Of the rich, by the rich, and for the rich, I guess.
posted by FormlessOne at 7:57 PM on March 8, 2005

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

*cough* bullshit *cough*

Anyone willing to synopsize the above issue?

Yeah, big business is collecting on all that support they've given the GOP.

To be more specific... They successfully spun the myth that people declare bankruptcy in order to skip out on the credit card debt they've deliberately rung up ... ignoring the reality that most bankruptcies are caused by medical bills, divorces, deaths, etc.
posted by pmurray63 at 8:01 PM on March 8, 2005

P.S. I wanna know which Senate Democrats voted for this.
posted by pmurray63 at 8:03 PM on March 8, 2005

Well, whaddya know ... one of mine did:

Biden (D-DE)
Byrd (D-WV)
Carper (D-DE)
Conrad (D-ND)
Johnson (D-SD)
Kohl (D-WI)
Landrieu (D-LA)
Lieberman (D-CT)
Lincoln (D-AR)
Nelson (D-FL)
Nelson (D-NE)
Pryor (D-AR)
Salazar (D-CO)
Stabenow (D-MI)
posted by pmurray63 at 8:06 PM on March 8, 2005

The real beauty of it, though, is the bill's sponsor, Chuck Grassley. He's got a conservative voting record on moral issues like gay marriage, abortion, and sex education. He talks a strong game on this front -- he's a member in good standing of The Family, a creepily named Washington group that melds Christian language with conservative nationalism and hides itself behind a veil of media-hostile secrecy. With this strong moral foundation, Grassley should be very sensitive to concerns about Biblical standards, right? Not quite.

This gem just in from the Des Moines Register:
A national group of Christian lawyers is appealing to church leaders to join them in lobbying against the bankruptcy reform bill introduced by Sen. Chuck Grassley, R-Ia.

The lawyers say the legislation runs contrary to the forgiveness of debt and charity required by the Bible.

"As Christian attorneys, we strongly believe that it was never God's intention to create a society where indebtedness was a crime or a badge of dishonor," Christian members of the National Association of Consumer Bankruptcy Attorneys wrote in a letter sent Feb. 26 to hundreds of church leaders across the nation.

The lawyers note that in the Old Testament, God did not outlaw borrowing and lending, but provided that loans would become discharged every seven years.

In response, Grassley said Congress could not be bound by biblical mandates because "the Constitution does not provide for a theocracy."

"I can't listen to Christian lawyers because I would be imposing the Bible on a diverse population," Grassley said. "I'll bet those lawyers wouldn't want us to impose the principles of forgiving debt every seven years. If that were the law, nobody would loan them money."
Despite Grassley's moral fortitude on popular Christian hot-buttons, he's jumped at every chance to screw individuals since he was elected in 1980. He's voted against eliminating the "marriage penalty" for married taxpayers. He's voted to repeal safety standards for assembly-line workers. He's voted to limit appeals in death-penalty cases, even when new evidence may prove the innocence of those on death row. He voted against minimum wage increases. He... well. You get it.

Grassley is quite happy to demolish Church-state lines when it favors his political career. He's thrown his support behind new legislation that would allow churches to endorse political candidates without losing their tax-exempt status. But when it comes to bankruptcy legislation, he knows which side his bread is buttered on. The credit industry, and MNBA in particular, is one of the GOP's largest campaign donors, and when they come calling Grassley answers. When their exploitative business model is threatened, society's morality and compassion runs a distant second. "I can't listen to Christian lawyers," he says, "because I would be imposing the Bible on a diverse population."

You can't pay for that kind of irony.
posted by verb at 8:15 PM on March 8, 2005

No joy in ParisParamusVille over this one.
posted by ParisParamus at 8:17 PM on March 8, 2005

Having just seen a friend through a career-ending sports injury, I have witnessed first hand the good that bankruptcy can do. This person now owns a home, and has a better [non-laborious] job. BK is abused, but let's not punish the people it was designed to help.

Big Business wins again. Note: No corporate bankruptcy reform mentioned anywhere. Who is looking out for the consumer?
posted by vaportrail at 8:25 PM on March 8, 2005

They've been busy.

Well, whaddya know ... one of mine did:

Biden (D-DE)
Byrd (D-WV)

Byrd voted for this crap? That really surprises me. Where did you get that info, pmurray?
posted by undule at 8:26 PM on March 8, 2005

When did our representatives becomes our rulers?
posted by crazy finger at 8:27 PM on March 8, 2005

U.S. Senate Roll Call Votes 109th Congress - 1st Session:

On the Cloture Motion (Motion To Invoke Cloture On Bill S. 256 )

(This same link is in the FPP.)

Talking Points Memo has a "Special Bankruptcy Edition", which has a list of Democratic Senators in two camps: The Credit Card Corps and The Consumer Champs.
posted by sequential at 8:41 PM on March 8, 2005

America's getting what it voted for. In the ass.
posted by trondant at 10:12 PM on March 8, 2005


A big stink needs to be made about this
posted by Sticherbeast at 10:20 PM on March 8, 2005

I can't be the first one to point out the supreme irony of this being pushed through in a year of record federal deficits, can I?

What I find most interesting about the recent developments with this bill is that they were finally able to kill the "abortion related ammendment". This ammendment, from NY Democrat Chuck Shumer, essentially tries to close a loophole that allows criminals to declare bankruptcy to keep from paying fines as a result of being convicted of a crime. In years past, the ammendment specifically addressed pro-life activists who barred entrances to abortion clinics or threatened doctors. The most recent Shumer ammendment took out any language specifically regarding abortion and broadened it to all criminals.

Imagine this. You're an activist, but not just an activist, a pro-lifer who publishes the personal contact information about doctors and their families. You threaten these doctors with bodily harm or even death. A civil suit is brought against you and you declare bankruptcy, along with several co-conspirators in separate jurisdictions. After $1 million in legal fees -- to the American tax payer -- the case is still on hold.

How does shielding this individual protect me as a consumer?
posted by jimray at 10:27 PM on March 8, 2005

Er, scratch that. Tax payers obviously do not foot the bill for civil suits -- on a relisten, that should be "...$1 million in pro bono legal fees, the case is still on hold."

My bad.
posted by jimray at 10:40 PM on March 8, 2005

A big stink needs to be made about this

The big stink needed to be made a couple months ago, when the Congressional maneuvering began. Now, most Senators--or enough of them--have probably made up their minds.

apologies if you were being sarcastic...
posted by MikeKD at 10:50 PM on March 8, 2005

pissed off. very.
posted by shmegegge at 11:00 PM on March 8, 2005

You can't pay for that kind of irony.

You can pay for it — that's the irony.

Crooked Timber has a post about this with lots of interesting comments.
posted by IshmaelGraves at 11:02 PM on March 8, 2005

Hope none of y'all gets sick ever again.
posted by Space Coyote at 12:03 AM on March 9, 2005

One of the things that economists attribute to the success of the US economy are the bankruptcy laws and how relatively easy it is to start again after taking a risk and failing.
Do these people know what they're doing?
posted by quiet at 3:03 AM on March 9, 2005

Do these people know what they're doing?

That question answers itself. But I'll answer it too. This administration has harmed our economy, our security, and our international prestige on a routine basis. This is more of the same. You'd have to presume that they really don't know what they are doing.
posted by stiggywigget at 4:14 AM on March 9, 2005

Ugh. And this is only year One.
posted by yoga at 4:42 AM on March 9, 2005

Corporate whoredom (aka fascism) runs the country.
This bill wasn't even written by legislators but by corporate lobbyists.
(No surprise there, Delay has been bragging about that for some years.)
Last week it was "no more lawsuits against corporations."
Next week look for debtor's prisons?

The regulatory agencies have already been gutted by CEO Presidential edict so there's little left to stop complete corporate fascism, especially considering the Patriot Act 1 and the upcoming Patriot Act 2. Dissent will not be tolerated. Get in line citizen.

Kinda makes me hope that the democracy domino theory is correct and that the US gets in the line.
posted by nofundy at 5:11 AM on March 9, 2005

I simply don't understand this. Credit card companies are in the business of taking risks. They risk that the consumer with poor credit will rack up bills and not pay them, and they attempt to mitigate that risk by jacking up interests rates for those consumers.

Now that risk is essentially gone, so shouldn't we see credit card rates coming down? After all, they're going to get their money no matter what thanks to this law, so why shold they still be allowed to get it in advance through higher rates? Wishful thinking, perhaps, but is my logic sound?
posted by schoolgirl report at 5:28 AM on March 9, 2005

Is ANYONE in favor of this? Shit, even Paris doesn't like it. Congress sucks.
posted by graventy at 5:31 AM on March 9, 2005

schoolgirl report, that's the same logic behind tort reform. It's flawed because, credit card companies aren't going to give up profits that they don't have to. If the risk isn't there any more, they just rake in more cash.
posted by graventy at 5:33 AM on March 9, 2005

America's getting what it voted for. In the ass.

And hopefully the ass pounding will continue over the next four years. The majority of American's have forgotten, didn't know or have deluded themselves into thinking that the Republican party represents anyone other than a sliver of the population and they need a nice, painful reminder.

When peeps who voted for Bush start bitching and moaning about what the administration is doing I like to start chanting, "four more years! four more years!" to assist in the negative feedback process.
posted by jperkins at 5:41 AM on March 9, 2005

The Senators who voted against adding protection for military families in the bill:

Alexander (R-TN)
Allard (R-CO)
Allen (R-VA)
Baucus (D-MT)
Bennett (R-UT)
Biden (D-DE)
Bond (R-MO)
Brownback (R-KS)
Bunning (R-KY)
Burns (R-MT)
Burr (R-NC)
Byrd (D-WV)
Carper (D-DE)
Chafee (R-RI)
Chambliss (R-GA)
Coburn (R-OK)
Cochran (R-MS)
Collins (R-ME)
Craig (R-ID)
Crapo (R-ID)
DeMint (R-SC)
DeWine (R-OH)
Dole (R-NC)
Domenici (R-NM)
Ensign (R-NV)
Enzi (R-WY)
Frist (R-TN)
Graham (R-SC)
Grassley (R-IA)
Gregg (R-NH)
Hagel (R-NE)
Hatch (R-UT)
Hutchison (R-TX)
Inhofe (R-OK)
Isakson (R-GA)
Johnson (D-SD)
Kyl (R-AZ)
Lott (R-MS)
Lugar (R-IN)
Martinez (R-FL)
McCain (R-AZ)
McConnell (R-KY)
Murkowski (R-AK)
Nelson (D-NE)
Roberts (R-KS)
Santorum (R-PA)
Sessions (R-AL)
Shelby (R-AL)
Smith (R-OR)
Snowe (R-ME)
Stevens (R-AK)
Sununu (R-NH)
Talent (R-MO)
Thomas (R-WY)
Thune (R-SD)
Vitter (R-LA)
Voinovich (R-OH)
Warner (R-VA)
posted by tizzie at 5:45 AM on March 9, 2005

The majority of American's have forgotten, didn't know or have deluded themselves into thinking that the Republican party represents anyone other than a sliver of the population and they need a nice, painful reminder.

Things have to get worse before they get better, eh? I've been waiting for the "better" to kick in for going on five years now.
posted by The Card Cheat at 5:57 AM on March 9, 2005

An amendment for catastrophic medical bankruptcies was also voted down.
Grandpa's going to lose it all next heart attack!
But Congress was nice enough to leave large loopholes for wealthier Americans. How good of them.
And corporations? Forget about it! It's now easier than ever to set up shop in the Caymans and avoid taxes and stockholder liability!
posted by nofundy at 5:58 AM on March 9, 2005

I admit I almost fell over with shock when I saw ParisParamus agree that this is a bad thing. After I got up and dusted myself off, I went to see what the Freepi thought about the bill.
Again, I almost fell over with shock. They copy/pasted a Krugman article on the board and most everyone was agreeing with Krugman!

So, if everyone from far right to left agrees this is a very bad thing, why on earth would it pass through Congress so easily? Both sides of the aisle too. Do our "representatives" really serve our interests today? The obvious answer is no. Then whose interests do they serve? The obvious answer is corporations. Do I need to quote what Mussolini said about fascism again?
posted by nofundy at 6:20 AM on March 9, 2005

posted by verb at 6:30 AM on March 9, 2005

OK, just one more thing and I'll back off. Here's a letter and a list of names of Dems who support pushing this bill through in an "expedited manner" (so you know this spans across the aisle):
The Honorable J. Dennis Hastert
U.S. House of Representatives
H-232, The Capitol
Washington, DC 20515

Dear Mr. Speaker:

We write to encourage you to bring bankruptcy reform legislation to the House floor as soon as the Senate completes its consideration of the bill. The New Democrat Coalition has backed common sense bankruptcy reform in the past and helped in passing the bankruptcy reform bill by overwhelming margins in the House of Representatives during the 108th Congress.

Over the last several years, we have worked to advance reasonable and balanced legislation that would require individuals who have the ability to repay their debts to do so, while preserving the important safety net of bankruptcy under Chapter 7 for those who truly need it. We believe that responsible bankruptcy reform embodies the New Democrat principle of personal responsibility, while at the same time adding important new consumer protections such as requiring enhanced credit card disclosure information and encouraging participation in consumer credit counseling.

It is our hope that the House of Representatives will consider this important piece of legislation in an expedited manner. We stand ready to work with you and our colleagues on both sides of the aisle to pass bankruptcy reform into law.


Rep. Ellen O. Tauscher
Rep. Adam Smith
Rep. Ron Kind
Rep. Artur Davis
Rep. Carolyn McCarthy
Rep. John Larson
Rep. Stephanie Herseth
Rep. Dennis Moore
Rep. Mike McIntyre
Rep. Joe Crowley
Rep. Jay Israel
Rep. David Wu
Rep. Diane Hooley
Rep. Melissa Bean
Rep. Jim Davis
Rep. Harold E. Ford, Jr.
Rep. Ed Case
Rep. Jay Inslee
Rep. Shelley Berkeley
Rep. Gregory W. Meeks

posted by nofundy at 6:31 AM on March 9, 2005

Shit. I'm in a position in my life where declaring bankruptcy may be my only option. Guess I'd better figure that out soon.

posted by cmonkey at 6:55 AM on March 9, 2005

quiet: Do these people know what they're doing?

undoubtedly, big business is scared spitless someone will come along play Microsoft to their IBM.
posted by Mitheral at 7:13 AM on March 9, 2005

This just baffles me. How can the Congressthings possibly justify a bill like this which will hurt EVERYONE except one specific lobby?

There's a reason we have such "liberal" bankrupcy laws. It's because someone who's completely beholden to debt becomes a drain on the economy. If all he's buying is food, and shelter, with everything else going to a bank or other debtor, then he's going to drag our economy down a bit since it requires people to be out there buying unnecessary crap.

Things are looking shaky enough on the personal finance front that it's not being overly reactionary to say a big bubble is likely to pop in the next few years. The housing market is ripe for it. And, right now the AVERAGE personal debt an American is carrying would be enough to buy them a decent car. (and if things continue as they have unchecked, in a few more years, the average personal debt will be roughly equivilent to the average yearly wage. Chew on THAT one for a bit.)

Get enough people going bankrupt, and unable to start over, contributing to society again, and we're looking at a depression. And that hurts EVERYONE.

Even the oh-so-precious credit card lobby.
posted by InnocentBystander at 7:22 AM on March 9, 2005

I've never used bankruptcy protection, and hopefully never will have to. But I can easily see how it can happen to someone. Given a catastrophic illness or series of events, I could be right there in a frighteningly short amount of time.

But not seeing how this is a bad thing for consumers and businesses... I'm just stunned.

Schoolgirl: your logic is perfectly sound. Except you profoundly underestimate the greed of corporations and the moral bankruptcy of the legislators in bed with them.

Also, I assume it is still perfectly legal for a business or a doctor to declare bankruptcy to defeat a judgement against them to a consumer.
posted by Ynoxas at 7:27 AM on March 9, 2005

Diane Rehm had a talk about this bill yesterday. Lots of good points, but the most important was the typical Republican hyporcrisy of not allowing individuals (i.e., non-coporations) to get some debt relief, while at the same time paying billions of _our_ tax dollars to bail out Enrons and Worldcom's and, well, pretty much every airline that exists.
posted by bardic at 7:28 AM on March 9, 2005

Also, I assume it is still perfectly legal for a business or a doctor to declare bankruptcy to defeat a judgement against them to a consumer.
The bankruptcy legislation being debated by the Senate is intended to make it harder for people to walk away from their credit card and other debts. But legal specialists say the proposed law leaves open an increasingly popular loophole that lets wealthy people protect substantial assets from creditors even after filing for bankruptcy.

Asset protection trusts have become increasingly popular in recent years among physicians, who fear large medical malpractice awards, and corporate executives, whose assets are at greater peril now because of new laws.
posted by airguitar at 7:40 AM on March 9, 2005

Anyone willing to synopsize the above issue?

more than that, is anyone willing to synopsize what the fuck is going on in the united states?


just how much more money do the corporations need? it seems like they really just view us as obstacles between them and our bank accounts rather than as human beings. goddamn.
posted by lord_wolf at 7:56 AM on March 9, 2005

I've been tracking the new bankruptcy bill on my debt and personal finances blog Informed Bankruptcy. I posted this a few days ago.

When you read the list of amendments to the bankruptcy bill that were voted down by the Republican led Senate, it's hard not to feel a strong mixture of anger and nausea. The poor, the sick, the elderly, those harmed by identity theft, and those in the military were all denied due protections from the credit card industry's greed.

Here's a list and description of the rejected amendments:

* The Senate rejected several Democratic amendments to the bankruptcy legislation on Thursday, including one that would have closed a loophole that lets wealthy people protect millions of dollars in assets from creditors even after filing for bankruptcy.

* After the vote on the Schumer amendment, the Senate by a vote of 54 to 40 rejected a proposal by Senator John D. Rockefeller IV, Democrat of West Virginia, to protect employees of companies that go into Chapter 11 by permitting them to get up to $15,000 in back pay or other compensation. It then rejected an amendment by Senator Richard Durbin, Democrat of Illinois, to curtail what he called the abusive practices of executives at companies like Enron and WorldCom who received millions of dollars in compensation shortly before the companies filed for bankruptcy protection.

* The chamber also defeated an amendment proposed by Senator Mark Dayton, Democrat of Minnesota, that would have imposed a 30 percent annual limit on credit card interest rate charges. And it rejected an amendment by Senator Bill Nelson, Democrat of Florida, to exempt debtors from the means test if their problems were caused by identity theft.

* One [rejected] amendment would have required credit companies to include, in "conspicuous" type on the first page of bills, a warning that making the minimum payment boosts the interest the consumer pays.

* The U.S. Senate on Wednesday defeated plans to... shield part of the value of senior citizens' homes from creditors in bankruptcy court.

* Two amendments proposed by Sen. Edward M. Kennedy (D-Mass.) sought to protect Americans facing medical hardship. The first would have exempted from the means test those who faced bankruptcy from medical bills. The second would have protected $150,000 of the value of patients' homes from being seized to pay creditors.

* Democrats pressed Tuesday to protect members of the military from the bill's new provisions, saying that some service members called to duty in Iraq and Afghanistan had lost small businesses or been forced into bankruptcy by other financial hardship... But Republicans defeated on a straight party-line vote, 58 to 38, an amendment sponsored by Durbin that would have created a broad exemption from the means test for members of the armed forces. Instead, the Senate approved a more narrow provision, sponsored by Sen. Jeff Sessions (R-Ala.), to exempt active-duty military, low-income veterans and those with serious medical problems.
posted by kmcclosk at 7:59 AM on March 9, 2005

oh, god, kmcclosk. i think i'm going to throw up after reading that.

i can't wait to see television media completely ignore this bill and its implications so that they can instead bring us more news about paris hilton's dog's latest outfits.
posted by lord_wolf at 8:11 AM on March 9, 2005

Both my senators voted Nay on the bill.

I love you, Senators Durbin and Obama. : )
posted by SisterHavana at 8:18 AM on March 9, 2005

Aw, dammit Herseth. I like you, too.
posted by graventy at 9:04 AM on March 9, 2005

Nice work kmcclosk.

But of course, we're waging peace in the middle east, so this domestic shit doesn't matter.

Am I the only democrat who actually feels optomistic about 2006 and 2008? If Americans don't wake up and realize the thuggery being imposed on them by Bush, we all deserve to live in this shithole of a false democracy. And that's when I move to Toronto. If they'll have me.
posted by bardic at 9:11 AM on March 9, 2005

Am I the only democrat who actually feels optomistic about 2006 and 2008?

Yes. I expect to loose ground in 2006 in congress, not gain. In 2008 I expect an even more lopsided Republican win than 2004.

I expect we are in for more of this type of administration until at least 2012. I'm hoping for a repeat of Reagan/Bush I. That's as optimistic as I will allow myself to be.

You have no idea how I hope I am completely, totally, absolutely, dead wrong.
posted by Ynoxas at 9:33 AM on March 9, 2005

Where did I hear this phrase?:
"Vast right-wing conspiracy"

So vast, so right-wing. Surely no one thought only Republicans were involved?

Our so-called 'representatives' have decided they would rather be our Lords and Ladies, our Public Masters.

Oh, but at least we brought democracy to the Iraqis.

on preview:
Am I the only democrat who actually feels optomistic about 2006 and 2008?

Surely not the only one. But I personally no longer have any faith whatsoever in the so-called "Democratic Party".
posted by Goofyy at 9:42 AM on March 9, 2005

Can't this be "gamed" by taking a job that pays lower than median income? I realize this wouldn't be an option for some people, but if you're up a shit creek, this seems a viable solution. Is this "trickle down" so people will make less money? Reward people with better credit, better paying jobs? "Yeah, I couldn't file chapter 7 as a sales exec, so now I am a manager at McDonald's"

No offense to fast food restaurant managers of course.
posted by AllesKlar at 9:50 AM on March 9, 2005

Making it difficult to get legal help...
...provisions in [S.256] would require the debtor's attorney to certify the accuracy of the debtor's bankruptcy schedules... Existing federal rules already require all lawyers--including bankruptcy attorneys--to certify that their pleadings are supported by the facts, but Section 102 of [S.256] would create a newer and harsher standard just for debtors' bankruptcy attorneys. By holding a debtor's attorney personally liable for any inaccuracies in the client's schedules that lead to the dismissal of the Chapter 7 petition or its conversion to a Chapter 13, the bill would force the attorney to independently verify all of the client's factual representations and would require the attorney to conduct a costly investigation and appraisal of all assets listed on the client's schedules.

...provisions in [S.256] would require attorneys to certify the debtor's ability to make payments under a reaffirmation agreement. Under current law, a debtor may choose to reaffirm certain debts--and retain liability for those debts--if the attorney certifies that the decision is voluntary and will not create undue hardship for the debtor. By requiring the attorney to also certify the debtor's ability to pay the reaffirmed debt, Section 203(a) of [S.256] would force attorneys to conduct costly and time-consuming audits of their clients' finances.

...provisions in [S.256] would require bankruptcy attorneys to identify and advertise themselves as "debt relief agencies" and then comply with a host of new regulations. Section 227-229 of [S.256] would interfere with the attorney-client relationship by requiring all debtors' bankruptcy attorneys--and many non-bankruptcy attorneys--to provide their clients with lengthy written disclosure statements containing government-approved legal advice on bankruptcy law while prohibiting the attorneys from giving their clients certain proper pre-bankruptcy planning advice. These provisions would also have a chilling effect on lawyers choosing to represent debtors by requiring all of their newsletters, seminars and advertising materials to include the awkward and misleading statement that "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code."

These three attorney liability provisions, taken together, would have a substantial negative impact on the availability of quality legal counsel in bankruptcy and would result in thousands of pro se debtors. These provisions would discourage many attorneys from agreeing to represent debtors at all, while dramatically increasing the fees and expenses of clients who are able to obtain legal representation. In addition, these provisions would strongly discourage lawyers from providing essential pro bono bankruptcy services. Unless they are removed, these provisions pose a serious threat to the efficient operation of the bankruptcy system.
posted by airguitar at 10:21 AM on March 9, 2005

The problem with the consumer bankruptcy system was moral hazard -- people felt that they could simply wipe out their debts at little long term detriment; it led people to incur debts that they couldn't realistically afford to repay, or to devote to consumption money which a prudent person would save or invest in insurance as hedges against unforseen liabilities.

The suggestion that lenders ought to bear the burden of correcting this moral hazard simply isn't economically sensible. It would be incredibly burdensome, if not entirely impossible, for any individual lender to amass all the information necessary. (Imagine how much your annual fee for Visa would be if the issuer bank had to audit your bank passbook and your insurance statements every quarter.) The consumer -- particularly a consumer with an above-median income, who are those principally affected by the reform act -- is the one who has, or should have, the complete picture of his own assets, liabilities, opportunities, and risks, and the ability to address these prudently.

And for everyone who says, "what about the corporations!" I say, nonsense. This moral hazard certainly is not the case in corporate bankruptcy, which usually results in the complete wiping out of the stockholders. When the company might continue to exist, (say, like MCI or USAirways), it's stockholders got nothing. The cancelation of old equity interests is a potent incentive for stockholders to manage their company's debt burden prudently.
posted by MattD at 11:00 AM on March 9, 2005

What about non-public corporations? How are they affected?
posted by sonofsamiam at 11:17 AM on March 9, 2005

The problem with the consumer bankruptcy system was moral hazard -- people felt that they could simply wipe out their debts at little long term detriment; it led people to incur debts that they couldn't realistically afford to repay, or to devote to consumption money which a prudent person would save or invest in insurance as hedges against unforseen liabilities.

And wasn't that risk the reason that credit card companies justified their usurious rates?
posted by jperkins at 12:27 PM on March 9, 2005

If the poor down trodden credit card companies were suffering under the old bankruptcy laws, why did they stay in bussiness? Did people hold guns to the CEOs of VISA and force them to hand out money losing credit cards?
posted by Iax at 12:51 PM on March 9, 2005

Hey... this is what the majority American public wanted. I say, let 'em have it... (just don't come crying to me... we warned you about this awhile ago)
posted by ph00dz at 12:52 PM on March 9, 2005

The problem with the consumer bankruptcy system was moral hazard -- people felt that they could simply wipe out their debts at little long term detriment; it led people to incur debts that they couldn't realistically afford to repay, or to devote to consumption money which a prudent person would save or invest in insurance as hedges against unforseen liabilities.

Except that half of bankruptcies are caused by illness (mostly by people who have health insurance).

(Imagine how much your annual fee for Visa would be if the issuer bank had to audit your bank passbook and your insurance statements every quarter.)

Let me try to imagine... what if Visa had access to some sort of report that included all my major purchases, debts and payments. Oh wait, they do. And my annual fee is still $0.

I appreciate you trying to mount a defense and balance the discussion, but this just doesn't cut it.
posted by jlub at 12:56 PM on March 9, 2005

MattD, you seem to be forgetting the real issue here: people who use credit card responsibly are not profitable for credit card companies. The industry has grown tremendously profitable in the past several decades by targeting those who aren't responsible, or very bad credit risks.

In order to continue grow as it would like to, the industry must continue to lower its lending standards and extend credit to riskier and riskier individuals. As it does that, though, the risk of bankruptcies increases. Rather than stick to defensible, responsible lending practices they're trying to close the "loophole" of bankruptcy.

This is not about 'forcing Americans to spend responsibly.' If they did that, our consumer economy would shut down. It's about the credit industry convincing the government to cover its ass while it plays lending-roulette.
posted by verb at 1:02 PM on March 9, 2005

In an economy with two-thirds of GDP driven by consumer spending, it's critical that people continue to buy buy buy. Remember the pleadings in 2001 about not being too terrorized to shop? "Take your kids to Disney World!" And if that means spending money you don't have, then so be it. The Economy needs you.

So they have. And if trends continue, one in seven households will have gone through bankruptcy by 2012. Whose fault is that? Why do people need so much shit?

I'm not pointing a finger, I'm asking. What's the problem with consumption? A move towards less or more causes problems for someone. Seemingly everyone, if you consider us all to be part of a single system.

Individuals can't complain about 'the system' without implicating themselves, because they are the system. You are the economy. (maestro) We are the world... etc.

So, legistation like this is a symptom of that. This mindset that Americans need four TV sets, a PVR, a DVR, a Hemi, fast food 24 hours a day, the WalMart price, new presents every Christmas, 1-800-flowers on Mother's Day, Valentine's, and Sweetest Day, thirty pairs of shoes, 200 DVDs, 500 CDs, an RV, cheap oil, and a vacation home somplace warm.

If changing that mindset would wreck the world economy, or endanger American hegemony, but... it's unsustainable, being paid for with funny money, financed by bonds held in Asia... What's next? How does it all work itself out?

I'm not sure I want to know.
posted by airguitar at 1:27 PM on March 9, 2005

What verb said...
posted by airguitar at 1:28 PM on March 9, 2005

It's also worth noting that credit industry profits have tripled over the past decade, despite climbing bankruptcies, and the majority of credit cards that wind up in bakruptcy courts have already made the issuing agency a profit via late fees and interest.

Let's repeat that again. Even when people declare bankruptcy, in most cases the credit card company has already broken even and made a profit.
posted by verb at 1:48 PM on March 9, 2005

So basically, they're just continuing to solidify their position so that it's legal for them to rip us all off.

I wonder what they'll do when they have all of the money, and we have none? People without money don't buy anything.

Anyone looking forward to serfdom?
posted by zoogleplex at 5:54 PM on March 9, 2005

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