Everybody knows the old adage about the drug dealer and his soon-to-be hooked junkie client, right? The first fix is always free.
For me, it was the free tee-shirt.
I’m talking about credit cards and debt. I was in college, minding my own business, when out of nowhere all of these wonderful offers came my way for free clothing, free Frisbees, even “free” money. All I had to do was fill out a credit card application.
Easy, right?
They got me young, the credit card companies, and as of this very day I’m still trying to dig my way out. The tee-shirt? Many years gone, I’m afraid.
Other people are less lucky and fall in a lot deeper than I ever did. And that’s the reason our nation’s bankruptcy laws were put into place: to protect law abiding citizens from a lifetime of servitude and repayment when the pit of debt and despair got too deep to climb out of.
In a land of easy credit and endless entrepreneurial opportunity, bankruptcy provides an emergency rope that allows risk takers and mavericks – as American a pair of adjectives as I can imagine – to risk and maverick and still have a future if the walls cave in. They’re also in place to help folks get a fresh start. After all, historically, we’ve been a nation of second chances, second acts, and second opportunities.
That is, except under the House of Bush circa 2005. The new Bankruptcy Abuse Prevention and Consumer Protection Act shortens up that old emergency rope. Under the new laws, debtors who the courts determine can afford to repay creditors over time and earn a salary higher than a state’s median income will no longer be able to wipe the slate clean under Chapter 7.
In effect, the new law make it more difficult for debtors to hold onto their cars and homes. The credit card companies are to get theirs first, we’re told.
The protection from crushing debt was built into our nation’s founding documents in order to express a difference between the old world and the new. America has long been a “land of opportunity” because the economic caste system of titles was successfully broken along with the shackles of debtor’s prisons.
Article comments
1 - Bennett Dawson
President Bush declared that new bankruptcy legislation will restore integrity to the bankruptcy process. But isn't it the opposite?
Like the "Clean Skies Act"? Status Quo.
Great post!
2 - Eric Berlin
Thanks very much, Bennett.
Yes, there has been quite a few times where this administration has tried to sell people on the idea that black, in all actuality, is white. This being but one example.
3 - Dave Nalle
It's really not a matter of black and white. It's a matter of realigning some priorities in the existing system to reduce abuses on both sides. And of course probably creating new problems at the same time.
Dave
4 - Eric Berlin
Well, it's very convenient that as per usual, these new changes will help Big Business and hurt Little Guy.
5 - Dave Nalle
But of course, Big Business employs Little Guy, so helping Big Business gets Little Guy his Little Job so he can make money to feed his Little Ones.
Dave
6 - Eric Berlin
Except when Big Business CEO and Cronies stuff their Big Pockets, and perhaps take on a few Little Guys part-time at Crap Wages.
Yep, there's an economic model in there somewhere.
7 - Dave Nalle
Except that a few part time Little Guys have no company loyalty and can be hired away easily and can't be counted on for long term projects or any kind of advanced or sophisticated or high responsibility jobs. So you have to hire some Little Guys and make them somewhat Bigger Guys and pay them a bit more because of their responsibilities...because if you don't then there's no extra money being made to stuff the pockets of the Big Guys...and that's the way business works to the benefit of everyone.
Dave
8 - Bennett Dawson
Not to get away from the point. Credit industry lobbies, bill passes, and it's for our own good.
Why do I feel so... so.... widened?
9 - Jon Sobel
There's a detailed analysis of the bill's history here.
10 - Eric Berlin
Thanks for that Jon. That's right, I remember seeing that in March.
And Bennett -- you boiled it down brilliantly right there.
11 - Dave Nalle
That daily Kos article is pretty funny, Jon. It speculates whether the Dems would have enough votes for a filibuster, when of course the Dems are just as much behind the bill as Republicans are.
The real issue, which Daily Kos barely touches on, is that bankruptcy should be a state issue, not a federal one, so this legislation should never really have been passed at all, and might well run into trouble with the Supreme Court.
Dave
12 - Robert G. Harris
The BARF (Bankruptcy Abuse Reform Fiasco) shamelessly targets the little guy and the lawyers who would help them. Lawyers who represent people with assets of $150,000 or less and have priority consumer debt are forever required to identify themselves as debt relief agencies. Those same lawyers are now to be held personally liable for debtor error or intentional omissions from the filing. Worse, responsible debtors who wish to repay part of their debt in Chapter 13 and retain their homes will be unable to do so because they will be forced into plans which, through the imposition of unrealistic expense allowances based on national standards not sufficiently tailored by state, will require payments larger than these wage earners can pay. All the while, rich debtors in Texas and Florida will keep their unlimited homestead exemptions, and the exemption maximum for IRA's and 401(k) plans goes up to $1 million.
The next time we have a national election, we would all do well to remember that a majority of this country, while by no means wealthy, still voted for the party that targets them without mercy. Rhetoric about God and country does not put food on the table or keep a roof over your head when your chosen President picks your pocket and puts the foot to your behind as you are left on the street.
13 - Eric Berlin
Thanks for adding detail to this important issue, Robert. I fear this "reform," like so many sweeping changes set about by the administration, will all too soon become lost among the swirl of Iraq and runaway brides and Michael Jackson and Social Security and on and on.
14 - Dave Snow
As a practicing creditor and debtor bankruptcy attorney, I agree with the sentiments of the post and most of the comments.
The attorney liability provisions in particular will have serious negative long term effects on the attorney-client relationship in many areas of practice. For example, this new law regulates the content of legal advice, and creates an adversary relationship between lawyer and client.
As we prepare to try to represent our clients and make a living (both much harder under the new law), it is becoming clear that the credit card companies have outsmarted themselves. The law is so poorly drafted that in many cases it appears to accomplish almost exactly the reverse of what was intended. It appears that in many chapter 13 cases, unsecured creditors will actually recover less under the new system than they do now. Apparently the investment analysts understood the consequences of the bill better than the lobbyists for the credit industry. Shortly after Pres. Bush signed the law, the bottom fell out of MBNA's stock, and they were promptly taken over by Bank of America. There is a tiny little bit of justice left in the universe.
15 - Eric Berlin
Great thoughts, Dave, thanks. I've learned a lot from some of the comments on this post.
And fascinating/disturbing regarding the likely practical outcome of the laws...