Sunday, March 13, 2005

Bankruptcy Reform



After spending last night perusing central Oklahoma's bankruptcy-court public-access system (via RACER, looking at random court documents and such from 2004), I am even more in favor of bankruptcy reform than I was before. And I've been pretty big on it for a while.

Example in kind: In one particular 2004 case I found, that for "Jane Doe," listed among her Chapter 7, petitioned-to-be-discharged (PTBD) debts, were entries for a $50 medical bill from 1985, a $50 telephone bill from 1999, and a $50 telephone bill from 2000.

Curiously enough: Also among her PTBD debts was a $250 bill from 2003 for the Barbie Book Club, as well as a $250 bill and a $400 bill from the Scholastic Book Club.

Still more curiously: Listed among her items for "current monthly expenses" were a $300 cell-phone bill and $75 for entertainment. See where I'm going with this?

Signing up for kids' book clubs and high-expense cell-phone plans when you already owe money for bills that are years overdue is crap. And this wasn't the only instance I found of behavior like this; it just happens to be the one I can remember most easily at this moment.

Amazing what you can find in court documents.

Not that the current bankruptcy reform bill would do anything about a situation like this (given Jane Doe's listed current income, I cannot imagine that it would), but it is a start. If people cannot exhibit personal responsibility on their own, perhaps tougher bankruptcy laws are the way to go.

Far be it from me to show any compassion for credit-card companies and other lenders, but still — the quicker the U.S. bankruptcy system is revamped, the better.

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— Posted by Michael @ 1:51 AM








4 Comments:
 

Michael,

I'm with you! I wish we could take some of our education budget and teach classes to kids about personal finance. I'm not sure what amount of good it would do, but surely it would be better than the situation we now have.

JLP

http://AllThingsFinancial.blogspot.com

 

I went through a chapter 7 bankruptcy and it still amazes me that I had to do that. I went from a 51k a year income to being out of work for 13 months. The only job I could find when I ran out of unemployment paid $8 an hour. I would have lost my home, if my aunt hadn't helped me make payments for 6 months. (And it's still a huge struggle. I'm working a 50 hour week now to try and put a little in savings.)

I had been paying off my old credit card debt and did not have a credit card at the time I lost my job. I did run up more credit card debt as I got one to try to stretch my money, figuring that I would find a job soon. Didn't work out that way. I did not see a single person in the court that looked like they were living high. They all looked pretty much like me, someone driving an older car and trying to pay their bills who happened to lose their job.

If you want to reform bankruptcy, then why not reform business bankruptcies too? Why do they say they want to catch deadbeats, then deny those with high medical bills the chance for a fresh start? Why do credit card companies still send out cards to dogs, children and students without jobs? Shouldn't they be required to extend credit only to people who might be able to pay it back? Isn't it interesting that we are so concerned about protecting an industry that rakes in record profits and charges rates that were once charge only by loan sharks? It's one thing to go after those abusing the system. It's quite another thing to deny protection to those who need it most.

 

Teri,

As things stand now, I am still pretty much FOR the bankruptcy reform that's making its way through the system. Is it what I would craft if I had the power? Not hardly.

As for "why not reform business bankruptcies too?" Dunno. Maybe that's not a big-enough money loser for the MBNAs of the world. Or maybe its on their agenda for 2006.

Why do they say they want to catch deadbeats, then deny those with high medical bills the chance for a fresh start?

The thing about "catching deadbeats" is for public newsbite consumption. This is about the card companies / lenders not losing money. Pure and simple.

Why do credit card companies still send out cards to dogs, children and students without jobs?

Because they can, and because that's where the money is. Until those folks file Chapter 7, of course. But we're fixing that currently.

Shouldn't they be required to extend credit only to people who might be able to pay it back?

I don't think so. Who's to make that judgement of "able to repay?" With the way our society is now, if the card companies didn't lend to high-risk folks, then watchdog agencies would soon come along and accuse them of discriminatory lending practices.

By the same token, I'm way tired of hearing card companies crying about the money they lose when they make high-risk loans. You played the high-risk game, and you lost this round. Deal.

Isn't it interesting that we are so concerned about protecting an industry that rakes in record profits and charges rates that were once charge only by loan sharks?

I couldn't care less about protecting the lending industry's profits. They do a fine job of that on their own. What I do care about is personal responsibility, and this country is evidencing less and less of it.

This is not a clear-cut issue in any way. There are major responsibility flaws on both sides of the legislation - consumer and lender.

I'm just not taking a position of "Well, this legislation isn't perfect, so let's not do anything."

 

I'm not a big business. I was involved in a real estate development deal with a CON. Unfortunately I didn't know till thousands of dollars were embezzled. After the fact I discovered: Over 50 judgements between he and his wife and 6 bankruptcy filings for chapter 13 - - all of which were dismissed.

I was mad as hell at the bankruptcy court who had the ability to stop the abusive filings. finally after about 5 hours of testimony the judge ruled the CON would not be able to file any form of bankruptcy for 5 years!

The effect of the 6 filings was to stop litigation from creditors for over two years. There was no effort whatsoever to comply with schedules. The CON under-declared his income and ommitted 2 businesses he had an interest in. He also didn't declare rental income he was receiving. This was proven by subponeaing his former tenant.

If the court cant weed out scum like this then they need to be forced to reform.

Judges need to find their spines and throw out obviously abusive filers.

Anonymous Anonymous
, at 11:40 AM, March 30, 2005  
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