Bankruptcy

[phage]

I didn’t want to hijack the “Diversity and Summer of Love” thread, but Lucky brought up changes that are proposed (being put into effect?) that make it more difficult for an individual to file bankruptcy. I’ll admit that I don’t follow this closely since it is, thankfully, not an issue for me. I think I understand the difference between the major ‘Chapters’ but couldn’t tell you which is 11 and which is 13.

 

However, don’t you think it’s a bit ridiculous that someone is allowed to erase their debt? I can get behind a reorganization and getting some protection from your creditors so that you don’t lose your house, but you should still have to pay back every single dime. I don’t understand how anyone can be financially irresponsible, go charge crazy, and then have that debt wiped out; but still be allowed to keep the things they charged.

 

Maybe I just don’t understand the process and I’m being an unsympathetic asshole. I do understand that it hurts your credit. Boo hoo. It still seems like taking the easy way out and a bit of scam.

[+ Lucky]

I can't disagree too much with your views on bankruptcy per se, but if we are going to allow the rich and super corporations to walk away from millions (now billions)of dollars of debts, we should allow the little guy a chance to start over too. Society has to make some allowance for the general good.

But the corporate fatcats are trying to make it harder for the little guy, but not changing the rules for themselves. They dangle easy credit in front of gullible people who then, surprisingly, rack up debt. Then, after they have squeezed them as hard as they can, they let the guy go bankrupt and either start a new life debt-free, or succumb to the new temptations thrown at him by greedy creditors who know the guy can't go bankrupt for another seven years. Then they squeeze him for super high interest rates.

The law is very unfair. In some states, a rich guy can go bankrupt but keep an elaborate mansion without penalty.

Ideally, we would all pay our debts. (I do.) But we write off so much for corporate welfare and government contracts, bankruptcy for the little guy is the least we can do.

[Guest 7Zach]

I couldn't disagree more. Debtor's prisons? The whole point of bankruptcy was to allow someone to erase their debts, and start over fresh. The creditors loaned the money, and that risk overall to the general population is calculated into the interest rate. High rate cards? The lender knows the people are a bad risk, and charges as much as 23% interest, and still makes a profit after writing off a lot of the debts.

The last changes absolutely galled me because it was still permissible to allow business debts to be written off; collapse the corporation and walk-away, but the changes two years ago required some debtors to go with a reorg plan. And that legislation was pushed only by banks, and more so, by the credit card issuers.

This change is the same - it protects business.

I would hope never to take bankruptcy, and I still believe that there is a stigma attached to it. But the overwhelming majority of people no longer think that. As a matter of public policy, I believe that the ones making the loans should take some responsiblilty for their acts, and that includes the risk that the borrower can escape the debt. I would be more willing to consider the proposed changes if the lenders had not gouged their customers so badly to begin.

And for the record, I am a conservative.

[phage]

Believe me, I’m with you both on the breaks that businesses receive. Being a corporate wage slave myself, I heartily resent the million dollar plus salaries paid executives (Our CEO received $5 million last year in stock options that he “somehow” knew to exercise before our stock tumbled 50% this year.) and want them held more accountable. I just can’t figure out how you do that. How do you hold individuals accountable for the collective actions of a group of people? Yes, the buck stops with the CEO, but as anyone in corporate America knows, large organizations take on a life of their own.

 

I also agree with you on the predatory nature of the credit card companies. I keep a very specific, and limited, amount of credit available on a couple open cards. The amount of actual debt varies quite a bit. I’ll run it up, move it around, focus on paying it off, and then start the cycle all over. I have definitely noticed that as soon as it gets near the maximum on any one card, the credit card companies come out of the woodwork. It's as if they smell blood in the water, assume you are in over your head, and are only too happy to throw you an anchor disguised as a life preserver.

[Guest newawlens]

I think there are some misconceptions here about corporate bankruptcy. When a corporation files a Chapter 11 petition, the usual result if the corporation reorganizes successfully and emerges from Chapter 11 is that the shareholders lose their investment. That means all shares of stock issued by the corporation, whether they belong to executives, big mutual funds or individual investors, are canceled and become worthless. Usually the banks and individuals who hold the corporation's bonds and notes are required to take stock in the reorganized corporation in place of the bonds, or they may get stock for some portion of the bonds and cash for the rest, but the original shareholders, whether they are big or small, get nothing for their shares, they are just wiped out.

 

Take Bernie Ebbers of Worldcom for example. When he quit the company a few weeks ago he still held millions of shares. In all likelihood those shares will be canceled. He borrowed around $400 million from the company to buy those shares when the price was high, and I suspect the terms of the loans are such that he still has to pay that back even though the shares he used that money to buy are worthless. He has other assets he can sell that may or may not be worth enough to cover his debt. He may end up declaring bankruptcy himself. I'm not saying anyone should feel sorry for him, but it would be a mistake to think he is getting a free ride while everyone else gets crushed.

 

When it comes to individual bankruptcy, studies show that most people who file have debt they can't pay because they incurred that debt at a time when their income made it seem prudent and later got laid off or suffered some other reverse that greatly reduced their income. It usually is not the case that people just went on a spending spree knowing they could declare bankruptcy and get out of paying. Banks that issue credit cards are complaining about the rising numbers of debtors who get their credit card debt wiped out, but a lot of it is their own fault. If they refused to issue credit cards to people who have been through a bankruptcy, the current law would be enough to weed out a lot of the problems they are complaining about.

[CT Dick]

I don’t

>understand how anyone can be financially irresponsible, go

>charge crazy, and then have that debt wiped out; but still

>be allowed to keep the things they charged.

>

According to a report on NPR last night, a vast preponderance of bankruptcies, 2/3 or 3/4, are due to a loss of employment. The people are up to their necks in debt but keeping ahead until they are let go.

 

Also, most bankruptcies occur when their non-mortgage debt surpasses twice their annual income.

 

These are not people running scams against the credit card companies, they are victims.

 

I'm not arguing for complete erasure of all debts but the tone here is a bit harsh.

 

Dick

[Guest Les]

I mostly agree with you Dick!

 

My oh MY; What a mean spirited thread.

 

My best friend had to recently declare bankruptcy because of a health crisis of a few years ago. I won't go into the details but his medical bills exceeded $200,000 dollars. He had no insurance and yet tried his best to pay a reasonable sum each month or negotiate a smaller amount due... all to no avail (doctors can be rotten)...so he declared chapter 13 where he would have eventually paid something to everyone but 'NO' the creditors insisted on full payment with interest... so he was forced into chapter 7.

 

Anyways he's back on his feet and was recently offered a credit card from "Providian Bank" with an intereset rate of 25.99%. Isn't that kind? They are really special!

[OneFinger]

>...was recently offered a credit card from "Providian Bank" with an intereset rate of 25.99%. Isn't that kind? They are really special!

 

Unfortunately, this is very typical for someone who has declared bankruptcy. Since they can't file another bankruptcy for 7 years, it is a "slam dunk" that their credit is better than the "average" guy.

 

This bank has a reputation of a vulture. They are known for offering credit to people that have gone bankrupt at very high rates. They rate right up there with Sears, Discover, and Capital Bank for ripping off people with a bankruptcy.

 

BTW, I know several people who have filed bankruptcy. In each instance, the only creditor to take back clothes, equipment, tools, or other purchases was Sears.

[Guest Chazzz69]

>>...was recently offered a credit card from "Providian

>Bank" with an intereset rate of 25.99%. Isn't that kind?

>They are really special!

>

>Unfortunately, this is very typical for someone who has

>declared bankruptcy. Since they can't file another

>bankruptcy for 7 years, it is a "slam dunk" that their

>credit is better than the "average" guy.

>

>This bank has a reputation of a vulture. They are known for

>offering credit to people that have gone bankrupt at very

>high rates. They rate right up there with Sears, Discover,

>and Capital Bank for ripping off people with a bankruptcy.

 

If I remember correctly the Federal Trade Commission recently fined Providian for its preadtory practices. Capital One Bank is also being investigated.

 

I have gotten to the point I only use a debit card or pay cash. The credit card is kept for major car repairs and that's it. Paid at the end of the month.

 

Believe it or not, the term I heard used by a friend of mine in the finance industry for people who pay their balances in full at the end of the month is "deadbeat". They beat the bank of the the interest charges on the balance carried forward each month. Can anybody confirm this for me?

 

Chazzz69

[phage]

>I'm not saying anyone should

>feel sorry for him, but it would be a mistake to think he is

>getting a free ride while everyone else gets crushed.

 

Very interesting information. It sounds like you know what you are talking about and it’s definitely something I didn’t know. I assumed the stock would take a nosedive, but I thought they got to keep it and wait for it to go back up after reorganization. I’m sure it’s no consolation for the common investor, but at least in these extreme situations (as opposed to corporations that make severe cutbacks and the CEO still gets paid millions) the CEO shares in the pain.

 

>When it comes to individual bankruptcy, studies show that

>most people who file have debt they can't pay because they

>incurred that debt at a time when their income made it seem

>prudent and later got laid off or suffered some other

>reverse that greatly reduced their income.

 

I feel for people in these situations. Lord knows that I could only go a few months before I had issues. But I still don’t think anyone should be allowed to completely erase their debt, and would expect that once I got back on my feet, I would begin making payments again.

 

Thanks for your perspective. As for comments below about “harsh tone” and “mean spirited thread”…what kind of rose-colored world do you guys live in? Mean spirited? I brought up a topic and stated an opinion. Sometimes, some people actually want to talk about something other than dicks and asses, and sometimes they are going to have…God forbid…opinions. Sometimes those opinions aren’t going to be nice and sweet and meet your standard of decorum.

 

In my book, it is just as mean spirited to set yourself up as an etiquette queen and make snide, lecturing remarks about someone’s post. But that’s okay by me since I’m not one of those people who thinks everything needs to be saccharine sweet around here all the time.

[trilingual]

The new bankruptcy bill only benefits the big greedy banks even more. They're already making money hand over fist, what with their egregious interest rates topped with ridiculous membership charges, late fees, and who knows what all else. The costs of individual bankruptcies are already built into these rates as a cost of doing business. In addition, the banks can deduct any losses from bad debts from their own tax liabilities. So it's not like they're exactly hurting here. This is just trying to squeeze the last drop of blood out of the small consumer.

 

The fact that this is passing Congress comes as no big surprise, of course. The NY Times reported yesterday, I think, that the banks have contributed something like $700,000,000 to various campaigns over the past few years that they've been trying to get this atrocity passed. Additionally, the chairman of one of the key committees was just given a $400,000+ debt consolidation loan at a very favorable rate by one of the banks. Of course that didn't influence him in the least. Naturally, Mr. Compassionate Conservatism is just salivating at the thought of signing this abortion to please his masters!

 

The truth about most consumer bankruptcies is that they aren't the result of people going out and deliberately running up their credit cards so they can then duck out on their debts. The vast majority of cases arise because of unanticipated financial disasters, like people losing their jobs (in a bad economy, often both wage-earners at the same time) or facing catastrophic medical expenses not covered by insurance, like the $200,000 bill mentioned previously. There's no way most people can pay a debt like that off a month at a time; the only possibility is to make a clean break and start over with a fresh start, which is what the bankruptcy laws were intended to provide. Now the credit card companies are going to make it even harder for people, just to satisfy their insatiable greed. You'd think Congress would have learned something from the recent economic collapse (brought to you by the same greed-head mentality) but I guess something hasn't penetrated yet.

 

It's stuff like this that makes me feel that if the seas were filled with Emetrol, it wouldn't be enough to make me stop barfing. . .

 

:-(

[Guest 7Zach]

well, phage, based on how u feel, the new bill suits your purposes. if the debtor makes the median income for his state, he has to reorganize and pay off 25% of his debt over 5 years. ditto, if the debtor's income is sufficient to pay off 25% of the debt over 5 years. I think that's right, but my info is garnered from the newspaper.

what bothered me most about the changes in the last bill was that they put credit card debt into a new category - you could still avoid debt by surrendering your equity in whatever asset that the asset secured - you could let the court sell the car and pay the debt or other debts, or u could keep the car and be obligated to pay that debt after bankruptcy. same with house, etc.

but unlike other debts that were not secured by any assets, the law allowed the credit card companies to be paid back in a reorg of the private debtor - the amount depending upon the debtor's resources.

 

and i'm against it, i think the debtors should be allowed to start fresh, stripped of assets other than those exempt, such as tools of their trade, etc.

corporations essentially get reductions in interest rate, or debt that is reduced, or a longer payback, but in any case, they essentially elect to stay in business, and use those assets. it's different because they're not an individual. but it makes sense cuz they're staying in business. but they still can throw in the towel and dissolve or sell out and let someone else pay the debt that those assets secure.

My biggest complaint is that the recent law from x years ago, and the new law, place credit card companies in a different category other than other unsecured debt, and make it harder to erase. and again, from public policy standpoint, i don't see that the credit card debt is more worthy of being protected than debt owed to any other entity that is unsecured. and i agree with the above, campaign contributions made it happen.

[Guest Ant415]

There are tons of reasons why someone would declare bankruptcy. How does the saying go.... "until you walk a mile in his shoes". However, it is too easy to declare chap 7, get ride of all your debts and get a clean slate. You can decide to resume payments with a creditor of your choice. There are many abuses out there.

 

I tend to a bit right of center and conservative on many spending issues. But there are events that happen in people's lives that make them broke. How many Americans do you think are a couple paychecks away from being bankrupt or homeless?

 

I was forced to file bankruptcy years ago. I didn't tell anyone, not friends or family, as I had enough shame to deal with.

 

When I figured how long I had carried some of the credit cards, the interest paid, it was easy reduce my guilt. I paid the principle off long ago while paying lots of interest.

[Guest newawlens]

>I’m sure it’s no consolation for the

>common investor, but at least in these extreme situations

>(as opposed to corporations that make severe cutbacks and

>the CEO still gets paid millions) the CEO shares in the

>pain.

 

To some extent. The CEOs of Worldcom, Global Crossing, Enron and other high-profile bankrupt corporations surely were stuck with a lot of shares that are now worthless. Just as surely they had cashed out some of their shares earlier for a lot of money.

 

Given the news today about Qwest I would say there is a better than even chance they will be the next big company to declare bankruptcy.

 

>Thanks for your perspective. As for comments below about

>“harsh tone” and “mean spirited thread”…what kind of

>rose-colored world do you guys live in? Mean spirited? I

>brought up a topic and stated an opinion. Sometimes, some

>people actually want to talk about something other than

>dicks and asses, and sometimes they are going to have…God

>forbid…opinions. Sometimes those opinions aren’t going to

>be nice and sweet and meet your standard of decorum.

 

 

I agree with you about this. I usually find the threads about sex here pretty boring because the standard of humor is not very high or because they deal with questions from beginners that I don't need any help with. Even so I do not complain about those threads, just pass them by. But the people who like those threads and don't like threads about more controversial issues always seem to complain about that. Well, if you don't like the controversial threads then just avoid them, how hard is that?

 

There is a thread on the board about the diversity of backgrounds among people who post here. I think it is a diverse group in those terms but not very diverse in terms of opinions on major issues. Among the regulars there seems to be a pretty narrow range of opinions on the major issues, and very little tolerance for opinions that are different from theirs. You just got a dose of that. Keep posting anyway. :-)

[DaninWA]

>Believe it or not, the term I heard used by a friend of mine

>in the finance industry for people who pay their balances in

>full at the end of the month is "deadbeat". They beat the

>bank of the the interest charges on the balance carried

>forward each month. Can anybody confirm this for me?

>

>Chazzz69

 

I'm a "deadbeat", eh? Cool:)

My family and friends think I'm a very responsible person.

 

Proves, once again, that my granddad was right. How can you be insulted by someone you don't respect?

 

Dan