[NV Greens] Fwd: What the Bankruptcy Bill Could Do to You

Sat Apr 2 00:26:03 PST 2005

>
>Debt Slavery: What the Bankruptcy Bill Could Do to You
>By David Swanson
>Guest Commentator - Black Commentator
>
>http://www.blackcommentator.com/132/132_guest_bankruptcy_bill.html
>
>The U.S. Senate has passed a dream bill  for credit
>card and financial service companies that, if passed by
>the House, will land millions of American families in
>debt slavery.  Rather  than being able to file for
>Chapter 7 bankruptcy and make a difficult  new start,
>families and individuals will be placed on long-term
>payment  plans to credit card companies, companies that
>will take their houses,  their cars, their
>child-support payments, and their paychecks.
>
>If you think you're unlikely to land yourself  a
>share-cropping position in this new feudal system, ask
>yourself  if you can be sure that no one in your family
>will get sick, be injured,  die, lose a job, or get
>divorced.  More than one in every 100 adults  in
>America files for bankruptcy each year.  If you're a
>child, the  chances of your family filing for
>bankruptcy are about twice that.  (Kids  cost money.)
>These rates have doubled in the past decade.  The basic
>reason that bankruptcies have increased is that
>personal debt has  increased.  In fact, in proportion
>to debt, bankruptcies are actually down.
>
>About 50 percent of all families who are  forced to
>file for bankruptcy do so as the result of medical
>expenses.  And  three quarters of those have health
>insurance.  Another 40 percent  have suffered a death
>in the family, lost their job, or gotten divorced,  or
>suffered some combination of these factors and medical
>costs.  Almost everyone who files for bankruptcy does
>so as a last resort.  Sixty-one  percent of those who
>do so have gone without medical care that they  needed
>but could not afford.  Fifty percent have failed to get
>prescriptions  filled.  A third have had their
>utilities shut off.  Twenty-one percent  have gone
>without food.  Seven percent have moved their elderly
>parents  to cheaper care facilities.
>
>The satirical magazine, The Onion, posted  fictional
>comments on the bankruptcy bill from people in the
>street,  one of which said "Well, there goes my
>foolproof get-bankrupt-quick  scheme!" Only in the mind
>of a comic or a Republican  do people try to go
>bankrupt.  But some Democrats (see below) seem  not to
>be grasping this concept either.
>
>After filing for Chapter 7 bankruptcy, you're  required
>to liquidate some assets and pay off what you can.  But
>  you are then able to write off the rest of your debt
>and start over,  albeit with a credit record that will
>make it harder to borrow and  sometimes harder to find
>work.  Under the current system, if a judge  finds that
>you have significant assets or income, you can be
>denied  Chapter 7 and be required to enter into Chapter
>13 bankruptcy, in  which you pay off your debt over a
>number of years.  This current "means  test" is
>conducted by a judge who is able to look at actual
>income and expenses, as well as to distinguish between
>someone whose  child has diabetes and someone who's
>been going on reckless shopping  sprees.
>
>The bill that is coming up for a vote in  the House
>would create a new means test that would forbid making
>any such distinctions.  It would even forbid comparing
>what someone  actually earns with what they actually
>have to pay for rent and basic expenses.  A court would
>be forced to use standard government figures  for
>expenses, regardless of what you're actually having to
>pay.  It  would base your income on your last six
>months of income, even if  you just got laid off.  If
>your income is below the median, it would  spare you
>the means test but require that you purchase credit
>counseling,  even if you have no money to pay for it
>and it isn't offered anywhere  near your home.  It
>would also require significant new legal expenses  and
>paperwork.
>
>But wait, there's more
>
>The problems with this bill could fill an
>encyclopedia.  In fact, the thing is 500 pages of
>convoluted changes  to current law.  But, before
>looking at a few of the details, let's stop and think
>about the basic idea.
>
>Credit card companies, like most lenders,  charge
>interest rates based on the risk they see of each
>borrower  failing to pay back the loan.  Some people
>pay 9 percent on their credit card and others pay 29
>percent.  The higher rate is supposed  to cover the
>losses the lender will suffer when some of the riskier
>borrowers default.  This system has been bringing in
>massive record  profits for the credit card companies:
>$30 billion last year.
>
>"Here's what's so strange," writes  Corinne Cooper, a
>retired law professor in Arizona, "The credit  card
>companies collect this risk premium, year in and year
>out. But  when the risk actually happens and the
>borrower cannot pay, the lenders  want the Federal
>government to intervene to force the debtor to pay,  by
>passing a law prohibiting them from filing bankruptcy
>and discharging  the debts. It's as if a life insurance
>company took premium payments  for years and then asked
>the government to pass a law prohibiting  death!
>Bankruptcy is credit death, and if this bill passes,
>the  courts will be clogged with credit 'zombies' -
>consumers who can  never pay back their debt, and never
>get rid of it.  Why, then, shouldn't  the debtor be
>able to recover all that extra interest paid to cover
>risk?"
>
>So, here we have an extremely profitable  industry and
>a legal system that's basically working.  And yet, as
>with Social Security, a corporate lobby group and their
>servants in Congress have tried to manufacture a
>"crisis."  In this  case, the imaginary crisis is fraud
>in bankruptcies.  As with Social  Security, there's a
>grain of truth that can be found if you dig for  it,
>but the largest problems are being entirely ignored, as
>are real unrelated crises (such as health care, war,
>trade, wages, pensions,  voting rights, the deficit,
>etc.).  Estimates of cases of abuse of  bankruptcy law
>range from 3 to 10 percent.  The non-partisan American
>Bankruptcy Institute estimates that at  most 3 percent
>of filers - and almost certainly less - are  able to
>discharge debts they could actually pay.  But few
>analysts  see this bill (HR 685) as a useful way to go
>after those abuses.  Several  have referred to it with
>such metaphors as "shooting a gnat  with an elephant
>gun."
>
>In fact, an elephant gun would have been  useful if
>someone had known which way to aim it.  Corporations
>have  a very easy time filing bankruptcy.  CEOs are
>able to squirrel away  fortunes while canceling
>employees' pensions.  Millionaires can file  for
>bankruptcy and keep unlimited amounts of money out of
>reach in "asset  protection trusts" as well as in
>super-expensive houses.  The  press secretary for the
>bill's primary sponsor, Senator Charles Grassley,  told
>the New York Times that "the senator's staff was
>unaware  of the trusts and the loophole for the wealthy
>that they represented."  Uh-huh.
>
>These loopholes need not be exploited offshore,  as in
>the olden days.  There are a number of states that
>allow them,  regardless of whether the robber baron
>lives in the state.  But the  legal costs of setting up
>"asset protection trusts" place  them beyond the reach
>of most people.  Oh, and corporations are allowed  to
>shop for friendly judges from state to state, a right
>that Congress  recently took away from the victims of
>corporate practices who try  to file class action
>suits.  The current bankruptcy bill leaves these
>millionaires' loopholes in place, although it requires
>that pirates  of industry have purchased their mansions
>three and a third years  prior to bankruptcy if they
>intend to keep them through the homestead  exemption.
>
>To watch a spokesperson for this abomination  of a bill
>get taken down by a knowledgeable opponent on CNN,
>click  here.
>
>In this interchange, George Mason University's Todd
>Zywicki is no  match for Elizabeth Warren, Leo Gottlieb
>Professor of Law at Harvard  University.  These two
>also testified to the Senate Judiciary Committee,
>which found Zywicki more convincing.  You'll notice,
>though, that he  argues that there is massive fraud
>without providing any evidence,  and at the end is
>reduced to claiming that it is 10 percent.  He starts
>out trying to use as evidence of fraud simply the fact
>that bankruptcies  are up, combined with a bizarre
>claim that we're living through an  age of widespread
>prosperity.  Excuse me?  He points to the stock market
>as a sign of prosperity, apparently unaware of how many
>people own  little or no stock.  Then he points to
>housing prices having shot through  the roof.  Zywicki
>also cites low interest rates.  I don't know about
>you, but my paycheck stretches farther with low
>interest rates.  Sometimes  I just pay half the tab at
>the grocery store.  "It's OK," I  tell them, "interest
>rates are low!"  Zywicki also mentions  low
>unemployment, which would be relevant if it were true.
>
>The hypocrisy
>
>The Republicans (and the corporate Democrats)  have
>outdone their usual level of hypocrisy this time.  This
>bankruptcy  bill would make it very difficult for a
>family like Terri Schiavo's  to ever get out of debt.
>It would deny bankruptcy protection to  the families of
>soldiers killed in Iraq or sent to Iraq and away  from
>their jobs and incomes.  It would make it very
>difficult for  small business owners who take risks and
>fail to start over.  And  it would impose on
>individuals a standard of fiscal responsibility  to
>which the White House and Congress, not to mention the
>credit  card companies, do not even pretend.
>
>Columnist Robert Scheer notes that Grassley,  the
>bill's sponsor in the Senate, in another bit of
>hypocrisy "actively  opposes abortion and same-sex
>marriage on biblical grounds yet believes  the Good
>Book's clear definition and condemnation of usury is
>irrelevant.  The Old Testament, revered by Jews,
>Muslims and Christians alike, mandates debt forgiveness
>after seven years, as was pointed out earlier  this
>month by an organization of Christian lawyers in a
>letter to  Grassley.  'I can't listen to Christian
>lawyers,' said the senator,  'because I would be
>imposing the Bible on a diverse population.'"
>
>This would be funny if this bill were going  to be
>easily defeated.  It can be defeated in the House if we
>put  our minds to it, and - if need be - put our bodies
>on the line for  it in nonviolent civil disobedience.
>But this fight won't be easy.  Corporate  America has
>been pushing this bill for eight years.  It passed
>both houses of Congress once before and then was vetoed
>by President  Clinton.  Two years ago, it passed the
>Senate, but the House voted  it down because the Senate
>had attached an amendment that would have prevented
>violent anti-abortion demonstrators from avoiding
>paying  damages to clinics.  This time around, the
>Senate and the Senate  Judiciary Committee voted down
>that amendment and numerous other  amendments aimed at
>making this bill less than utterly disgusting.
>
>David Swanson is a board member of Progressive
>Democrats of America. 
>See http://www.debtslavery.org
><http://www.debtslavery.org/> .
>
>_______________________________________________________
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-- 
Paul Etxeberri

"Forests precede civilizations and deserts follow"   ---Chateaubriand