Bush signs law making it harder for Americans to wipe out de

mquast53000 · Post by **mquast53000** » Wed Apr 20, 2005 3:39 pm

WASHINGTON -- President Bush signed the biggest rewrite of U.S. bankruptcy law in a quarter century on Wednesday, making it harder for debt-ridden Americans to wipe out their obligations.

"Bankruptcy should always be a last resort in our legal system," Bush said. "If someone does not pay his or her debts the rest of society ends up paying them."

Many debtors will have to work out repayment plans instead of having their obligations erased in bankruptcy court under the law, which will go into effect in six months. The 500-page legislation won final congressional approval last week after being pushed for eight years by banks and credit card companies.

The measure would require people with incomes above a certain level to pay some or all of their credit-card charges, medical bills and other obligations under a court-ordered bankruptcy plan.

Bush said the new law makes the financial system fairer for debtors and creditors.

"The act of Congress I sign today will protect those who legitimately need help, stop those who try to commit fraud and bring greater stability and fairness to our financial system," Bush said.

Those who fought the bill's passage said the change will fall especially hard on low-income working people, single mothers, minorities and the elderly and will remove a safety net for those who have lost their jobs or face crushing medical bills.

The financial services industry argued that bankruptcy frequently is the last refuge of gamblers, impulsive shoppers, divorced or separated fathers avoiding child support, and multimillionaires who buy mansions in states with liberal homestead exemptions to shelter assets from creditors.

"In recent years too many people have abused the bankruptcy laws," Bush said. "They walked away from debts even when they had the ability to repay them."

New personal bankruptcy filings edged down from 1,613,097 in the year ending June 30, 2003, to 1,599,986 in the year ending last June 30, breaking an upward trend of recent years.

Between 30,000 and 210,000 people -- from about 4 percent to 20 percent of those who dissolve their debts in bankruptcy each year in exchange for forfeiting some assets -- would be disqualified from doing so under the legislation, according to the American Bankruptcy Institute.

Those people have six months until the law takes effect to escape the tougher guidelines. Bankruptcy attorneys have said they anticipate a rush to the courthouse.

Under the current system, a federal bankruptcy judge determines whether individuals must repay some or all of their debt.

Under the new law, those with insufficient assets or income could still file a Chapter 7 bankruptcy, which, if approved by a judge, erases debts entirely after certain assets are forfeited. Those with income above their state's median income who can pay at least $6,000 over five years -- $100 a month -- would be forced into Chapter 13, where a judge would then order a repayment plan.

mquast53000 · Post by **mquast53000** » Wed Apr 20, 2005 3:42 pm

I would be willing to bet that there was some influence from those that gave Bush money for re-election. I think this is going to be a law that bites poor America in the ass. Like banks and credit card companies really need anymore help from the US Government. Now Wells Fargo can make an extra 10 million a year while a single mother of three can’t feed her kids. Go Corporate America!!!

Post by **SonomaCat** » Wed Apr 20, 2005 3:54 pm

Darn... why can't I ever just agree with somebody?

Anyway, I actually kind of like this legislation. It sounds like most/all of the changes relate only to people who make quite a bit (they must make over the mean income in that state), so it shouldn't have any impact on the truly down-on-their-luck types. It will, I hope, only impact the truly irresponsible or downright greedy people who choose to go the bankrupcy route.

I know of a guy (my predecessor ex-boyfriend of an ex-girlfriend of mine -- so we're not exactly tight) who ran up about $80K in credit card debt, fully intending to declare bankrupcy at the end. Due to homestead exemptions, he was able to keep most everything and came out way ahead in the transaction, just as he had planned. I know this is an exception, but I'm happy knowing that something is being done to clamp down on this sort of thing.

I wouldn't have minded to see an amendment or two on the bill to discourage banks and credit card companies from promoting the use of credit to the extent they do. They are getting a bit of a free ride -- they can still market people into making bad decisions (which they certainly do), but are now getting more help on the bankrupcy side.

All in all, though, I am glad to see that this legislation has means-testing in it -- that should prevent the poor from getting hit any harder than they would otherwise.

Cat Grad · Post by **Cat Grad** » Wed Apr 20, 2005 4:07 pm

BAC, I think it has to do with that 516 or 517 social security prefix

All joking aside, I tend to agree with you. Think of how many times Donald Trump and Dennis Washington have used the bankruptcy court to bail them out of cash flow problems. Does this do anything to stop them. One reason I appreciate the Hysell family so much; Cliff's uncle had two sawmills when he ran into a cash flow problem and refused to go that route (bankruptcy) and paid the last of his notes off shortly before passing away. I guess Montana State teaches us responsibility in general and fiscal responsibility specifically.

Post by **rtb** » Wed Apr 20, 2005 4:09 pm

I agree BAC, there are way too many people who abuse the use of declaring bankruptcy!! I would definately like to see credit card companies forced out of marketing to poor decisions, but this bill is a good step!!

Cat Grad · Post by **Cat Grad** » Wed Apr 20, 2005 4:27 pm

But you know it's not just the credit cards that get us. I refused after about my fifth house to disclose to a realtor what I was prequalified for because they always tried to put me in the max house and payment with the line of B.S. that it was a good investment. Managed to stay well under a quarter of my take home for payments and it was still a good investment

Regret not understanding that sheet metal and four wheels aren't status symbols until I was in my late thirties

But...I always maxed out both IRA and 403b in addition to government pensions because they really didn't affect take home noticeably (other than the brand of cigars or beer).

Bleedinbluengold · Post by **Bleedinbluengold** » Thu Apr 21, 2005 8:49 am

DANG - I should have not disclosed that to my significant other!

mquast53000 · Post by **mquast53000** » Thu Apr 21, 2005 8:56 am

rtb wrote:I agree BAC, there are way too many people who abuse the use of declaring bankruptcy!! I would definately like to see credit card companies forced out of marketing to poor decisions, but this bill is a good step!!

I guess I look pass the abusers and find myself concerned with those that are basically screwed. I do know a person that has a child that has had a number of mental health problems. Their insurance did not cover his particular condition, so the family had to pay the hospital bills out of their own pocket. The family couldn’t keep up with the financial burden, and had to declare bankruptcy. These are the situations that I worry about, not what the Donald does…