17 March 2005

Financial services lobbyists wrote the bankruptcy bill and shopped it to ďfriendlyĒ Congressmen

I don't believe in bankruptcy. If you incur debt, you should pay it off. However, I find blatant Republican hypocrisy in the new bankruptcy rules passed by the Senate.

First, consider that the vast majority of individuals and families filing for bankruptcy truly need the relief due to hardships imposed by medical conditions, where medical insurance won't even address. And it's estimated that 90% of American bankruptcies are the result of such medical emergencies, job loss, divorce, or death of family members.

Iíve been doing research on families in financial trouble for more than twenty years to learn how many people were abusing the bankruptcy system. My colleagues and I did a really extensive analysis and learned that families turn to bankruptcy not because they want to find a way not to pay, but because they are desperate. More disturbing, we released a study earlier this year that revealed that over half of bankruptcies are in the aftermath of medical emergencies.

I never wanted to get involved in politics, but the bankruptcy bill now moving on a fast-track through Congress isnít fair. It beats up the average family already staggering under the weight of bad luck and huge debts, while it lets real abusers go free. That appears to have been the idea from the start.

Again, I haven't studied the legislation in detail, so I can't say if I'm vehemently opposed to it. But, make no mistake about it, it's blatant Republican hypocrisy, as has come to be expected, to serve corporate interests and the grubby lobbyists that wrote this deal. See, Republicans believe big special interests like banks and credit card companies shouldn't be shorted, but by the token that they didn't address loopholes for the wealthy folks elude paying their debt, shows they have no regard for fleecing taxpayers and working Americans.

There's a larger thread of hypocrisy that streams around this controversial issue, that is the dichotomy between worker and proprietor, which in the blue collar industrial era were vastly different, but now in this "free agent nation", where many have chosen (or been forced) to kindle the entrepreneurial spirit and the rules have indeed been turned upside down. Starting and growing a business is fraught with failure, many a business goes sour, and the starters regroup and rebound, often using bankruptcy protection to buffer them from landing in a spot where their prospects for economic recovery would be most dismal. So, why are the rules harsher for wage workers, who now are at the mercy of turbulent forces totally out of their control than wild eyed speculators, who hope to carve out economic success via thier own business venture, but are near immune to ramifications of non-debt payment? Seems to be a giant divide, that again, favors the privileged, the elite, the well-heeled over the working stiffs.

Comments

I AGREE, I FEEL SORRY FOR THOSE PEOPLE FORCED TO SUBMIT TO BANKRUPTCY, BUT I BELIEVE MORE AMERICANS ARE LEARNING MORE ABOUT HANDLING DEBT, AND TRENDS TO PAYING OFF DEBTS ARE ON THE RISE.

http://moneycentral.msn.com...

"The truth about credit card debt
Conventional wisdom is that weíre all hooked and struggling. The reality is, in fact, quite different and less frightening.

Youíve probably heard that the average American carries more than $8,000 in credit card debt.

Itís a figure frequently cited by politicians, journalists and pundits as a sure sign of impending economic collapse. They argue that consumers, already struggling under this massive burden of debt, soon will have to stop spending like drunken sailors. The economic recovery, therefore, is doomed!"

"The surprising thing about this statistic isnít that itís so widely known. Rather, itís that the statistic paints a picture thatís just plain wrong.

In reality, most Americans owe nothing to credit card companies.

Most households that carry balances owe $2,000 or less.

Only about 1 in 20 American households owes $8,000 or more on credit cards.

These figures are from the Federal Reserveís 2001 Survey of Consumer Finances, one of the most comprehensive assessments of what Americans own and owe."

"Take heart: Weíre actually frugal
In much the same way, a relatively small population with huge credit card balances can skew the average to make it look like the typical American is carrying a much bigger debt load than he or she actually is. Consider:

23.8% of American households have no credit cards at all -- no bank cards, no retail cards, nothing.

Another 31.2% of the households the Fed surveyed paid off their most recent credit card bills in full.

So together, the households that owed nothing on credit cards equaled 55% of the total.
Hereís some better news: Paying off balances actually became more common between 1998 and 2001. The proportion of households that had bank cards (Visa, MasterCard, etc.) who reported that they regularly paid off their balances in full rose 1.5 percentage points to 55.3%."

"We donít carry that much debt
Of the households that did carry a balance, the median amount owed was $1,900. That means half of the households with a balance owed more, and half owed less. (Medians are less subject to the skewing phenomenon that plagues averages; thatís why economists tend to favor them.)

Bill Whitt at the VIP Forum, a Washington D.C. research firm, helped me dig even deeper. By analyzing the credit card debts of all the households the Fed surveyed, Whitt discovered:

Only 29% of households owe $1,000 or more on their cards.

21% owe $2,000 or more.

6% owe $8,000 or more.

4% owe $10,500 or more.

1% owe $21,400 or more.
The Fed statistics pretty much gibe with what Fair Isaac, the creator of the FICO credit score, discovered when it reviewed millions of credit reports.
There are a few differences between the universe the Fed examined and the one looked at by Fair Isaac. For one thing, credit reports are individual -- thereís no such thing as a household or even a joint credit report. Also, you have to have and use credit to have a credit report. Finally, credit reports donít typically distinguish between balances you pay off and those you carry each month.
"Thereís still plenty of trouble out there
Does this mean all the hand-wringing over consumer debt is so much noise? Hardly. Although most Americans seem to be avoiding the credit card trap, there are still plenty of people on the financial edge:"

ADMITEDLY MOST BANKRUPTCY IS NOT DUE TO CREDIT CARD DEBT, BUT I BELIEVE MORE AND MORE AMERICANS ARE LEARNING HOW TO CONTROL DEBT AND MANAGE THEIR FINANCES. HOPEFULLY SOMEDAY WE WILL NOT HAVE TO WATCH ANY MORE OF THOSE ANNOYING COMMERICALS ABOUT DEBT CONSOLIDATION AND "NON-PROFIT" ((RIGHT, LIKE THERE TRULY IS SUCH AN ANIMAL)) DEBT MANAGEMENT SERVICES. IF YOU ARE A COLLEGE STUDENT GO AHEAD AND GET THAT CREDIT CARD, BUT WHEN YOU START USING IT TO PAY FOR BEER AND PIZZA, THAT IS A SURE SIGN YOU ARE HEADED FOR TROUBLE.