After-Action: The Bankruptcy Of The Blogosphere

The bankruptcy bill is set to clear the Senate, and is expected to sail through the House shortly, despite widespread opposition in the blogosphere that spanned the political spectrum.  How widespread?  In one "Can't tell the players without a scorecard" post, we actually find Atrios pointing approvingly to a Free Republic post and calling the leaders of his Democratic party "morons".

Yet the unusual alliance of Atrios, Josh Marshall, Kevin Drum, the Daily Kos, Glenn Reynolds, Jane Galt, John Cole, and many more seems to have had zero impact.  In the Last Alliance, Trent Lott was cast down - what happened here?

A few things.  First, time was against us - per the Feb 18 NY Times, the Senate took this bill up and moved it quickly.  They were able to do so because the issue has been kicked around Congress for years, and a similar bill passed both houses in 2000 (only to be pocket-vetoed by Clinton).

Secondly, the blogosphere was caught napping - Atrios did not post until March 6; Kevin Drum seems to have his first post on March 4; Josh Marshall took up the issue on March 6.  Where were the canaries in the coal mine?  (And if anyone wants to volunteer a link to their early warning, sing out in the comments below).

The big media were no better - the first NY Times hand-wringer was on March 3, too late to slow this freight train.  [E. J. Dionne of the WaPo wrote on March 1].

One possible explanation - too many stories.  Social Security, Lebanon, the Pope, and the residue of the Guckert debacle may have been distractions.  But isn't the blogosphere supposed to multi-process?

Another view - opponents of this bill adopted an "embrace your destiny" attitude.  The bill was voted out of the Senate Finance committee with three Democrats (Biden, Feinstein, Kohl) joining nine Republicans in a 12-5 vote.  With this sort of bipartisan support, and given the bill's past history, opponents may have chosen not to work their contacts at the NY Times and amongst the usual suspects.

Third, some of the arguments offered by bill opponents were, hmm, phoney.  The NY Times, Paul Krugman, and many others cited a Harvard bankruptcy study showing, per Krugman, that "One recent study found that more than half of bankruptcies are the result of medical emergencies".  Nonsense.  Or, per Todd Zywicki, "that conclusion cannot be based on this article that is published in Health Affairs".  Jane Galt does a good job of presenting the issues (and repeats another phoney argument that we attributed to Kevin Drum.  Say it ain't so, Jane!)

Fourth (First?  First, Second, and Third?), money talks, as explained by the Daily Kos, Glenn Reynolds (click on "Why, indeed"), and, over the years, many others.

There will be other days.  A hint to the canaries - the Feb 18 Times story tells us this:

In addition to completing bankruptcy legislation, the [business lobbyists] face their biggest test over two other tort revisions. One would sharply limit damage awards in medical malpractice lawsuits. Another would overhaul the way courts dispose of asbestos cases, but that has become bogged down in negotiations among trial lawyers, unions, manufacturers and insurers.

Forewarned.

MORE:  Shameless Self-Promotion Alert: Please, leave links to useful commentary in the comments.

UPDATE:  Undaunted!  Glenn Reynolds links to Politology, a group that wants to carry the fight to the House.  The CW is that this bill can not be stopped in the House, but they only say that because it's never been done.  Besides, an e-mail doesn't even cost 37 cents.

Folks who plan to fight on (don't rush me) ought to check something - where is Rush Limbaugh positioned on this bill?  Could he be re-positioned?

And picking up the NRO could help - Google does not show them pounding the table one way or another (Hey, correct me!).  They hated the press coverage in 2001, but that is a different point.

Last point - I am not going to instruct activists in how to boil water for coffee, but - is there a House committee this bill needs to clear?  Are there Congressman who might be swayed by phone calls, e-mail, and a letter campaign to their home-town newspapers?  Who are the targets?

MORE:  "Last Alliance"?  What about opposition to FEC regulation of blogs?  Well obviously, "Last Alliance" refers to ancient history.  Obviously.

Comments

[toby928]

I've got to disagree with you guys. In this case, financial dealings are pretty simple; don't spend what you can't afford, don't borrow what you can't pay back, and don't go bankrupt when you have the ability to pay, even if its hard. In moral terms, stand by your word. What else is the measure of a man?

Toby

[Jos Bleau]

"One possible explanation - too many stories."

Its really the other way around, I think. I know I'm cynical, but I see very few stories in the media that don't look like low-value added press releases from various interest groups, nudged along with partisan help.

In this case, since the Dems themselves were split (or maybe just half of them were bought) and the folks for debtors relief don't have the central office or publicity skills of, say, the Brady anti-gun campaign, there were no pre-digested, just-remember-to-put-your own-byline-on-our-spin materials out there that created the right kind of morality play, this story more or less did not exist.

Or - this was an enterprise story where reporters and editors had to all the heavy lifting with no pre-digested spin or pre-set template to fit everything to. And they showed about as much enterprise as I've some to expect ...

Compare the coverage of this bill to, say, the Terror-Suspects-Can-Buy-Guns-Oh-My!!!! story from earlier this week.

[Toby928]

Tobias Took: thread killer

[Ron]

I gotta say, on first sniff I agree with Toby. Nobody's putting a gun to people's heads & forcing them to assume debt they can't afford. I myself only have one credit card from each of the major issuers and only use them when I have to. I find living a cash-only lifestyle, while possibly limiting, is actually quite liberating.

As to the other upcoming bills, why shouldn't med-mal & asbestos litigation be reformed? Talk about people taking advantage of the weak-willed in our society...

[Carl F]

The blogosphere matched the mainstream media in aimless partisan inanity on the topic of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 or S.256IS.

The first and most critical problem is this comment is one of the few places, on the web or in print, where you will find the name and the number of this legislation. So, even if the New York Times or Atrios' call to arms so stirred me to action, I couldn't call my Senator because I'm never told the name or number of the bill I'm supposed to be opposing.

The other reason, I suspect, that the blogosphere was just as impotent as the MSM on this issue is the argument on most blogs matched the inane irrelevant arguments in most MSM articles. The argument that credit card companies make a lot of money, especially on late payment and over-limit fees, and that millionaires have loopholes are not very compelling reasons for the average blog reader to oppose this bankruptcy reform bill.

A reasoned analysis with commentary on the merits of the bill would've been much more effective at letting readers know WHY they should oppose the legislation.

[steve sturm]

Toby hits it on the head. The blogosphere didn't get any traction on this issue because this is a non-issue to most of America (at least those who, as Toby says, spends only what they can afford...). This issue wasn't going to influence a Presidential election, it wasn't about what a Senate Majority Leader said, it wasn't about a slur on the US military.

As the old saying goes: the blogosphere can lead the public to a story, but we can't make them care.

Full commentary here

[Fred]

I didn't write on it because of all the things you could fix about the bankruptcy system, this one will likely have the least real impact. Now if Congress would get around to addressing the extortion-in-all-but-name abuse of Section 547 of the Bankruptcy Code (which purports to protect creditors from improper transfers of funds pre-petition to other creditors, but which really allows massive wealth transfers from unsecured creditors to bankruptcy attorneys), that would have a real impact on the economy.

[TM]

Good points by Carl F and Steve Sturm. Here is a link to the bill.

This was interesting, too - a little background on The National Bankruptcy Review Commission.

It proves nothing, of course, but it is worth remembering that Congress has kicked this around for years. Upsetting that kind of apple cart is not easy.

[TM]

The ABA is opposed to the requirement that lawyers certify their clients financial representations.

[TM]

Lots of (oppo) links at the American Bankruptcy Institute.

Anyone who can find the pro-reform case (which I assume can be made), leave a link, please.

[gt]

Toby,

I generally agree. Except that when you see the GOP passing this bill but voting down amemdments to kill the loopholes, like the asset protection trusts, that allow the wealthy to keep money even in bankruptcy I can't help but wonder, why?

[Ron]

Well, in a great case of unitended consequences, if the ABA is against it then I am most likely to support it.

Also, as touched on by others earlier, I have yet to see a detailed critical analysis of why this is a bad bill. The only thing anyone says is "the credit card companies make tons of money". Well, those of us on the right are supposed to believe in capitalism, aren't we?

[creepy irish dude]

Toby928 says: "... and don't go bankrupt when you have the ability to pay, even if its hard. In moral terms, stand by your word. What else is the measure of a man?"

Hey Toby, go post this advice in one of TM's post on social security reform!

[gt]

Creepy, that's good!

;)

[Toby928]

CID, Is that agreement or disagreement?
Tob

[creepy irish dude]

Total Agreement Toby-In fact you've solved the whole SS crisis.

All the government has to do is charge SS payments to a credit card.

The the SS Administration can never declare bankruptcy!

And the Republicans have already voted their approval of this plan!

[Toby928]

CID, I'm sorry, is that english your typing? Read my post again and make an actual comment, or attach a smiley if its humor ;-) 'cause it just don't parse.

Tobias Took: thread killer

[creepy irish dude]

Ummm...see if you can figure this out:

My comment
________________

Your head

[Toby928]

CID, so should I read your comments to be an endorsment of 'welsching'. ;-) Your point re the government is right despite yourself. The SSA (really the politicians) has promised more than it can pay. All the current reform proposals that I can see, ARE a form of bankruptcy. Maybe that will have to happen but I don't like it at all.

Tob

[TM]

I can't help but wonder, why?

From newspaper accounts, a couple of points emerge - first, hte House-Senate dealwas that if the Senate passed the bill as-is, the House would, too. This saves a potentially gruesome conference.

Second, this bill has been around for eight years, which is longer than the asset-protecytion trust scheme (folks used to go offshore for that kind of protection).

Third, the asset-protection trusts are not exactly driving the default rate in the credit card industry. Per the Times, they are doctors shielding assets from malpractice, and corporate directors worried about Sarbanes/Oxley.

Maybe those issues should be addressed, but a better bill would be a comprehensive look at malpractice reform, or corporate oversight.

Put another way, going after these trusts is fun, populist grandstanding, but has nothing to do with most abusive bankruptices (I bet). And not much to do with the history of this bill over the last few years, either - as a fun way to demogagoge against it, and bog it down with amendments, sure; but let's not confuse tactics with substance.

[AggravatedDocSurg]

It is fascinating to see the hue and cry over this bill, predominantly because the hubub is coming primarily from attorneys. While there has been some support amongst the blogosphere attorneys for medical malpractice and tort reform (which are a much more important issue for the counry), certainly I have not seen a call for a "cross-blog coalition" to fight for it.

[Crank]

Well, I got the Last Alliance reference. Are you suggesting we will live to regret not casting Lott into a volcano while we had the chance?

[Toby928]

TM, excellent points on the need for comprehensive reform, but I wonder; in the 'evenly-split' partisan environment was a better, more comprehensive bill possible? Is this a case of the best-we-could-get? I tend to think that too much sunlight on this sausage would have led to no reform at all. Would that have been better? beats me.
Tob

[Robert Musil]

Tom,

I view this widespread cross-blogosphere virtual coalition against the bankruptcy reform bill as an anthropological curiosity - and a sort of reprise of the blogosphere's widespread support for Lessig's bizarre constitutional assault on the Bono Act, which extended the life of copyright terms. And I think the current agreement is just as wrong-headed as the prior one. As so often the case, when so many people of such different political stipes join together in bipartisan agreement, one knows they're almost certainly seriously wrong. In fact, the blogospherian resistance effort in both cases has a lot in common with the dancing crazes and mass self-flagellation displays of the middle ages. Why does this kind of thing happen? Is there a virtual hallucinogenic fungus in the system that periodically affects so many otherwise sound minds?

Consider the objections expressed by normally level-headed InstaPundit. We are to believe that much personal bankruptcy is caused by tortious infliction of credit by scammers. OK, but even if that is correct, the "scammed" are wronged regardless of whether they have to resort to bankruptcy. There's no good reason why somebody who manages to scrape together the resources to pay off a "scammer" should be treated differently than someone who elects to throw in the towel. So the proper remedies are to be found (or enacted) in consumer protection laws that apply regardless of bankruptcy of the debtor. Whatever those remedies are, they should remain available in bankruptcy - but there's no good reason for the law to set off a nuclear bomb of total discharge just because the debtor gets into credit trouble. Actually, my sense is that "scamming" is not a major problem (although gambling addiction may be - and may be getting worse).

The other objections to the pending bill that I have seen are similarly flimsy - although maybe not as completely nutty as Lessig's old constitutional anti-Bono Act rants. I gather he’s still in continuous depression over those – to the point where Richard Posner has actually had to publish articles telling him to cheer up. I hope that the collective hang over from the anti-bankruptcy-bill bender is not that bad!

[gt]

Tom,

Over at Jane Galt's she linked to a bankruptcy lawyer who says that in his experience there is little to no bankruptcy abuse. Yes, it's just his opinion but although I keep hearing about this abuse I haven't seen much proof of it.

The reason I point out the loopholes is that it is the position of Republicans and conservatives that people should be more responsible for their actions. The counter argument has been that the GOP does not seek to make all equally responsible and consistently votes or allows loopholes that benefit the wealthy. This is a perfect example.

If the GOP really believed that they stand for personal responsibilty surely it would be slam dunk to approve an amendment that limits abouse of bankruptcy by the rich in a bill that seeks to generally limit abuse of bankruptcy.

It's hard to look at the facts in this case and not conclude that those that talk of class warfare by the Right are correct.

[random m]

I'm a bankruptcy attorney.

First, is everyone aware there are two personal bankruptcies to choose from? One is a chapter 7 "wipe everything out" the other is a chapter 13 "pay at least part of the debt back"? This is already the case. What the Credit card companies want to do is force more people into 13's. The success rate (make it to the end and get the discharge of debt) for 13's in my state is 20%. Forcing more people into 13's isn't going to up the success rate. We'll just end up with more people perpetually in chapter 13 bankruptcy. Priority debt like attorney fees, court fees, taxes and secured debt already gets paid early on in a 13 which means the credit cards have to wait till the latter years to get anything. Repeat 13s where someone starts but cannot finish so starts again a 13 are already common. I think the credit card companies are going to be disappointed by the result of this law. Meanwhile, who will be getting the squeezed out pennnies? The court, the bankruptcy attorneys and mortgage or car financers. (Yet oddly enough most bankruptcy attorneys hate this bill.)

As for living within your means-good point. But the overwhelming majority of those who come walking through my door really can't pay. Most have been struggling for years. They'll be recovering from something like high medical expenses and then someone gets laid off. They'll get re-employed but in the meantime got behind and the interest rates soar, the late fees and other penalties have been tacked on and they realize they can't make it.

I've seen grown men tear up in the agony of not being able to support their family and pay their debt. The emabarrassment and shame so many feel is almost overwhelming. Many that come in could have come in one or two years earlier but didn't want to admit defeat. Second or even third jobs, taking out other loans to make the payments on the first, not taking medication they need-I've seen all this.

Let the credit cards be more reasonable in working with people and stop hiking up interest rates at the drop of a hat and bankruptcies will go down. So many try to work out something and the 32% interest rate credit card (that used to be a decent rate) will say no way. It often at that point the reality of the situation sets in and bankruptcy will be considered for the first time.

I've seen the abuse too of course, but the majority are hard-working, long-suffering Americans who just can't do it anymore.

[TM]

If the GOP really believed that they stand for personal responsibilty surely it would be slam dunk to approve an amendment that limits abouse of bankruptcy by the rich in a bill that seeks to generally limit abuse of bankruptcy.

It's hard to look at the facts in this case and not conclude that those that talk of class warfare by the Right are correct.

I disagree. And, although I am repeating myself, here we go again - the bill being passed today is roughly what has been passed before, going back several years. The asset protection trusts are new (as is Sarbanes Oxley). In fact, Sen Grassley said (somewhat implausibly) that he was not familiar with them. By and large, we seem to have nothing, other than Dem talking points, suggesting that they are an abused loophole in bankruptcy.

Put another way, if these trusts were such a problem for lenders, why were they not picked up in the bill?

So, the simple, non-class warfare, utterly unsatisfying theory is that these trusts are not that common, have virtually nothing to do with the increase in strategic bankruptcies, were not contemplated in the original legislation, and are only being brought up now by Dems eager to kill the bill by introducing complicating amendments.

I understand why Krugman and his acoylytes will want to cling to the more sinister and exciting theories, but I don't see it.

An dI learned a bit about these trusts here, and the Times had an article here - if anyone is an expert, let us know.

And what is interesting in the Times article is that no attempt is made at all to tell us how many of these trusts have actually been used to shield assets in a bankruptcy. They want to close a loophole without any facts about how many assets are in these trusts, when they are used, who has benefitted, or anything else.

And for some darn reason, Congress thinks they can take those burning issues up at a later date. Go figure.

Random M: Thanks for the input. I don't have any sympathy for the credit card companies, and I hate those loan shark rates, but... It would be interesting to see what would happen if we went back to the days of usury caps; the restricted availability of credit would be one consequence, of course.

Whether the Dems want to position themselves as the party committed to less credit availability for lower income groups is an intriguing question.

[Robert Musil]

Tom,

One additional thought on the narrow sub-topic of whether or not there is a lot of "bankruptcy abuse." I think it is very odd to ask or look to bankruptcy attorneys for an answer to that question, simply because aside from Hollywood agents I don't know a less candid or more confused bunch. The people to ask are credit institution officers who deal with personal debt and bankruptcies. I don't mean the official statements of the institutions themselves - those statements are self-serving, especially since Congress is about to act (although anyone who thinks modern American credit institutions represent the "political right" in this country is about eighty years behind the times). Anyone who has spent any substantial amount of time actually privately communicating with such "bankers" knows that they generally and subjectively believe there is a lot of bankruptcy abuse, at both the high and low ends. At the low end there are lots of hidden assets, fraudulent conveyances, consumer purchases prior to filing and lots more. Moreover, most financial institution officers charged with personal work outs and bankruptcies not only feel there is a huge amount of bankruptcy abuse, but also that much of that abuse is of the worst sort at both the high and low ends: planned, strategic abuse.

At the high end there is a well-established abuse of the "homestead exemption." When he faced possible personal bankruptcy in the early 1990's, Donald Trump bought "Largo a Mar" - the largest estate in Palm Beach (Florida has an unlimited homestead exemption) and made it his "primary residence." Multiple bankruptcies of certain types of sophisticated, high income individuals are very common. Some time ago Congress actually had to pass a law preventing people with student loans (especially that financed professional training, such as medical or law school) from declaring bankruptcy right after graduating. That practice was wide spread - and that personality type has not gone away.

The existence of widespread personal bankruptcy abuse does not end to determine the discussion. But one reason the opposition to this now-pending bill has been so feckless is that so many of the opponents advance arguments that are just bizarre - such as outright denial of widespread personal bankruptcy abuse. The fact is that any Congressperson can be quickly convinced that widespread personal bankruptcy abuse obviously exists at both the high and low ends - and from that point on anyone denying that fact is simply viewed as a fool or a charlatan by the people making the law. Of course, Congress often gives fools and charlatans what they want - but not because Congress believes their arguments.

Just ask Professor Lessig. Somehow Congress is just not discovering that technological and artistic progress in this country is being brought to a virtual halt by the Bono Act.

[hoof in mouth]

I for one would be perfectly happy to see the reinstatement of usury laws and the resulting loss of credit for some groups. In financial services, there are products which are not available to people based on many factors including net worth, experience and time frame. These are legally required for the protection of both the advisor and the client, because a person without experience cannot fully understand the risks involved, even with disclosure. A volatile product that is "safe" for a trained, experience expert is not "safe" for someone else, even if they really need or want it.

[TM]

As usual, Robert Musil is a lighthouse in a confused fog. If I can put his first comment in one sentence, it would be that we should address the problem of unscrupulous borrowers with bankruptcy reform, and the problem of predatory lenders with tougher consumer protection laws.

Someone (Drum) noted that easy bankruptcy will have the (desirable) effect of discouraging predatory lending, but it will discourage "good" lending too (if, at this point, folks can even admit that there might be such a thing).

As to high end and low end abuse - I remember the med school exception you noted, but how much other high end abuse is typical and predictable, rather than highly situational? E.g., there may be hundreds of doctors with asset protection trusts, but how many are invoked, and how often does their existence "deny justice" (whatever that means) to creditors?

And can that be taken up separately, as part of malpractice reform, or whatever?

Athe other end, I saw a factoid in some article thatsaid that(IIRC) 1.5% of households file for bankruptcy, but 15% would benefit from doing so. The theme of the article was that strategic bankruptcy was on the rise, as folks heard from friends/relatives how helpful it was, and the social stigma changed.

[Cousin Dave]

Ron from earlier had a good point. Part of the problem with the opposition, including a lot of people who should know better, is that it's being driven by populist fever rather than reasoned opposition. I've had a hard time myself finding any anti-reform commentary that doesn't have the phrase "evil credit card companies" in its first paragraph.

So let me give it a crack. Over the past week, as I've researched the issue, I've gone from being mildly in favor of the current bill to opposing it. My opposition to the bill isn't driven by any desire to stick it to the Man, but from my belief that this bill is attemping to solve the wrong problem. It's trying to keep people who are and always have been bad credit risks from abusing the bankruptcy process.

So what is the right problem? It's the fact that the lenders no longer have any discretion about who they lend to. A litany of credit "fairness" bills and court decisions has stripped loan officers and credit evaluators of the right to employ judgement or common sense. Credit ratings, to the extent that anyone actually bothers with them, are one-number scores produced by plug-and-chug formulas designed to eliminate human judgement from the equation; in fact, there is no need for a person to be involved at all, and these days often they aren't. Feed in a credit report, a number comes out, and that's it. This elimination of judgement and common sense leads to absurdities like the guy whose credit rating goes down because he canceled a few cards he wasn't using.

Who do credit card companies engage in carpet-bombing mass mailing marketing tactics? Because they don't have any choice. They don't have the legal privilege of actually making decisions about who they want to do business with. The moment that anyone, anywhere, wants a particular credit card with a $50,000 limit and gets turned down, instantly the cries of "redlining" go up and within minutes lawyers are lined up at the Madison County, Illinois courthouse door with class-action paperwork in hand. So if you are a credit card company, you either market indiscriminately or you go out of business, or a court does it for you. You knowingly make loans to bad-risk customers because the law gives you no other option, and you do your best to recoup the losses by hiding them in the rates and fees you charge the good customers. Why do so many credit card companies have "rewards" programs now? They are trying to find a way to improve their standing with their better customers. A much better way would be to "reward" the good customers with lower rates and better terms -- but the law and the courts won't stand for it.

Now, I'm not saying that lenders should be allowed to go back to the days when loans depended entirely on the whims of the loan officer. (Lenders don't really want to go back to those days either. Those work-from-the-gut loan officers guessed wrong a lot. With modern technology, lenders have much more reliable ways of identifying good and bad risks.) What I am saying is that there are an awful lot of bankrupticies that can be seen coming from a mile away; the lenders can pretty much predict the moment someone signs up if that person is going to default or not. Give them back the right to do something about it, to be more selective, and the bankruptcy rate will go down.

Believe it or not, it is possible to live without a credit card. When I was in college in the early '80s, I couldn't get one. When I graduated, all I could get for the first couple of years was a partially secured card with a $500 limit. I survived.

[Cecil Turner]

I think you'd do better with the "evil credit card companies" shtick. Frankly, I have a hard time staying awake through pro or con arguments, so reasoned opposition isn't getting it. Toby nailed it earlier: nobody gives a good crap, and this thing is going to fly because of inertia.

[gt]

Why would the bill being old be an excuse? If the bill is old shouldn't it be updated?

Isn't the abuse self evident in an asset protection trust, if you can declare bankruptcy yet shield millions of dollars? What other evidence or information could you possibly need?

[sama]

Limbaugh played tape of Kennedy having a Howard Dean like moment on the Senate floor, and laughed at him, calling him unhinged. Otherwise, he's made no mention of it.

[Patrick R. Sullivan]

"What other evidence or information could you possibly need?"

Not only do I want to know where you work, I want to know where you got that Phd.

[Patrick R. Sullivan]

"Who do credit card companies engage in carpet-bombing mass mailing marketing tactics? Because they don't have any choice. They don't have the legal privilege of actually making decisions about who they want to do business with. The moment that anyone, anywhere, wants a particular credit card with a $50,000 limit and gets turned down, instantly the cries of "redlining" go up and within minutes lawyers are lined up at the Madison County, Illinois courthouse door with class-action paperwork in hand."

Bingo. And they think this bill may be a back door way out of the problem created with the anti-redlining laws.

[TM]

Isn't the abuse self evident in an asset protection trust, if you can declare bankruptcy yet shield millions of dollars? What other evidence or information could you possibly need?

Frist, a ditto to Patrick. Second, I am holding out for the least bit of info about the circumstances in which these are invoked before I declare them to be "abusive".

If, for example, it is used by a surgeon who is frequently sued for malpractice because he has developed the habit of removing both of his patient's kidneys (Motto: "One for luck!"), "abusive" might cover it.

OTOH, if a doctor who performs abortions is routinely hit with nuisance suits by ardent pro-lifers, maybe "abusive" is the wrong word.

I have to admit, it does sound easier over in the reality based community, where actual facts are not needed.

As to redlining - I wondered if I was the only one thinking that.

[POed Lib]

The real reason that the conservative blogosphere was so late is that they, lovers of Big Republican Government that they are, innately believe that being kicked around by large corporations is what little people are for.

[wayne]

I think time was one factor, but it is also quite possible that a lot of people are shrugging their shoulders about this bill. Mainly, because a large portion of this population thinks that bills are individual responsibilites, they also don't see themselves having to apply for bankruptcy and in fact would do just about anything to make sure that they won't approach bankruptcy ( they see it as a big Red Letter on their foreheads ).

[J Allan]

Cousin Dave

You are correct in your post that the correct issue is not being addressed. But only as it pertains to credit card companies. Entities like JC Penney, Sears, Lowes, Home Depot and many small businesses are also stiffed not only by Chapter 7 but Chapter 13 as well.

As a former IRS employee, I reviewed hundreds of bankruptcy files covering all chapters. Anyone really interested in the issue should take time to review a few files at the Bankruptcy Court in your area. You will be surprised at the number of small dollar cases for chapter 7.

One abuse a few years ago, was young women,(I know sexist me,) purchase a few thousand dollars of household items, mainly from direct sellers and then after 6 months and usually without the knowledge of their future husband, file chapter 7 shortly before marriage and discharge those debts.

Another problem is the advertising by Attorneys in all manners of publications, advertising how easy and painless bankruptcy can be. Many of these one man operations may have hundreds of cases before the Court at any given time and are unable or unwilling to really give any counselling to their clients.

Whether this Bill is the best vehicle or not, I have not kept that much in touch to know. But this I do know, if it adversly affects enough constituants of the Congressmen it will be revisited and unfortunately at some date in the future made worse.

[bob]

Man, you have a lot of comments from people who haven't read the first thing about this bill. Try www.talkingpointsmemo.com/bankruptcy, where Harvard Law Prof. Elizabeth Warren, who is an expert on this subject, and a few of her students are guest blogging.

Yes, people should discharge their debts. But the credit card companies are clearly the more sophisticated party in this transaction, and they have it down to a science how likely people are to pay them back. They could simply give lower credit limits to riskier people on the front end, but apparently the mathematical equation works out better if they give higher limits, despite the number of people who become unable to pay.

Now, they can have it both ways, offering unreasonably high limits on the front end and when people predictably overextend themselves, squeezing every last penny out of them in bankruptcy court.

Those of you who think it can't happen to you, well, either congratulations on being rich or I hope that you or your kids don't come down with a catastrophic illness that exceeds your health insurance coverage.

[Forbes]

Oh, no, POed Lib, you've got it wrong. As little republicans, we love being kicked around by those big, bad corporations (and banks, too)--it's in our nature. (It also helps explain those monthly checks we get from the VRWC.)

Goodness gracious, folks. Consumer applies for credit. Credit company grants line of credit. Consumer runs up charges beyond ability to pay. Consumer files bankruptcy to void unsecured credit card debt. Credit company advocates for a tightening of bankruptcy law that would require consumer to pay an amount greater than zero towards outstanding credit card debt.

You'd think credt card companies were forcing people at gun point to run up their credit cards bills--'cuz we know the evil credit card companies are using abusive techniques to make you spend, spend, spend, and buy, buy, buy.

And then we get GT pointing his flashlight over in the class warfare corner, "No, no, it's the rich, it's the rich that are abusing the bankruptcy provisions because they're using these asset shield trusts to stiff the credit card companies, therefore forcing the companies to charge high interest rates on the poor!" Right...

Just like Sandy Weill (or Robert Rubin) at Citicorp, and Jamie Dimon at Bank One are famous Republicans with their shoe on the neck of their credit card customers. (Granted Weill is now retired, and Bank One has been acquired, but those two banks were two of the largest issuers of credit cards over the last decade.)

Anybody ever heard of free will, and personal responsibility, or are we to subsidize those personal failings, as well?

[TM]

Forbes, I think Bob did a nice job of presenting the Talking Points view of personal responsibility. Briefly:

Yes, people should discharge their debts. But the credit card companies are clearly the more sophisticated party in this transaction... so it is really the fault of the lenders if people getoverextended.

Now... people predictably overextend themselves...

Those of you who think it can't happen to you, well, either congratulations on being rich or I hope that you or your kids don't come down with a catastrophic illness that exceeds your health insurance coverage.

And those of you who think it can't happen to you because you aren't running big balances, and are trying to live within your means - BEWARE! You are just ONE mass-mailing away from being sucked into a vortex of financial despair.

[Paul Zrimsek]

Assuming for the sake of argument that we really want credit card companies to be our health insurers of last resort, I want to hear more about how their scientific money-extraction equation is able to predict who will come down with a catastrophic illness.

[gt]

Tom,

Not sure what you are talking about. It's pretty evident what an asset protection trust is. It allows a millionaire to make sure there is a certain amount of money no one can touch. Because of the legal costs it only makes sense for people with a lot of money. That means that if you are a millionaire you can go bankrupt but have a lot of money left. If you are poor or middle class you don't have that advantage.

What more do you need to now?

[Forbes]

Yeah, TM, it was the reference to TPM, as a source for information on the bill, that caused my eyes to glaze over...

I especially liked Bob's reaching out for a Harvard Law prof, as an "expert" on the matter. Last I checked, common sense, individual responsibility, and a little self-restraint or self-discipline doesn't require an "expert." (Or certainly shouldn't, but since it's un-PC to make distictions between right and wrong, I understand the impulse to authority.)

And then there's the "congratulations on being rich" part...funny that, I'm not rich, I especially need to live within my means, so I pay off the balance on my card bill every month.

And while being rich is a relative term, living within your means is not.

People "predictably" commit murder...should we subsidize that?

Yes, yes, I know. We're ogres. We're nasty. We're brutish. We're heartless. (Did I leave anything out?)

What needs subsidizing next? Gluttony, or sloth?
;)

[gt]

Forbes,

Can you imagine what would happen to the US economy if all of a sudden everyone started living within their means?

[TM]

What more do you need to know?

I need to know examples of how they are abused before I know whether they are abusive.

Examples of where they are not abusive might alos be illuminating.

Your assumption seems to be that they must be abusive. By extension, I guess it follows that all legal suits are justified, and that no one was ever harassed or threatened with legal action just because they looked like a wealthy target, etc.

I don't see it that way - I can imagine, as in the abortion doctor example I gave, cases where an honest man might want to protect his assets from others.

Let me know if this is too tricky.

We're nasty. We're brutish. We're heartless. (Did I leave anything out?)

We're short. (Explains the Napoleon complex.)

[gt]

They are abusive by their very nature because they give rich people the ability to shield money that poor and middle class people don't have. It is giving the rich a right others lack.

Your very example shows this. A rich abortion doctor can try to use this to shield himself. A poor or not-so-rich abortion doctor has no such remedy.

[Forbes]

GT: Give me a break...only millionaires can afford such a trust? That's the magic number, because attorneys you personally deal with will only take clients with a million dollar net worth. Right. Yeah, that's the ticket, every millionaire I know has one of these trusts--it's the latest trend. (Because someone with $2.4 million in assets and $1.6 million liabilities is not wealthy enough--or in dire enough circumstances--to afford the abusive lawyering you're so excited about. He's part of the poor and middle class!)

And one of the complaints about this bill by the ABA is that they're supposed to certify client assets and libilities in the bankruptcy proceeding (which they do not want to do). So on one hand, they haven't a clue to net worth, on the other hand, they know exactly!

Perhaps I missed it earlier in the thread, GT, did you cite or link to a study or report detailing such a trust, and the number of times it was successfully used to shield assets, and the total amounts of such assets shielded? (And I don't mean a WaPo article filled with anecdotes.) 'Cause it sure sounds like a straw man argument--but you could be right. Enquiring minds would like to see facts, not allegations.

Cheers.