Bankruptcy Reform Part 2: Why This Law Sucks
Mon Jun 05, 2006 at 05:09:49 PM PDT
A few days back, I posted a
diary that provided some background on the eight year legislative history of "bankruptcy reform." (Preliminary note: From here on out, it's "the new law" because "reform" is just too Orwellian. It usually means we fixed something that was broken.)
But that diary was all about roll call votes, bill numbers and such. This time, I'm going to explain why this new law sucks.
The new bankruptcy law sucks because it's hurting people
A piece in In These Times, Bankruptcy Law in Shambles, makes my point here:
In December, Alfonso Sosa, a house painter in Fredericksburg, Texas, fell behind on the payments for the mobile home he shared with his wife Melba. The mortgage holder moved to foreclose, and Sosa filed an emergency petition in federal court for bankruptcy protection. But the Sosa family quickly ran afoul of the country's new bankruptcy law, which had gone into effect only six weeks before. One of the many new provisions requires all debtors to take a simple, one-hour credit counseling class before they file, but the Sosas had not known about the requirement.
Although Sosa had taken the class by the time they got back to court, U.S. Bankruptcy Judge Frank R. Monroe quickly dismissed their case, leaving the Sosa trailer open to foreclosure.
Monroe was furious, not with the Sosas, but with Congress for tying his hands. "Can any rational human being make a cogent argument that this makes any sense at all?" he wrote in his opinion. He even accused Congress of colluding with the nation's credit industry "to make more money off the backs of consumers in this country."
The Sosas aren't alone. People who really need help are getting their cases kicked over technical violations, failing to comply with requirements that have nothing at all to do with the trouble they are in or what will happen if they don't get relief.
The new bankruptcy law sucks because republicans suck
My head almost exploded over the lies and distortion the republicans spread on behalf of this new law. At the heart of all their arguments was this: People are using bankruptcy to cheat and that's hurting hard working Americans. Never mind that even the studies that supported the republican viewpoint found no more than about 15 percent worth of bankruptcies were "abusive." (There's a lie there, too. The studies generally looked at how many people filing under Chapter 7 could afford to repay "some" of their debt in Chapter 13. "Some" could be two percent, which wouldn't exactly make Visa start dancing in the streets.) An independent study, i.e., one not funded by the credit card industry, put the figure closer to two or three percent.
But who cares? They changed the rules on everyone to catch those mythical abusers and, in the end, the Sosas lost their house.
A quick note here: Yes, some people abuse the system. But the freewheeling spendthrift who maxes out the credit cards and then dashes off to bankruptcy court is the exception, not the rule. Moreover, the law already provided their creditors a remedy. Republicans were more offended by the notion that these creditors should have to pay for their own legal battles.
The new bankruptcy law sucks because Democrats decided they wanted to suck, too
Go to my other diary and look at the vote tallies. For five straight Congresses, whatever bill was pending passed by a veto-proof majority. This new law is a classic example of why some people think there's no real difference between Democrats and republicans.
One Democrat that really mattered did something that mattered: President Clinton pocket vetoed the bill in 2000.
One Democrat who really sucks: Joe Lieberman. Like too many Democrats, Lieberman supported this every step of the way. Until 2005. No one will ever convince me he had a change of heart. Rather, my money's on him knowing for certain he could look like the good guy by voting against it, but safe in the knowledge that it was going to pass anyway.
One Democrat whose suckiness, vel non, is a source of a whole lot of debate: Hillary Clinton. It was widely believed that Mrs. Clinton informed her husband's views on this law back when he was President. She was, the word had it, concerned that it would have deleterious effects on women and children. As a Senator, she voted for the bill in 2001, but voted not to cut off debate in 2005. The moral of this story is that no one really knows what Sen. Clinton's position is on the new law.
Some of the Democrats who saw the light from the very beginning: Paul Wellstone (may he rest in peace), Sherrod Brown, Bernie Sanders, Jerry Nadler and Shirley Jackson Lee.
The new bankruptcy law sucks because the way things work in Washington sucks
Aside from having little or no factual support, this law didn't have any public support. On August 23, 2002, a letter was sent to the majority and minority leaders of the House and Senate that was signed by the American Association of University Women, AFSCME, ACORN, the Consumer Federation of America, the Feminist Majority, the NAACP, Public Citizen, NOW and a whole bunch of other groups. In addition, bankruptcy judges, bankruptcy trustees and academics all tried to tell Congress that it was on a fool's errand.
What prevailed was money. Jokes started to circulate that the reason it was taking so long to pass this new law was that Congress was trying to squeeze another election cycle out of the financial services industry.
Yes, this new law is the poster child of campaign finance reform and of the inside-the-beltway mindset.
But to end on a positive note: The new bankruptcy law is also why we keep fighting.
UPDATE: As a commenter correctly pointed out, I misspoke regarding the Sosas. At this time, they still have their mobile home. In my head I was confusing them with another family that did lose their home, again because of the counseling requirement. Apologies for the misstatement!
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