Bankruptcy isn't popular. Those who have endured it would rather forget it. It certainly doesn't rate as a cherished memory...
But Bankruptcy is a critical safety valve in the marketplace. In the past it provided a critical counterbalance to over-aggressive or predatory lending. Bankruptcy served as a "Nuclear option" that allowed consumers to keep from being pinned down with a never-ending debt load. I call it a Nuclear option because both the Lender and the borrower had much to lose. But it had the effect of forcing Lenders to only enter credit deals where the Consumer could actually pay the debt off.
But that all changed with the new Bankruptcy Law.
Senator Dodd has introduced legislation to roll back the more odious provisions of Bankruptcy. Quoting from his call to action:
Recent studies show that nearly half of all people who file for bankruptcy protection do so because of medical reasons. Almost as many are due to the loss of a job or divorce. Unfortunately, today's bankruptcy laws—recently re-written by the credit card companies, passed by a compliant Congress, and signed into law by President Bush—disproportionately penalize our most vulnerable families and leave them without a safety net.
This is a bigger issue than just the middle class. Right now the US economy is teetering on the brink of recession, due largely to the mis-pricing of credit risk. And it's no small coincidence that the increase in aggressive lending in the sub prime sector coincided with revised Bankruptcy laws favoring Lenders. Why not lend to folks who can't afford it? Especially if Bankruptcy laws prevent the consumer from discharging the debt.
Dodd is really on to something here. And I am more than disappointed that Harry Reid, Hillary, and other Dems actually voted for this monstrosity.