While you're still fuming over this bailout, you might want to recall 2005, when congress bailed-out credit card companies by making it harder for the regular guy to declare bankruptcy- most of whom were put there by crushing medical bills. Worse yet, those bankruptcy laws helped drive foreclosures as homeowners defaulted on mortgages.
The overhaul is intended to make it more difficult for consumers to file for bankruptcy under Chapter 7, which allows debtors to erase their debts after they sell some of their assets. It will set up a new "means test" that will send more debtors into Chapter 13, forcing them into court-ordered payment plans. People with incomes above a state's median income who could pay at least $6,000 over five years would be expected to make payments.
Unfortunately, this law hurt families under crushing medical expenses the hardest.
Critics cited a study done by Harvard University in February which found that half of all personal bankruptcies are the result of medical bills.
Congress did not always have this position, especially as 18 senators, including co-sponsors of a 1991 bill, voted for a tougher pro-consumer measure in 1991, and then vote against a weaker measure in 2005- (McCain and Biden)
While you're still fuming over this bailout, you might want to recall 2005, when congress bailed-out credit card companies by making it harder for the regular guy to declare bankruptcy- most of whom were put there by crushing medical bills. Worse yet, those bankruptcy laws helped drive foreclosures as homeowners defaulted on mortgages.
(2005) Opponents said that the bill will do nothing to prevent lenders from charging exorbitant fees and that it will hurt people who file bankruptcy only because they've lost jobs or fallen ill.
"This bill is great for credit card companies and banking industries, but bad for everyone else," said Rep. Jim Oberstar, D-Minn. "In fact, it hurts those who most need the second chance offered by bankruptcy."
The overhaul is intended to make it more difficult for consumers to file for bankruptcy under Chapter 7, which allows debtors to erase their debts after they sell some of their assets. It will set up a new "means test" that will send more debtors into Chapter 13, forcing them into court-ordered payment plans. People with incomes above a state's median income who could pay at least $6,000 over five years would be expected to make payments.
Last year, nearly 1.6 million Americans filed for bankruptcy, including 17,076 in Minnesota. The new law could affect between 30,000 and 210,000 bankruptcy filers a year, according to the American Bankruptcy Institute.
Unfortunately, this law hurt families under crushing medical expenses the hardest.
Critics cited a study done by Harvard University in February which found that half of all personal bankruptcies are the result of medical bills.
The passage of this bill had unintended consequences that are particularly apropos for our current situation.
(2005) Washington Mutual Inc. got what it wanted in 2005: A revised bankruptcy code that no longer lets people walk away from credit card bills.
The largest U.S. savings and loan didn't count on a housing recession. The new bankruptcy laws are helping drive foreclosures to a record as homeowners default on mortgages and struggle to pay credit card debts that might have been wiped out under the old code, said Jay Westbrook, a professor of business law at the University of Texas Law School in Austin and a former adviser to the International Monetary Fund and the World Bank.
``Be careful what you wish for,'' Westbrook said. ``They wanted to make sure that people kept paying their credit cards, and what they're getting is more foreclosures.''
Washington Mutual, Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. spent $25 million in 2004 and 2005 lobbying for a legislative agenda that included changes in bankruptcy laws to protect credit card profits, according to the Center for Responsive Politics, a non-partisan Washington group that tracks political donations.
The banks are still paying for that decision. The surge in foreclosures has cut the value of securities backed by mortgages and led to more than $40 billion of writedowns for U.S. financial institutions. It also reached to the top echelons of the financial services industry.
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"[Congress is] to have to figure out some way to address the problem," Westbrook said. "I don't think our economy or our consciences can handle the number of foreclosures we'll see if they do nothing." (also see Prisoners of Debt, Economist 2005)
Congress did not always have this position; intense lobbying from the financial sectors were very influential and even turned some of the votes from pro-consumer to a decidedly anti-consumer measure.
Opponents of the bill said it passed only after lobbyists for the financial services industry spent $40 million. "Let's not kid ourselves: This bill was written for and by the credit-card industry," said Rep. William Delahunt, D-Mass. "It's got nothing to do with the consumer."
TPM added in 2005:
Why would 18 Senators, including co-sponsors of the original measure, vote for a tougher pro-consumer measure in 1991, and then vote against a weaker measure in 2005? Could it be that the more than $2 million these Senators took from the credit card/banking industry in the interim made them change their mind?
....
Sen. Joe Biden (D-DE)
1991-1996 contributions from commercial banks: $73,575
1997-2002 contributions from commercial banks: $33,675
Sen. John McCain (R-AZ)
1997-2002 Commercial Banks: $235,228
In addition, Hillary Clinton herself changed positions on a similar measure between her time as first lady and as a Senator. Unfortunately, without a concerted effort by middle class voters to ensure our collective interests are met, we can continue to count on lobbyists having their voices heard above ours.
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Additional links
Bankruptcy Reform and Foreclosures
US Senate Banking Hearings
"Examining the Billing, Marketing, and Disclosure Practices of the Credit Card Industry, and Their Impact on Consumers."
• Elizabeth Warren
Bankruptcy Bill Said to Hit Poorest Americans Hardest
Credit Cards, Bankruptcy Laws and the Mortgage Meltdown