In April the Orwellian-titled "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005" was passed. This bill is neither an effort to stem bankruptcy abuse nor protect consumers; rather, it rewrote the bankruptcy laws to erode consumer protections from predatory lending practices and to increase credit card companies' ability to collect from consumers who are already experiencing significant economic distress. Despite some Democratic efforts to amend the bill in order to protect at-risk consumers---retirees, people with disabilities, the military, and the elderly, for example---the bill passed with 73 Democrats crossing the aisle to support it.
And it goes into effect on October 17---unless the Democrats step up to the plate and do something to help the victims of Katrina from being victimized again.
According to Harvard University law professor Elizabeth Warren, the bill "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."
The bill treats individuals who file for bankruptcy like deadbeats, regardless of their reason for filing. To refresh your memory, here are the more objectionable aspects of this legislation:
- Make debtors pay more to creditors, both in bankruptcy and after bankruptcy, so that a bankruptcy filing will leave a family with more credit card debt, higher car loans, more owed to their banks and to payday lenders.
- Make it more expensive to file for bankruptcy by driving up lawyers' fees with new paperwork, new affadavits, and new liability for lawyers, so that the people in the most trouble can't afford to file.
- Make more hurdles and traps, with deadlines that a judge cannot waive even if someone has a heart attack or an ex-husband who won't give up a copy of the tax returns, so that more people will get pushed out of bankruptcy with no discharge.
- Make it harder to repay debts in Chapter 13 by increasing the payments necessary to confirm in a repayment plan, so that more people will be pushed out of bankruptcy without ever getting a discharge of debt.
Warren says,
There are people who abuse the system but this bill lets them off. Millionaires will still be welcome to use the unlimited homestead exemption. Today, middle class American families use the exemption to ensure that they aren't out on the street before they have an opportunity to restructure their debt and remedy their financial troubles. And if they don't want to buy a home there, they can just tuck their millions of dollars into a trust, a "millionaire's loophole" that lets them keep everything--if they can afford a smart, high-priced lawyer.
Determining the extent of Katrina's impact on the national economy depends on questions that can't be answered yet. To be sure, the impact on the American economy will be major, including employment: nine refineries are shut, the tourist industry is decimated, important ports that carry oil, grain, and other goods in and out of the US are closed. Shelters in Baton Rouge were packed with about 45,000 New Orleans-area refugees, according to the Wall Street Journal today. Most of these people were poor to begin with, living paycheck to paycheck, working at companies that are now under water. People who have nothing fled their homes with nothing.
One to two million people have been forced from their homes and their jobs. If they can't work, they can't pay their bills and will likely incur more debt just trying to survive the aftermath of Katrina. Their lives are permanently changed.
This bill will adversely impact scores of real people who are down on their luck and desperate to get on with their lives. It is yet another example of how Republican policies help the rich and abandon the poor and the middle class. Democrats need to stand up and fight the good fight by moving quickly to repeal the implementation of this bill.
You know the drill: Contact your senators and congressmen. If anyone from Harry Reid's office, Nancy Pelosi's office, and the DNC are reading get moving. There is little time to waste.