Surprise! Bankruptcy filers really are broke

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http://www.boston.com/business/personalfinance/articles/2006/02/26/surprise_bankruptcy_filers_really_are_broke/

By Michelle Singletary  |  February 26, 2006

In what will undoubtedly be the first of many ''I told you so" reports, the National Association of Consumer Bankruptcy Attorneys has found that, overwhelmingly, people who file for bankruptcy protection aren't deadbeats who went on shopping sprees with the intention of shirking their debts.

That's quite contrary to what was being charged by supporters of a federal bankruptcy law that went into effect last October.

For years, those proponents argued that billions of dollars were being lost because people were simply being allowed to walk away from their debts.

On the day President Bush signed the bankruptcy bill, he said: ''In recent years, too many people have abused the bankruptcy laws. They've walked away from debts even when they had the ability to repay them."

Now, in the first analysis of the tens of thousands of people who have undergone credit counseling since the law passed, the bankruptcy attorneys association found that nearly all (97 percent) of the debtors truly couldn't pay their debts.

[ixion]

gee, information that would have been nice BEFORE

that bogus bill was railroaded through. :grr:

[hootinholler]

15. You're being sarcastic, right?

The info was there and quoted to congress critters.

-Hoot

[ixion]

60. yeah...

should have included this: :sarcasm:

[LostinVA]

22. Paraphrasing "The Wedding Singer"?

[ixion]

59. lol... yeah

you got me. :+

[LostinVA]

66. I've seen that movie too many times!

[NVMojo]

32. Damn straight! And shame on Harry Reid for supporting Bush on this!

[saigon68]

38. DINOs like Biden (d) MBNA

got down on their knees and fellated a bunch of bank execs

And then voted to screw poor people.

[entanglement]

57. Oh, don't blame them, they're "moderates"

:sarcasm:

[splat@14]

1. Hmmm, Then maybe those that had a abortion didn't want to be pregnant?

I see a trend here....

[unblock]

4. and maybe those on welfare are really poor.

hmmm.

[DBoon]

21. and really DO want to work for a living.

nt

[entanglement]

58. ...

:thumbsup: :thumbsup: :thumbsup: :thumbsup: :thumbsup:

[shrike]

2. And the sky is blue

Forgive my sarcasm (It's a good article) but I'm tired of Mr. Obvious having to visit the national media, halls of congress, etc., so often.

My husband and I have decided we're geniuses because everything we say turns out to be correct. Of course, we're going to have to add in the 90 percent or so of DUers who agree with us.

Maybe this site is the new MENSA.

[Demeter]

11. Based On Mensa's Letters to the Editor, I Must Agree

Mensa's Bulletin is being Freeped by fundies, fascists, and the New Agers. Never saw so much illogical cow manure in my life as the February issue.

[Piscis Austrinus]

26. Wrong magazine

I think you accidentally picked up a copy of "Densa."

Peace
PsA

[KansDem]

34. LOL! "Mr. Obvious..."

Too bad his evil twin, "Mr. Oblivious," is quite well-known in the national media, halls or congress, and so on...

[cal04]

3. thank you for posting. Something else to send my idiot rep who

voted for this sorry ass bill

[OldLeftieLawyer]

20. YOUR Rep?

My fucking Rep - a Democrat, no less - was the bastard who sponsored this bill.

Of course, this was after MBNA bailed him out of his third divorce - his kid from that marriage had a rare brain cancer as an infant, and the Clintons were here visiting the tyke quite often, so, of course, Jim Moran, our Representative, voted for Clinton's impeachment, the hypocritcal, disloyal bastard.

Moran got a six-figure (more than $250,000, as I recall) "loan" from MBNA. And then, voila! He sponsored the Bankruptcy bill.

Oh, and don't worry about him today, folks. He's married a very wealthy real estate lady, and now dwells in her mansion overlooking the Potomac.

[tblue37]

23. What an, um "Moran"! (eom)

[OldLeftieLawyer]

25. Can you believe it?

Moran. James P. Moran. Democrat from Northern Virginia.

I vote Democrat every time, but Moran will never get a vote from me again.

[Piscis Austrinus]

27. Seconded. eom

.

[cal04]

29. mine is a dem too. I guess I should have put representative

and boy did I let her secretary have it when she voted this
I sent her a nasty email right after I read this, with the article

[HockeyMom]

5. Your job is outsourced,

you are out of work, or even UNDEREMPLOYED for 6 months, and the bills add up quickly. Charge the mortgage/rent, utilities, food, etc., and see how fast that adds up.

Or you require hospitalization and have no insurance. Again, see how fast the credit cards escalate.

These I am sure are the major reasons for out of control debt. We were in the first category for the tune of $26,000. Selling the house was the only way to get out from it.

[FloridaPat]

17. That was why my credit cards went sky high. And I refused to

refinance my home to pay my creditors. I saw no reason to be homeless since these were * biggest contributors and they think sending my career overseas is good for the economy. So here's there economy

[laylah]

46. Like an idiot

I didn't refuse to refinance to pay my bills as that is the way I was raised; HOWEVER, I filed bankruptcy 2/17 :cry: I did my best (and had a 754 rating when I filed).

Jenn

[FloridaPat]

50. I filed the paperwork in Feb of last year right after I got laid off.

I was out of work for 10 months. Got laid off again in January. Luckily my dad is paying the few bills we have - like the mortgage - which will be paid in 2 years.

[SoCalDem]

49. Refis only turn unsecured debt into secured debt..

I know people who have re financed two or three times to pay off credit cards and in the end had no more equity, and when the bell tolled next time, had to sell their house, and had next to nothing to start over with,

My friend declared bankruptcy just before the deadline, and now she CAN pay her bills, and save some money too..


We cancelled/cut up all (except for Discover) our cards (in a minor protest).. Our credit was TOO good, and every time we turned around they were increasing our limits.. If we added up the "available credit" on the cards we had it was approaching $100K.. It's LUNACY.. I spent a lot of time shredding all the "special offers and checks" we got daily..

We actually use our debit card more than credit cards anyway..and we still have the Discover for emergencies (It has a $25K limit...surely that's enough for any emergency :eyes:..)

[laylah]

51. What I did find out

is folks who earn under $41k a year, have a better chance of succeeding in a b.r. I am a social worker...'nuf said.

Recently divorced (ex makes $90k plus), etc. As I said, I had close to an excellent credit rating when I filed and a pristine credit history since I was 17 years old (about 38 years). I will reaffirm with my mortgage company, it is the credit cards which I must default on. Little "secured" debt compared to "unsecured". As ashamed as I am, I too, will be able to pay my bills and have some money, once this nightmare is over.

Jenn

[SoCalDem]

52. Were you behind on your mortgage? If not, why do you have to

"re-affirm"? My friend just kept paying the mortgage and I think she filed Chapter 7..

[laylah]

56. I was not behind

on anything but was advised to list the mortgage to show the total debt owed. Maybe due to the new b.r. rules? :shrug:

Jenn

[SoCalDem]

68. She did hers before the new rules..that must be it

:)

[FloridaPat]

71. By "reaffirming" that tells the company that you are going back to

the original agreement. I had to do that with my mortgage and car.

[PassingFair]

77. "unsecured debt into secured debt.."

The Bankruptcy Bill changed THAT, too!

Credit Card debt is now SECURED DEBT.

Welcome to slavery.

[Le Taz Hot]

63. Refinincing worked in our situation

but it has to be the right circumstances. My mortgage interest rate is FAR FAR below the 29.99% interest I was paying to numerous credit card companies. Previous to the refi, for every card there had to be a monthly check written, along with various assundry medical, dental and vet. bills. We took about 40% of the equity out of our house and paid off about 95% of what we owed. All-in-all, we save about $1,000 a month which, we figure, is akin to a part-time job.

[SoCalDem]

72. But you lost 40% of your home equity to pay bills that were not

secured by your home, and if you got a 30 yr fixed, you refinanced 95% unsecured debt for 30 yrs..

That's all I was saying before.. If you qualified for BK, it might have been financially beneficial to do that and preserve the equity in your home..

[Mandate My Ass]

6. All the congress knew this. They tried to pass this bill 7 times

before it finally went through last year. Experts testified that only 3-5% of filers were deadbeats and that this bill would hurt those who faced catastrophic bills while letting rich deadbeats skate. There was no mention of this in the media before the bill passed and now they want to pretend they're surprised. :eyes:

I hope Biden suffers intensely for sponsoring this POS bill.

[Realityhack]

79. Yep... and to boot...

many (actual majority? I don't recall the figure) of the bankruptsys were due to un-expected medical expenses (both ensured and to a far greater extent the un-inusured) so if they wanted to reduce bankruptsy they could have actualy done something about it. Not to mention worked on the federal minimum wage, etc, etc.

This was just something the banks wanted so they could squeze the last few drops of blood out. A bunch of the time they make a substantial part of their initial loan back in intrest payments before the bankruptsy ever happens.

[izzie]

7. Just like 'welfare queens' some do it for the hell of it. but-----

most people do not. I guess the law is for people like Ken Lay who maybe broke and they can go after him. Surly they do not want to go after people who lost their job or got sick. OK so I am being silly. My father got stuck in 2 bankruptcies and he was sure mad. Both people bought businesses from him and paid for about half the Morg. then filed and my father got 10% on the dollar on the rest. Both of these people walked off and got new jobs and never had to pay more to my father. Just who was in the wrong? Both kept their homes and the whole works. Only the people doing business with these two people lost money.Some thing was wrong with the law and the new one does not look like it is much good either as far as I can see.

[AndyTiedye]

54. The New BR Law Does Nothing For COMMERCIAL BR Abuse

The new bankruptcy law only affects PERSONAL bankruptcy.
Commercial bankruptcy is still as abusable as ever.

[izzie]

61. Well I should have known that.

These were business people I was talking about. I guess I was dreaming that Congress would do anything to business. I do know someone who could not pay for their home and walked off from the loan but it was not bankrupt filing but it sure did a job on how they lived for a number of years but this was 10 years ago so under old laws. Course when a man owns a business and another man buys but does not pat for it all it is sort of personal. My father started these businesses and sold because he was ill so it was sort of unfair.

[Realityhack]

80. Worse than that...

Buisnesses often get special bailouts on top of the easier bankruptsies and of course they vertualy always get a re-structuring type bankruptsy rather than liquidation.

And if that isn't enough they get away with bloody murder on taxes.

[AlamoDemoc]

8. send this article to Sen. Biden@MBNA Bank. com

[niallmac]

9. ...and Joe legislator will make amends how?...

"Can't say. Have to talk to my MBNA PAC man and find out how to vote."

[Auntie Bush]

10. I also wonder how many welfare recipients are truly needy?

That's the same tactics they used when Reagen cut welfare.

[Demeter]

12. Bet You A Buck The Deadbeats Are GOPers!

After all, it sounds like Ken Lay's financial planning course: take the suckers for everything and then go belly up.

[joefree1]

24. Ding ding ding ding

From Kos:

The "Abuse Prevention and Consumer Protection" in this bill occurs for Chapter 7 and Chapter 13 bankruptcies - individual avenues of bankruptcy. Conspicuous in absence, evidently not needing reform, are Chapter 11 bankruptcies.

Want to guess what Chapter 11 covers?

You guessed it. Chapter 11 is bankruptcy for businesses
http://www.dailykos.com/story/2005/3/6/63144/06015

[chalky]

13. I see they've been digging through the "No shit, Sherlock" stack again.

n/t

[lovuian]

14. I'm waiting for debtor prison to comeback in style

Its only going to get worse!!!

[Nomen Tuum]

16. and don't forget THE POOR FARMS

Amazing how these Ayn Randites who live in their LASSEIZ FAIRYLAND love to bullshit about how nobody in America has the "freedom to fail" anymore...

[HockeyMom]

30. and Orphanages

I am old enough to have had parents and grandparents who lived back then. I can remember all the horror stores they told me about those times. It was not pretty.

I never thought I would be living in the 1930s in the 21st Century. In more ways than one.

[annabanana]

48. and workhouses . .

Scrooge would be gratified..

[AnneD]

64. I hear they are building all those new

'overflow' detention centers...maybe they can be put to good use.

[Megahurtz]

83. And the ovens......

:sarcasm:

[ChairmanAgnostic]

18. while Donald Trump

manages to LOSE MONEY owning a casino, and plans to screw his creditors in bankruptcy court. And those same idiot lenders are so mesmerized by his TV persona, that even after he screws them, he talks them into getting every bigger loans from them.

[FloridaPat]

19. This was know before the "reform". The thing is, the bankruptcy

people check to see if you ran up bills just so you could go bankrupt and keep everything. They have the ability to take everything you ran up the bills with. The only thing wrong was too many broke and unemployed people were getting out of the 25% interest rate game the credit card companies came up with. Notice how we haven't had credit card reform.

[jwirr]

44. Absolutely, the minute one files bankrupcy and it is final the

credit card offers start all over again. They are totally responsible for offering easy credit to people who are not able to pay the costs.

[Realityhack]

81. A lot of those run up bills...

were for medical care and basic things like food stuffs, rent, etc. Many people have very few sezeable assets when they are declaring bankruptsy. Your plazma tv can go but thats not the typical situation.

[AndyA]

28. Yet another failed Bush law!

Have any HELPFUL laws been passed under Bush? ANY? Once you exclude his business buddies and cronies, leaving just the average American citizen, have ANY of his laws been helpful or protective in any way?

Sorry, I can't think of one...

[barb162]

31. I think there are a lot of poeple on the edge right now.

A friend of mine just filed a few months ago. Even though she has medical insurance, she is in such bad financial shape she can't afford to go to the doctors because she can't afford to pay the deductibles.

[Realityhack]

82. Copays / Deductables are insane.

one of my friends went to the emergency room and her share was $500 AFTER the insureance. Many plans are $1000 and thats not counting other tests etc. This is the root cause of many MANY bankruptsies. If we had single payer health care you would see a dramatic drop in bankruptsies.

[xchrom]

33. the bankruptcy was written to go after individual filings --

both the congress and the senate KNEW that few of those filings were bogus.


so why do it then? -- to squeeze more money from the middle class -- treating them as if they were a mine.

that's why.

it's not that our congress criters didn't know better.

mail THAT point of view to them.

[kineneb]

35. well duh!

We are filing now. We had to wait until Hubby got his disability so we could try to save the house. With his health issues, there is no way he would survive a move. Lots of debt, no income (except SSDI), no real assets. That is where we are.

[kayice]

39. I understand your life completly except single mom here

with 3 kids, disabled. You lose everything before you get SSDI and are treated like a crook before you do, then barely enough to survive.

Still, I think the poor people who lose their jobs after 30 or so years and then have no chance of finding another at the same rate because there are NO JOBS, are the ones that we will really see start to suffer greatly.

[EndElectoral]

36. More compassionate conservatism

[eppur_se_muova]

45. MORE compassionate, LESS conservatism

That's a bumper sticker. No copyright, feel free to pass it on.

[WhiteTara]

37. debtors prisons are being built as we type

KBR has that contract and these people could be sent there for their slave labor. Got to pay off those debts somehow.

[depakid]

40. I'm not even sure debtors' prisons would wake the sheeple up

How many people out there even know anything about this. Or care.

Until it happens to them. Then, as usual- it will be the Republicans why cry the loudest while demanding "their" rights.

[WildEyedLiberal]

41. I have loathed Harry Reid ever since he voted for this.

The minute he voted for this, he should have relinquished his leadership role and given it to a real Democrat, like Minority Whip Durbin. Is it any surprise that Reid lets us down time and again?

[madmark]

42. its not a matter of i told you so; the data was there and available

on the day congress and the president passed this piece of shit law.

[jwirr]

43. When it comes to a repug congress: what * wants * gets

regardless of the truth. I hope they all live long enough to see what they have done in the name of their god.

[stickdog]

47. Bankruptcy Law Abuse = Even Non-Wealthy Were Declaring

[Up2Late]

53. Well, of course * thought that, because all HIS friends that filed...

...for bankruptcy DID have the means to pay the debt. He only knows that type of deadbeat.

[Nothing Without Hope]

55. This was for the credit card companies. ****EXCELLENT CARTOON:****

Tom Tomorrow hit this one out of the park - time to share it again. Its title is MORAL BANKRUPTCY and it was published in March 2005:

From this page at Working For Change (a great site, by the way):
http://www.workingforchange.com/comic.cfm?itemid=18719

[True_Blue]

74. LOL!

I love it!:rofl:

[tanyev]

62. How about replacing the word "people" with "corporations"?

On the day President Bush signed the bankruptcy bill, he said: ''In recent years, too many corporations have abused the bankruptcy laws. They've walked away from debts even when they had the ability to repay them."

Let's see this President and this Congress do something about that.

[Javaman]

65. Aside from the credit card companies sponsoring this bill...

did any health care orgs sponsor it as well?

I recall reading that a good portion, perhaps more than half, that file for bankruptcy do so because they are unable to pay off medical debt.

Now it would seem to me, the the huge medcorp that influences all our congress people would see it in their own best interest to have this law passed.

call me crazy.

[Maeve]

67. This is a job for Obviousman!

http://images.ucomics.com/images/nq/medium.html

[apnu]

69. Reminds me of Regan's 'welfare queens' bullshit

They don't exist, but the image of them persists today. This bankruptcy thing is the same old pig under a different name.

[AnneD]

70. So does this mean....

they'll repeal that stupid law?

[mdmc]

73. which dems voted for this law?

:kick:

[mdmc]

75. I found out from another thread - fuck the dlc!

Although Hillary Clinton did not vote for this.

[aden_nak]

76. Act first, find out the facts later. That's the Bush way.

[Realityhack]

84. they had the facts...

that wasn't the problem at all.

[allisonthegreat]

78. the chance you take

A lot of people can't afford to pay their rent...