U.S. bankruptcies appear to be rising

[lovuian]

http://feeds.bignewsnetwork.com/?sid=ba2ce3ad06b9284b

Tightening of the U.S. bankruptcy law may actually be resulting in more bankruptcy filings, a study has found.

Robert M. Lawless, an Illinois College of Law professor, examined the relationship between changes in federal bankruptcy law and the filing rates by consumer debtors, the school said Tuesday in a news release.

He found that the liberalization of the bankruptcy law in 1979 did not lead to a significant rise in bankruptcy filings but the subsequent tightening of provisions in 1984 did.

More stringent bankruptcy laws, he wrote, can have the perverse effect of creating expectations of higher recovery rates from debtors by banks and other lenders, which then encourage the lenders to expand consumer credit, which can lead to more future bankruptcies.

Calling this the paradox of consumer credit, Lawless also noted that the widely accepted idea among experts that bankruptcy filings are directly linked to outstanding consumer debt might be misplaced.

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I'm glad its backfiring on them

[SeattleGirl]

1. Ha! It's biting them in the ass.

Good!

[SoCalDem]

2. I personally know TWO families who ened up declaring the week before the law changed

They were both in debt, but willing to struggle along.. UNTIL the law was ready to change and they feared that IF they needed to declare down the line, they could lose their house.. so they both declared just before the law changed..

I have talked to one couple since, and they were so relieved to be out from under, and have started saving in a big way, now that they aren't sending every spare dime to pay credit cards.

They have refused to get any cards...even though they are getting tons of new "offers"..

Shame on the congress for knuclking under to the CC companies..

[Bozita]

3. Keep watching for folks upside-down on their mortgages

Many have already taken loans based upon the increased value of their home.

Now what?

I got it. ... We could just pass some laws that outlaw homelessness.

[Dr Batsen D Belfry]

4. Paging Mr. Obvious, paging Mr. Obvious

1) Double the minimum payments on outstanding credit card debt
2) Increase mortgage rates
3) Don't fix healthcare insurance

Here you have the perfect bankruptcy trifecta

Were you solvent before W?

DBDB

[Sen. Walter Sobchak]

5. I work at a lawfirm with a bankruptcy practise,

we have seen a bit of a curve, in the build up to the new bankruptcy law we saw a massive spike, but it dropped right off - really beause those who had been contemplating bankruptcy all jumped at once.

But we are seeing it creep up again - but nothing all that unusual about the current blend.

We see about:

About half our clients have been through some sort of disaster, medical, divorce or death.

About 20% of them are in a bad financial situation that just plain happened though no fault of their own. It is usually people who found themselves out of work at mid-life and unable to get their career out of the gutter and in the meantime burn their savings and go into high-interest debt trying to stay above water.

and about the last 30% are just fucking stupid with no money management skills, living like their millionares on $25,000 a year. Credit has become to easy to get in America, turn off the easy unsecured credit and easy mortgages and this pool will dry up rapidly.

We encountered a couple last year with a combined income of about $60,000. They had two leased SUV's, $40,000 in credit card debt, massive student loans, an extreme sub-prime mortgage on a condo and a loan for breast implants!

These people couldn't afford a buspass and a trailer on their income living where they were - but that just didn't sink in.

[SoCalDem]

6. When credit cards first came out, it was HARD to get them

and they did not just "send them out".. You had to ASK to have a higher credit limit, and you had to have a certain income to even qualify..

It annoys me to NO end to see people with little or no income having a wallet-full of credit cards..especially college kids.

It's very easy to rack up a pile of debt in a hurry..

When our son was in college, we had a card made up in his name..for emergencies, and we insisted on a $1K limit, even though OUR cards had a $15K limit..

He only used it for emergencies, and always paid it back..( He went to school in Italy, so getting cah to him in a hurry would have been difficult)

[Sen. Walter Sobchak]

7. the old days,

In the old days Credit Cards were not a very profitable business for the bankers to be in because of regulated interest rates. If the cost of money was 15% and the state capped credit card interest at 10% you were losing money on those who didn't pay it off every month. So credit cards were were more of a special service for a banks best customers than a profit center.

When the supreme court and a couple of states unchained credit card interest it took off into what it is today. And it has been destructive to America as any massive drug epidemic.