A question about bankruptcy law

[Art Vandelay]

One thing that was mentioned in the Newsweek article, and on which I would like more details, is that there is a special exemption for people sued for interference with abortion clinics. That sounds inexcusable, but it could have been misrepresented. Does anyone have details on that?

Also, are retirement accounts involved in bankruptcy proceeding? It would be very disturbing if Bush pushes for private accounts, then opens them up to bankruptcy seizures (or allows them to be included when deciding how much assets someone has).

Some families have an income that might just surpass the state median, but have no savings or are otherwise in a financially precarious position, so that their income level is perhaps not a fully reliable indicator of how poor they actually are.

If someone is filing for bankruptcy, then isn't their net savings presumably negative?

Vagabond

It was very common for him at one time to get a credit card, buy a car or once he took a trip to disney world and stayed in the hotel there for a week on the new card and then didn't make a single payment on the card. This is credit card fraud and people shouldn't be allowed to do that.

How is this credit card fraud?

If you spend your money wisely you won't be pushed over the brink by some bad luck.

That's quite an overgeneralization.

TragicMonkey

To be fair, it should be pointed out that health insurance, when not obtained via an employer, is not cheap.

Moreover, the high cost of individual insurance, and of health care without insurance, can be traced in part to the government. Shouldn't it take responsibility for this by allowing bankruptcy?

And no, not all of the working poor have $40K trucks.

And not every poor person who has a $40K truck or a cell phone has it for personal use.


Meadmaker

The hospitals who provided the care to them deserve to be paid.

Why? Hospitals are allowed to engage in predatory practices that would be criminal if practiced by anyone else.

Indeed, unless you are quite literally living in poverty, and have no health insurance, shame on you.

What do you mean by "quite literally living in poverty"? Seems to me that you're being incredibly judgemental.

That plan figures your income minus reasonable expenses, and for a period of five years after you declare bankruptcy, you have to give the rest to your creditors.

That sounds a lot like the communist maxim "From each according to their abilities, to each according to their needs". Except without the "to each according to their needs" part, of course. Why should anyone work for extra money? Not being able to have anything but "reasonable expenses" seems like a horrible way to live. Almost like a five year prison sentence. Martha Stewart lived better in prison than many poor people.

LegalPenguin

Bankruptcy has always been a Federal area of law.

Not exclusively.

RandFan

The lesson is simple. Don't extend credit to those who are poor risks unless you are willing to accept that many will default.

Indeed. They are essentially selling call options on the debt, then complaining when people use them. The very reason they can charge such lucrative rates is because it's so risky.

Good post. It doesn't deal with identity theft but that is a side issue and can be argued to be a red herring.

It does show that credit companies are quite tolerant of risk, as long they are compensated. Why should we focus on law abiding citizens before going after criminals? I think it is quite on point to ask why credit companies are so concerned about squeezing money out of poor people, but are largely complacent about allowing identity theft.

When the prime fell through the floor unsecured debt did not change significantly if at all. 21% rates remained 21%.

There are basically four elements to interest: inflation, time value of money, risk, and profit/adminitrative costs. Prime rates are basically the first two. With prime rates being so low, most of the 21% is risk and profit, and lowering the prime rate doesn't do much. Lowering the risk, on the other hand, may have a significant effect. But you're right that there's a good chance that it won't.

Something else to consider: credit cards charge interest based on current bankruptcy law. Isn't a bit unfair to apply new laws to debt contracted under old laws, and priced according to the risk under that old law?

 

[Meadmaker]

Vagabond
How is this credit card fraud?

If you use a credit card to buy something, and you know you aren't going to pay for it, it's fraud.

The way this applies to the new bankruptcy bill is as follows. Suppose you know that you are about to declare bankruptcy. You have no money to pay bills. However, you still have an open credit line. So, you pull out the card, buy tickets to Disney World, have a good time, and declare bankruptcy when you get back.

The new law exempts certain purchases made just prior to a bankruptcy filing. The Disney trip would have priority getting paid back.


MeadmakerWhy? Hospitals are allowed to engage in predatory practices that would be criminal if practiced by anyone else. [/QUOTE]

Huh? Like what? I haven't spent a lot of time in hospitals, but I've never come out feeling like I was a victim of crime.

What do you mean by "quite literally living in poverty"? Seems to me that you're being incredibly judgemental. [/QUOTE]

One of the worst things about our society is that being "non-judgemental" has been transformed into a virtue.

What I mean is that people ought to treat health insurance as an obligation. If you are injured, the hospital is required to treat you, regardless of your ability to pay. You should not place others in a situation where they have to pay for your misfortune. However, if you are living in poverty, that's a different story. A real definition of poverty would be a condition in which you cannot provide for basic services such as food, clothing, and shelter. If that's the case, then of course you can't provide health coverage either.

However, health insurance should be in the next category of bills.



That sounds a lot like the communist maxim "From each according to their abilities, to each according to their needs". Except without the "to each according to their needs" part, of course. Why should anyone work for extra money? Not being able to have anything but "reasonable expenses" seems like a horrible way to live. Almost like a five year prison sentence.

But it's a self imposed five year prison sentence. If you borrow money, you ought to pay it back. This law says that you don't have to pay it all back, but if you have an above average income, you should have to pay back as much as you reasonably can within a five year period.




With prime rates being so low, most of the 21% is risk and profit, and lowering the prime rate doesn't do much.

Cheaper credit is available. I don't know what to do about people who refuse to take advantage of it. I'm perfectly willing to outlaw high risk, high interest, credit, but there isn't much political will for that solution.

 

[CBL4]

Originally posted by RandFan
Like anything else credit is based on what the market will bear and not on costs.

Short term, correct.

If there is significant competition and credit companies see an advantage in passing on savings they will. But there is historical precedent to know that is not always the case.

In the long term, as long as there is no barrier to entry, any profitable business will see competition. Eventually (less than 5 years), the interest will drop and everyone will benefit.

CBL

 

[Meadmaker]

Why does everyone think that the rent is least important bill to pay? As a landlord, I sick of people who money for cable TV, beer and cigarettes but cannot pay their rent on time. I will admit that medical insurance is an important bill but I alway thought a roof was more important.

CBL

Health insuracne can be cancelled more quickly than eviction proceedings can complete. Sometimes, when her customers didn't pay bills, she didn't have money to pay hers. That made her late sometimes. I assure you that beer and cigarettes were not put ahead of the rent in her case. Maybe cable TV, but not beer.

But she always paid the rent, plus whatever late fees were tacked on.

My point was that a lot of people treat health insurance as optional, and in my opinion, they shouldn't. Also, I brought her up because I saw in her someone who was living barely above the poverty line, but still managed to carry health insurance. When people "can't afford health insurance", I have to ask what they can afford, instead of health insurance.

 

[ceo_esq]

If someone is filing for bankruptcy, then isn't their net savings presumably negative?

Not necessarily. Many retirement savings, for example, are excluded from the bankruptcy estate.

 

[Boo]

When people "can't afford health insurance", I have to ask what they can afford, instead of health insurance.

Hmm, let's see...as a single mother with a small child that would be food, electricity, appropriate clothes for school (warm jacket, shoes), school lunch money (I made too much to qualify for reduced lunch), utilities i.e. water and sanitation, gas for transportation to and from work (no public transport available), work uniforms for my job, continuing education for professional licensure (both required by employer but not provided), car payment and insurance for car. Oh, did I mention rent? It might take awhile where you are to evict but where I was if you were more than 30 days late then you were gone.


That is what I could afford, barely. Health insurance? Savings?




Boo

 

[CBL4]

Originally posted by Boo
Hmm, let's see...as a single mother with a small child that would be food, electricity, appropriate clothes for school (warm jacket, shoes), school lunch money (I made too much to qualify for reduced lunch), utilities i.e. water and sanitation, gas for transportation to and from work (no public transport available), work uniforms for my job, continuing education for professional licensure (both required by employer but not provided), car payment and insurance for car. Oh, did I mention rent? It might take awhile where you are to evict but where I was if you were more than 30 days late then you were gone.

I am going to ask an extremely political incorrect question. Why did you have a kid when you could not afford one? If there was some sort of accident in your life, I apologize in advance.

BTW, you should move to Washington state. If you are a full time student with two kids, you can get a 3 bedroom apartment worth $1053, all education expenses paid, all utilities paid for, all food provided and health care. I am not sure about car or clothing but I would bet on getting them.

CBL