New Bankruptcy Law Can't Find Deadbeats

[jeffrey]

With the new bankruptcy law taking effect last year that the credit card companies claimed would make people that were abusing the system pay their debts, the first study on the new law was released by the National Association of Consumer Bankruptcy Attorneys (NACBA). The results? The new bankruptcy law is not working. Of the 61,355 consumers that have gone to the credit counseling firms as required as the first step under the new bankruptcy law, almost all (97%) were unable to repay any debts and with nearly four in five (79%) seeking debt help due to circumstances beyond their control. These included such events as the loss of a job, catastrophic medical expenses or the death of a spouse.

Brad Botes, executive director, National Association of Consumer Bankruptcy Attorneys, said: "Contrary to the claims of proponents of bankruptcy law changes that they would zero in on the alleged legions of 'deadbeats' who supposedly were crippling the U.S. economy with 'billions of dollars in losses associated with profligate and abusive bankruptcy filings,' the federal bankruptcy law changes that went into effect on October 17, 2005 are doing no measurable good whatsoever. Instead, they have put new hurdles in the path of people who are already flat on their back due to financial crises over which they have no control, such as the loss of a job, catastrophic health care bills, and so on."

Botes noted that bankruptcy filings are down because many Americans may
mistakenly believe that the courthouse doors are barred to them. The NACBA executive director said: "Credit counseling organizations now know what bankruptcy lawyers and other experts said all along: Congress got it dead wrong when it passed the bankruptcy law. Even though the process is now more cumbersome, time consuming and expensive than before, consumers who need help should still seek out a bankruptcy attorney to explore their options and figure out how to navigate this trickier and more confusing process."

Two key findings from the study:

* Almost none of those seeking bankruptcy protection are able to repay their debts.

* The vast majority of Americans seeking bankruptcy protection are victims
of unfortunate circumstances, not reckless spenders seeking to shirk their
debts.

Entire Press Release

[cercis]

You know what pissed me off most about this? Credit card companies routinely give high credit limits to people who would never be able to pay off the full debt. If someone is working for minimum wage at Walmart, they should never have a limit of $20k+. Yet some do. When I did garnishments for citibank, I had access to the applications - none of them lied about their income or job situations.

If I loaned $500 to a friend without a job and he didn't pay me back, you'd say that it was wrong for him to not pay me, but you'd also look at me and say "well, you knew he didn't have a job, you should have known that was a risk".

[Ima saver]

I think the credit card companies should check the assets of people applying for credit. All they want to check is your credit score. I would rather loan money to someone with a paid for house because I would have a much better chance of getting my money back.

[dealsaver]

Originally Posted by cercis

You know what pissed me off most about this? Credit card companies routinely give high credit limits to people who would never be able to pay off the full debt. If someone is working for minimum wage at Walmart, they should never have a limit of $20k+.

Hopefully this doesn't happen. If credit card companies start tightening their lending models, I'll be out thousands of dollars of income and free travel that I ordinarily make of their backs. This year looks to be particularly profitable and I won't even be able to take advantage of all the free travel offers this year because there is just not enough vacation time to do so! Hopefully these deals will still be around when I retire, but not if those "do gooders" who are out to protect others from themselves have their way.

[cercis]

Dealsaver, I'm not getting what you are saying. Do you mean you charge stuff and then don't pay it back? That's the only way anything I said could affect you.

There's no reason in the world to think that if credit cards started lessening their level of losses they'd also do away with special deals. In fact, if they had more marketing money to go around (because, you understand, they claim they are losing millions of dollars to bankruptcy filings) then they'd compete even harder for good credit risks and we'd see even better deals.

[sweeps]

Does this count as being a victim of unforeseen circumstances?

[dealsaver]

Originally Posted by cercis

Dealsaver, I'm not getting what you are saying. Do you mean you charge stuff and then don't pay it back? That's the only way anything I said could affect you.

There's no reason in the world to think that if credit cards started lessening their level of losses they'd also do away with special deals. In fact, if they had more marketing money to go around (because, you understand, they claim they are losing millions of dollars to bankruptcy filings) then they'd compete even harder for good credit risks and we'd see even better deals.

Cercis, I agree with the sentiment that credit card companies are way too lax with their lending standards. They give out credit like candy. Although they make enormous profits with this business model, savy consumers can take advantage of this to their own personal benefit. Just the account opening bonuses alone for opening certain credit cards can give you free flights and hotel stays without spending more than $1 on each card. You can also earn free gift cards to spend while you're on vacation. This is a tremendous deal especially for those low to middle income individuals who could never afford to pay back their cards if they chose to max them out. The terms for these offers vary, but often you recieve your account opening bonuses after your first purchase. These type of deals are discussed on Fatwallet.com and FlyerTalk.com. There is no need to do as you've alluded to and charge things without paying for them, something I do not endorse. You can essentially get these things for free from the card companies. You can earn all these things before even taking advantage of the 0% credit card offers that come with these cards to make money. As someone who has more credit avaiable to them than they'd ever care to pay back if I maxed out all my lines with consumer spending, I would be a prime target for having future credit card applications turned down if banks tightened up lending standards (thereby shutting down a prime source of free account opening bonuses to me). Thankfully, banks still keep extending credit offers attached with goodies to me even though I could buy a house or two on my available credit.

[VJW]

Originally Posted by jeffrey

Two key findings from the study:

* Almost none of those seeking bankruptcy protection are able to repay their debts.

* The vast majority of Americans seeking bankruptcy protection are victims
of unfortunate circumstances, not reckless spenders seeking to shirk their
debts.

What a shocker.

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