Bankruptcy “Reform” Blog Opposition Is Growing

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I really didn’t think that a brand-new blogger simply expressing his personal opinion on a piece of legislation that appeared (and to be realistic, still appears) to be certain of passage would have much of an impact in the real world. And in the long run, I really want this blog to be a consumer help site and not overtly political (in this world? Nice try.).

But when a political matter has such a potential to hammer people who play by the rules it’s hard to just stand by without at least trying to yell “stop!”

So here we are. There is a still-unorganized but very real shared opinion across what appears to be most of the blogosphere that recognizes a bad bill when they see it.

And this is a bad bill:

- There has to be a way to reign in the abusers without preventing almost anyone with above-median income from filing for Chapter 7 bankruptcy. Do you realize that a two-income couple making $40-45 grand a year combined with huge unpaid medical bills and an otherwise clean credit record might be prevented from filing Chapter 7 in many, if not most, states?

- There has to be a way to stop the well-heeled bankruptcy filers from hiding their wealth inside so-called asset-protection trusts without forcing almost half of filers into near-servitude for 3-5 years after being forced into Chapter 13 instead of Chapter 7.

- There is nothing even resembling a quid pro quo from the financial services business in the bill. All the abusive fees and outrageous interest charges have equal footing and “validity” in bankruptcy court with the original principal balance. In Chapter 7 that ordinarily doesn’t really matter, because any unsecured creditor will usually get nothing or close to nothing no matter how much they claim. But since the money-changers know that they’ll get a percentage of whatever they submit for payment in a Chapter 13 bankruptcy, after this bill passes they’ll pile on fees and increase their penalty rates to levels that will leave you breathless. What’s in the bill to prevent this?

If you can stand a more detailed look at how some typical scenarios might work out, go here.

When a similar bill first appeared about 9 years ago, I believe it was not as tough on average filers (but it may have been) and I supported it. But since then, the abuses of the lending industry (and for that matter, the corrupt so-called “credit counseling” business, which stands to get an ill-gotten windfall from the new Chapter 13 business) have grown to such a point that they simply cannot and should not be trusted to conduct themselves ethically if the playing field is so stacked in their favor.

I certainly don’t have any earth-shattering ideas short of contacting your in-their-pockets Senators and Representatives, and telling them they may very well lose your vote (that’s orginal, /sarcasm), or contacting local media, which as Instapundit notes have been very quiet on this issue. As I understand it, it goes over to the House next and then to the president. Maybe the strategy should be to demand some (well, a lot) of give by the financial industry before they get their free ride to feast on the unfortunate.

I do know that:

- On the left, Politology is ticked, and wants action.

- Libertarian Instapundit surely isn’t letting go.

- A lot of those ordinarily seen by some as knee-jerk “conservatives” are either opposed or having serious second thoughts (but JustOneMinute thinks it’s over).

- The all-Martha-all-the-time business press is finally covering the story.

So even though it seems beyond quixotic at this point, there’s an awful lot of energy out there to stop this.

The lockstep GOP Senate majority that thinks that passage will be a political victory ought to consider this hearfelt comment from their core constituency before they get too satisfied with themselves:

As a christian, I am disturbed that all the GOP Senators and 1/3 of the democratic Senators basically voted for usury. This president is supporting usury.

It is why people are skeptical of the faithful. It is all proper to criticize immoral personal behavior (and it is), but when something so strongly biblically criticized as usury is embraced by those who profess to have faith, it is deeply disturbing.

+++++++

9:30 PM ET UPDATE: The bill is out of the Senate 74-25. On to the House where conventional wisdom says it’s a slam-dunk. At a minimum, one can hope that someone in the House with a conscience will try to attach some amendments to its version reining in fees and rates. If that happens, the House and Senate will have to reconcile their differences in a joint conference, and some fur could truly fly.

CBS MarketWatch is reporting that “House Republican leaders have said they would move quickly if the Senate sends them legislation with few amendments, signaling that a final bill could land on President Bush’s desk within weeks…..”