October 17, 2005

Wholly Toledo Update: ABC and Other Headline Writers Get it Completely Wrong

Filed under: MSM Biz/Other Bias — Tom @ 11:33 am

Link to ABC post (HT Michelle Malkin):

ABCtoledo

For the record: White supremacists did not riot. Gangs largely if not entirely consisting of African-Americans did.

ABC’s headline is not an isolated incident. Deceptive headline writers are at work throughout the nation. Here are four examples, though I could have listed forty:

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UPDATE: Newsbusters is all over this.

UPDATE 2: Isn’t it odd that The Toledo Blade hasn’t editorialized on the riots yet (as of Monday, Oct. 17 at 2:30 PM)? UPDATE 2A: Well The Blade came through as expected. Their Tuesday editorial’s first sentence seems like excuse-mongering to me: “THIS time it was Toledo’s misfortune to catch the hate-mongers’ eye, but it could have been any city in America.”

UPDATE 3: Newsbusters is now saying that the headline has been changed to begin with “Anti-White Supremacists….”–but I don’t see it at the referenced link at the very beginning of this post, which remains as shown here in the screen shot as of 3 PM 9 PM.
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Original Post: Wholly Toledo

Positivity: Quake Hero Saves Seven Lives

Filed under: Positivity — Tom @ 6:05 am

Amid the earthquake misery in Pakistan, a dog handler has saved lives and improved spirits:

(more…)

Brave New World: Bankruptcy “Reform” Takes Effect Today

Filed under: Bankruptcy & Reform,Taxes & Government — Tom @ 12:02 am

Note: More links, including references to forms and Means Test data, will be added to this post throughout the day as time permits.
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Monday, October 17, is the day the “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA, otherwise known as Bankruptcy “Reform”) goes into effect (full text is here; a “redlined” version of the Bankruptcy Code in PDF format is here).

Those of you who are relatively new to the blogosphere probably don’t realize the amount of time and energy that went into a brief and ultimately unsuccessful effort, both on the left and right, to derail this law during February and March. Among many others, Trevino of RedState.org, Instapundit, and Josh Marshall and a band of experienced bankruptcy lawyers at Talking Points spoke out.

All of it was to no avail. Taking advantage of what I still believe is widespread ignorance of what is actually in the legislation, and egged on by very large campaign contributions from the lending industry, nearly every Republican, and quite a few Democrats, including more than a few surprises (Joe Biden, Delaware-MBNA and Debbie Stabenow, Michigan-GMAC, to name just a couple), voted for the bill by substantial majorities in both houses of Congress. When the President signed the bill, his prepared remarks focused on “serial filers” and shutting down “bankruptcy mills.”

In brief (as brief as one can be with legislation that is so sweeping), the new law changes consumer bankruptcy law in the following ways:

  • It allows all filers whose earnings are below the median for their state and family size to file for Chapter 7 (“immediate” discharge).
  • It will force filers who earn above the medians just noted, and who appear, based on the Means Test discussed below, to be able to afford to pay $167 or more a month against their unsecured debts, into Chapter 13 (partial payments against unsecured debts) for a period of 5 years (instead of 3). Based on my limited analysis, I believe that the large majority of above-median filers will be forced into Chapter 13.
  • It forces every filer, even obvious Chapter 7s, to complete a Means Test, which compares average monthly income from the past six months (not projected future income) to average monthly expenses that are strictly determined from formulas (not from actual expenses expected to be incurred).
  • Filers who are required to be in Chapter 13 must use the results of this Means Test (again, not their real income and real expenses) to determine how much they can pay unsecured creditors each month while they are in bankruptcy.
  • It requires all filers (7s and 13s) to attend a “Client Briefing” with an approved credit counseling agency before they file for bankruptcy, and to successfully complete a different and more lengthy money management class before their bankruptcy will be discharged.
  • It reduces the types and dollar values of assets filers can protect from unsecured creditors.
  • It restricts and regulates how bankruptcy lawyers can present themselves to the public, and what they can say to potential clients.

The arguments of the bill’s supporters were, and still are:

  • Bankruptcy is too easy, especially for relatively well-off people who may currently have no assets, but nevertheless have the means (as in future earning power) to be able partially or fully pay their debts.
  • The current (soon to be old) bankruptcy system does not fix the central problem, which is that a large plurality, if not the majority of filers have never learned how to control their finances and live within their means.
  • There is a great deal of “fraud” in the current system that needs to be prevented and detected. This “fraud” (in quotes on purpose) consists of people hiding or transferring their assets, low-balling their income, misstating their expenses, and in the extreme moving to states with the most lenient exemptions for home values and other assets to avoid having to make payment in bankruptcy.
  • Lawyers who operate “bankruptcy mills” must be put out of business, and lawyers who advise clients on how to rearrange their affairs so they can minimize their exposure in banktuptcy should be muzzled.

Opponents made, and still make, the following arguments in response:

  • The restrictions on how bankruptcy lawyers can present themselves (they must refer to themselves as a “debt relief agency”), and on what they (and other financial advisers) can say and do (they are NOT allowed to advise conumsers about bankruptcy before they file) are at least unfair and possibly unconstitutional restrictions on speech. The new liabilities bankruptcy attorneys are expected to take on for the accuracy and completeness of filings, even if the filer deceived them, are unprecendented and do not exist in any other area of legal practice. The new law even encourages filers to represent themselves, even though very few are capable of doing so without making mistakes that hurt their position.
  • Perhaps it is too easy for certain people, especially those who move to unlimited homestead exemption states like Florida (where you can have a paid-off multimillion-dollar home, otherwise be in debt up to your ears, file for bankruptcy, and keep your home after the bankruptcy is discharged). But the provisions of the new law make the process too difficult for the vast majority of people who are filing for bankruptcy due to circumstances mostly beyond their control (unpaid medical bills, disability, layoffs or plant closures, natural disasters, etc.).
  • There is a need for consumer education, but the time to do it is when people first get into trouble, if not sooner. Additionally, it is an insult to the intelligence of people who are bankrupt because of uncontrollable factors, such as those mentioned above, to force them to sit through training they don’t need.
  • The degree of true “fraud” in the bankruptcy system is minimal, as exemplified by the fact that FBI task forces dedicated to bankruptcy fraud have, other than a very few large cases, had to pursue cases involving as little as $5,000 to $10,000 just to keep busy.
  • The Means Test used in the new law is a one-size-fits-all straightjacket that does not consider an individual’s or family’s actual income, expenses, and circumstances. Because of that, most of those who are forced to file for Chapter 13 will appear to be able to afford to pay hundreds of dollars a month more than they really are capable of. This will make Chapter 13 filers under the new law even less likely to complete their partial payments regimen than Chapter 13 filers were under the old law, when more than half were unsuccessful.
  • The asset restrictions are draconian and punitive, often extracting their revenge on innocent parties (e.g., a beaten-up second computer used for homework or wireless phones used by children for personal safety may have to be sold to satisfy debts).
  • The bill greatly increases the cost of filing and paying for bankruptcy for no reason. Filing fees have increased by amounts that are not warranted. Additionally because of extra work required of lawyers to protect themselves from the new level of liability they are expected to assume, legal fees in most instances will be much higher than they are for filings under current law.
  • Other than a few very minor disclosure requirements, the bill does nothing to rein in predatory and unfair lender practices such as penalty interest rates and “universal default.”
  • The lending industry believes it will collect an additional $3 billion dollars per year from debtors as a result of the new bill, which is a miniscule amount ($10 per person) compared to the onerous costs in time and money being imposed on filers and their lawyers. The industry was also not required to share any of the costs of implementing the legislation it is benefitting from.

The runup to the new law has surprised and disappointed me in a number of ways:

  • Increased filings. When the law passed, I guessed that filings would increase before the new law took effect, but not by “much.” The fact is that there has a been a significant increase in filings. I believe than many of those who rushed to file should have waited, but may have been misled into filing early by the media deadline hype (with otherwise generally poor explanations of the law), or by bankruptcy lawyers planning to get out of the business after the new law takes effect. For example, many below-median income filers, who make up aboiut 80% of the filing population, may have been forced into Chapter 13 in the past few months; if they had waited, they would have been automatic Chapter 7s and in most cases would have been better off, even with the higher filing and other fees. Bankruptcy districts in the South have a tradition of making filers attempt a Chapter 13 if it appears at all feasible, regardless of income. That goes by the wayside beginning today.
  • There appears to be no legal effort to prevent the bill from taking effect, even though there are several possible avenues for litigation that would seem to have a fair chance of succeeding:
    – Equal protection in the differing treatment of below-median and above-median filers.
    – The questionable constitutionality of the effective gag on any kind of advice being placed on bankruptcy lawyers and other advisers.
    – The fact that the measure raises revenue but did not originate in The House as The Consitution requires [to be fair, based on precedent, this argument is a long shot, because for some reason the courts have ruled that filing fees aren't "revenue"]).
  • Proof of widespread fraud wasn’t evident before the law, and it still is not evident now.
  • Creditor behavior has not changed one bit. Late fees, over-limit fees, and penalty rates have all continued their relentless upward march. “Universal Default” has spread further, and the excuses for applying it have reached near-absurdity.
  • The promise that some of the bill’s supporters used to placate opponents, namely that they would get around to passing reform of creditor practices later this year, has been proven to be as empty as most of those who opposed it predicted it would be. Congress can’t even seem to get identity-theft and data-protection legislation through, let alone anything that would meaningfully regulate day-to-day lender behavior.

There are some good things about the bill, but they are mostly in the corporate area. It places severe restrictions on “retention bonuses” like Delphi paid out to its main executives ahead of its filing last week. It also makes it more difficult for companies to remain in bankruptcy for a long period of time, as many airlines like United have, without facing the possibility of liquidation.

Though all filers are hurt by the higher cost structure and the lack of available advice, the consumers most hurt by the new law will primarily be those who earn above their state’s median income. As their financial situation deteriorates, their creditors will be able to pile on fees and ever-higher interest charges with impunity, all of which will considered eligible for collection if the artificial and arbitrary Means Test “shows” that payments can be made. Given who will be hurt, I expect there to be some amount of backlash against the law within the next 12 months, and it will be primarily against the party currently in power. The only question is whether the size of the backlash will matter.
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Links to various forms and information

Means Test Links:

  • US Trustee Census Bureau and “IRS Data” main page (the original data for most allowed expenses comes from IRS published expense allowances granted to delinquent taxpayers in their tax collection efforts):
    Median Income Table by state and family size:
    — National Allowances for living expenses
    — Allowances for Transportation and Housing & Utilities in select-a-state format (scroll halfway down the page)
  • From the IRS web site:
    — Local Housing and Utilities allowances in detail
    — Local Transportation allowances in detail
    — All “Other Expenses” that may be allowed based on individual and family circumstances (scroll down about a third of the way to paragraph 5.15.1.10)

Training and Counseling Links Index: