Sunday, March 13, 2005
Today's Chicago Tribune - a publication that at least as of today I still subscribe to - has a horrible editorial on the bankruptcy bill. It is horrible not because of the position it takes on this bill - at least not solely on that basis. Reasonable minds can disagree. Rather, it is horrible because it is clear that whomever wrote this editorial had not read the bill itself as they only address one effect of the bill. The article makes it apparent the author of the piece was completely unaware that the bill had other provisions that had other effects. (compare the Chicago Tribune editorial with this one by David Broder in the Washington Post).

Here is some of what this article fails to mention about the bankruptcy bill (full text of the bill is here):
  • Section 1301 of the bill provides that credit cards that require a minimum monthly payment of 4 percent or less of the outstanding balance (the majority of cards fall into this category) need only disclose certain hypothetical results that would result from making minimum monthly payments rather than stating what would occur in that customers particular situation. To find that out, the consumer has to call a toll free number - and this number can be answered by an automated device to provide the estimate that again will not use the consumer's actual account information but rather FRB-generated tables.
  • Section 1303 continues to allow credit card companies to utilize the marketing method of highlighting teaser introductory rates, and then - although it must be clear and conspicuous - listing the normal rate in smaller font and a less conspicuous location than the teaser rate.
See here for more.

Additionally, the editorial completely fails to address the following points and arguments that were made by a large group of law professors:
  • This legislation is not needed to achieve its stated purpose as current law allows the bankruptcy judge sua sponte, or the United States Trustee by motion, to deny a discharge in Chapter 7 to prevent "substantial abuse."
  • The "means-test" is actually less flexible than the current system, not more flexible. If a middle-income debtor has $100 per month more income than the IRS chart allows a delinquent taxpayer to keep, that debtor is required under this bill to enter into a 60 month payment plan rather than being discharged in bankruptcy. The net effect of this payment plan is almost non-existent. All of that debtors creditors would yield a mere $6000 dollars over the next five years less costs of the government-sponsored administration - leaving me to wonder if the costs would actually outweigh the payments - they very well might.
The letter goes on to highlight a myriad of other problems and issues with this bill - none of which are addressed or mentioned by the editorial.

But the fundamental conclusion of all of this is that even if you agree with the stated premises of the editorial, that "there is a troubling rise in bankruptcy filings," and that current law "made filing for bankruptcy, even for those who had the means to repay their debts, much to easy," it is clear this bill probably doesn't really fix those problems. Or at a minimum it could have done a much better job of doing that (and here I do not mean by closing the loop holes that the editorial suggests are still open). The "mean-test" system of this bill itself - which is what the editorial is essentially praising - simply is a poorly conceived system. And that is the problem when corporate lobbyists are allowed to write legislation with little, if any, legislative oversight over the legislations provisions.
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Location: Chicago, Illinois, United States

I am an attorney in Chicago. Politically speaking, I am an indepedent that tends to lean conservative on fiscal issues and progressive on social issues. I try to remain as unbiased and open-minded as possible. Please email or post any comments, and especially criticisms. If something I say is wrong, or you disagree - let me know about it!

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