Bankruptcies Will Increase Inspite of BAPCPA

Sometimes we all need a slap in the face to know when we are being "sold out" by our so called "friends" and in this case "elected politicians". Case in point:

BAPCPA (http://www.justice.gov/ust/eo/bapcpa/index.htm ) is that little known initiative passed into law in 1995 under George Bush designed to thwart bankruptcy abuse...a law for an abuse which never really existed and was solely created at the behest and lobbied actions of Major Credit Card Issuers.

So why was this law created? One word: Greed

In the following link is a factual Harvard Law sponsored report titled: Did Bankruptcy Reform Fail? An Empirical Study of Consumer Debtors, by Robert M. Lawless, Angela K. Littwin, Katherine M. Porter, John A. E. Pottow, Deborah K. Thorne, and Elizabeth Warren*

http://bdp.law.harvard.edu/pdfs/papers/Lawless/Did_Bankruptcy_Reform_Fail.pdf

This independent study confirmed the BAPCPA law did not protect the rights of people, or end bankruptcy filings...it protected Credit Card Issuer financial interests at the expense of families who really need the relief provided under prior Bankruptcy Laws. Let's face it...Gone are the days when you can "start over financially."


Here's an excerpt and highlights of the conclusions found at the end of the report:

"The Consumer Bankruptcy Project is the first random national sample of
families that filed for bankruptcy after the 2005 amendments. Our initial findings
should dampen the enthusiasm with which some trumpet BAPCPA’s success in reducing the number of bankruptcies. The principal feature of the amendments was an income-based screen that was supposed to differentiate can-pay debtors from their can’t-pay counterparts. The data suggest that this failed: there is no differentiation based on income, either for the sample as a whole or for the division of families into Chapter 7 and Chapter 13.


Instead, the data suggest that the incomes of the families filing for bankruptcy after the amendments are indistinguishable from the incomes of the families filing for bankruptcy before the amendments. By its own design, the means test focused on income. It did not take account of the overall financial condition of debtors; net worth and debt-to-income ratios were irrelevant to the new law. While secured debt received some favored treatment,the size and impact of unsecured debt loads, such as credit card and medical debt, were largely ignored. With only slight exceptions, families that owe a little and families that owe a lot of unsecured debt are equally eligible for Chapter 7 relief once they have survived the income-based means test. Yet this is where our additional findings reveal important differences with the 2007 filers. After the amendments, families filing
for bankruptcy owe more debt, particularly more unsecured consumer debt, than their counterparts from 2001 and are having a much harder time servicing that debt with disposable income.

The higher debt-to-income ratios among the families that filed bankruptcy
in 2007 suggest that Americans are struggling harder than ever before
they collapse into bankruptcy. Whether they are discouraged by the negative
publicity surrounding the 2005 amendments, concerned about the stigma associated with bankruptcy, or dissuaded by aggressive debt collectors who
bully them into believing they can no longer file for bankruptcy, it is clear
that families are not turning to bankruptcy even when they have great need.
This is a result Congress neither intended nor promised."
Some report huh? The above excerpt is A-typical of laws that serve the lobbyists - not the people they target for wealth extraction, loss of liberty or control. In spite of its good intentions, you can bank on several of these predictions as I look downstream in the economic crisis and coming mega-depression.

1. Continued and rising unemployment is going to extend into personal bankruptcy filings.
2. BAPCPA is just a pebble in the path of the train wreck coming down the line as more and more people look for financial protection.
3. Bankruptcy courts are not prepared for the onslaught and will be overwhelmed...this will prohibit "late filers" from reaching status in time to save their position.
4. In the final analysis, no one is going to give a second thought whether you do, or do not, pay down a credit card company balance in a personal survival situation. Likely they will be the first to be shunned.
   "First you have to find me, then you have to sue me, then you have to get blood from the turnip".
   
   
5. The people will call to end BAPCPA as the true nature of the law and its' consequence is revealed. Lot's of "how did this law pass" calls.

Here is my definition of an important concept for all those people who think they are immune from those who seek to redistribute your wealth:
Judgement Proof: A condition or position where a person or legal entity has taken all necessary steps to protect assets present and future from all claims and legal challenges existing, real or perceived.
In essence, all wealth is out of reach and out of touch by anyone except by the holder.
Lack of payments (income) results in loss of corporate income. If you aren't making money you downsize. If you downsize, you send people to the street. If you downsize far enough, you sell off assets to make cash. If you sell off enough assets and are out of cash you are broke...bankrupt.