Asymmetrical Information

I'm just not seeing how bankruptcy reform is going to solve the problem. The alternative to bankruptcy is not to "pay" the bills - the alternative is to simply "not pay" the bills. Do we intend to reinstitute debtor's prisons? Do we have enough police to track down people who just stop paying? As the answer to these questions is certainly no, the most likely result of bankruptcy reform will be more restrictive credit policies - which is what the credit companies were trying to avoid by pushing for bankruptcy reform.

Randy,

I'm not sure I can agree with you. You have to look at this from a marginalist approach. The guy who lost his ability to work, is $500 K in debt, etc. isn't going to be able to pay in any case. You're absolutely right in that instance. But, what about the guy who's a couple of months behind on bills, has a decent income, and can work out a (admittedly painful) payment plan? Making bankruptcy a relatively less viable or less attractive option might tip the balance in favor of payment in some cases.

or how bout this : You lose everything in a massive flood. With a mortgage to pay and no job, the business was wiped out as well.. Think this might generate some bankruptcy's?

Judson,

Exactly. I think the flood aftermath will demonstrate a lot of the undue harshness of these "reforms."

My understanding is that the law makes it more difficult to file bankruptcy if you still have income or assets that can be used to pay your bills. Someone who has lost home and job has neither assets nor income.

Shell, not quite. The law doesn't make it any more difficult to file the bankruptcy petition. It makes it more difficult to obtain relief under Ch. 7 (liquidation) and forces many people file plans which require them to make regular payments to creditors for periods ranging from three to five years.
Even if you've "lost" your home, you still have assets. Even a damaged home has some value, even if its just the value of the land its on. Savings, a car, personal property, are also assets for purposes of a bankruptcy estate.

Er... why shouldn't I use my savings to pay off my own legally acquired debt?

Er..mayb you need to do other things like eating and getting medical care?

I never heard of anybody who starved because they couldn't pay their bills.

I have heard of many people who refused to pay their bills so that they did not starve or have less drugs or go to fewer movies or buy booze etc. etc...

Eamon you are naive.

thedaddy

I'm just not seeing how bankruptcy reform is going to solve the problem. The alternative to bankruptcy is not to "pay" the bills - the alternative is to simply "not pay" the bills.

Because the bill affects people who have incomes at or above the median, and have savings. It doesn't prevent them from filing for bankruptcy, either-- it just makes it harder for them to file under Chapter 7, which liquidates all their debts, and makes them have a plan to make regular payments towards their debts, as noted.

It also prevents people from moving to and buying a huge home in Florida or another state with unlimited homestead exemption right before declaring bankruptcy.

In response to Katrina, the legislation pretty clearly directs people to take circumstances into account-- and someone who has lost their assets and job due to the hurricane and flood is not going to be treated the same as someone who still has them.

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