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Unread 02-13-2008, 01:46 PM   #1
RedJeepXJ
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change in bankruptcy law = the coming recession

This seems to make sense to me but no news organization has even mentioned it, in 2005 we changed the bankruptcy laws from forgiving debt to just delaying the payment of that debt.

Everyone said at the time that it would prevent people from abusing credit and thus lower interest rates, this is good for us. well two years later and every lending institution has over lent to consumers who can no longer shed debt that they were never capable of carrying in the first place. companies used to depend on collateral and income which has become irrelevant.

And for the benefits to consumers that pay on time, (not that it matters since I pay mine off each month) I have no lower interest rates then I did then, as If corporations would reduce because they could.

The bankruptcy law was what it was to protect everybody, banks only lent what they were comfortable with the risk of losing. And before anyone says people were abusing the system, that rarely happens, most people who filed for bankruptcy had nothing and were often put into debt from medical bills, not from new cars

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Unread 02-13-2008, 02:23 PM   #2
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The credit card companies were losing money(but still turning a hefty profit) hence they had their special interest groups pressure the right people into changing the law. It is an interesting theory about that and the coming recession whether or not if it is true.
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Unread 02-13-2008, 02:27 PM   #3
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Another example of the effects of the corporate lobby in America. Its great to know that the career politicians care about their constituents. It shows in every bill they vote for.

Here is another example:

http://www.nytimes.com/2008/02/13/us...in&oref=slogin

How long until you are an "Al Quaeda" suspect?
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Unread 02-13-2008, 02:39 PM   #4
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And before anyone says people were abusing the system, that rarely happens, most people who filed for bankruptcy had nothing and were often put into debt from medical bills, not from new cars
Just curious what statistics you've seen that lead you to make that statement? Almost all of the cases that I am personally familiar with over the last 10 years (admittedly not many) were absolutely from abuse and people living large.

Not calling you out or anything I'd really like to see some breakdown since what you're purporting does not match my reality
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Unread 02-13-2008, 02:42 PM   #5
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So if you declare bankrupcy now, what are the pros and cons? Is it worth it?
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Unread 02-13-2008, 02:44 PM   #6
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Have to disagree.

The coming recession (some say its here already) is due to the housing bubble bursting in a way that nobody has seen before. The housing bubble started inflating when Greenspan opened the spigot of cheap money shortly after 9-11 to keep the economy humming along and the banks/mortgage companies couldn't lend it out fast enough, resulting in bidding wars for houses that "never fall in value" being purchased by people who never should have qualified for a loan. "You have a pulse, you qualify for a $400K mtg. and don't worry about the fine print...adjustable rate loans can't hurt you. Just sign here." They didn't call them "liars loans" for nothing. People making $30K/year were borrowing $300K.

Wall street figured out how to sell these poor quality mortgages to unsuspecting investors, many of whom are overseas, and now that they realized they bought worthless paper, nobody wants to buy these junk mortgages and the cash-flow pipeline has plugged up like never before.

The changes to the bankruptcy laws had and will have little effect on the economic chaos coming down the road. It might cause a few deadbeats to pay off a few more dollars that they previously would have walked away from, but the recession has roots far deeper than bankruptcy changes.
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Unread 02-13-2008, 02:53 PM   #7
RedJeepXJ
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medical causes main cause of bankruptcy
http://newstandardnews.net/content/?...em&itemid=1439

giving people more credit then they can handle is as much the lender's fault as the borrowers, If the lender is willing to lend 1 million dollars someone making $20,000 a year then that's the lender's risk

I am not saying the bankruptcy laws are the main cause, but they didn't help consumers and they sure didn't help prevent this mess, it may have been better controlled if banks were more stingy with the lending

also: http://www.commonblog.com/story/2007/11/16/173047/62
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Unread 02-13-2008, 02:56 PM   #8
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Originally Posted by Willys2TJ View Post

The changes to the bankruptcy laws had and will have little effect on the economic chaos coming down the road. It might cause a few deadbeats to pay off a few more dollars that they previously would have walked away from, but the recession has roots far deeper than bankruptcy changes.
Your right about the housing bubble. But with foreclosures at an all time high due to the bubble bursting, the debtors will remain responsible for any and all debt leftover after the sale of the property. Bankruptcy now does not alleviate them of the debt, it simply restructures the terms for repayment. This definitely will impact our economic recovery.
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Unread 02-13-2008, 04:34 PM   #9
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The bankruptcy law was what it was to protect everybody, banks only lent what they were comfortable with the risk of losing. And before anyone says people were abusing the system, that rarely happens, most people who filed for bankruptcy had nothing and were often put into debt from medical bills, not from new cars
Maybe where you live, but in my parts, bankruptcy is a way of life for many. You know when it is coming too because a brand new luxury SUV will land in someones driveway, the driveway of the house that is worth less than the SUV itself! Next thing I know, I am reading about them in the sheets and most of the debt is plastic with the HUGE SUV loan in the mix.

It is time people took responsibility for their actions and that means closing bankruptcy loop holes for those who abuse the system. Also, people in high school should be REQUIRED to take some sort of personal accounting class. I know several high school grads who don't even know how to balance a checkbook, not to mention manage money. They don't know what insurance or taxes are, they don't know how to navigate life other than to use plastic. Sadly, I have a few tenants like this. They operate on cash only because "they can't bounce cash".

A recession is due. Our economy travels in cycles. Always has, always will. I think this will be a very deep and hard recession as we as a nation spend on borrowed money instead of earned money. Look at what the government does to help the economy. They encourage more borrowing instead of more earning and saving.

This one may leave a mark.
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Unread 02-13-2008, 04:54 PM   #10
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So if you declare bankrupcy now, what are the pros and cons? Is it worth it?
So any insight to my questions?
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Unread 02-13-2008, 06:39 PM   #11
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So any insight to my questions?
this is an article from the time of the law change

If a bankruptcy filing is in your future, this week is your last chance to file before sweeping changes in the bankruptcy law apply.

New rules take effect Oct. 17 that will make it more difficult to wipe out debts if your household income is above the median for your state, with adjustments for household size. In Florida, the change affects people who make more than $44,831 for a household of two ($59,798 for four).

If you make less than that, you can still file for Chapter 7 and wipe out all your debts. If you make more, you'll have to go through a means test to determine if you could afford to make payments of at least $100 a month over the next five years. If the court decides you could, you will be forced into a Chapter 13 repayment plan.

About 5 to 10 percent of all filers are expected to be affected. About the only plus: Chapter 13 allows homeowners who are behind on their mortgage payments to catch up without threat of foreclosure.

Credit counseling and financial education will be required for all filers under the new law, although it looks like telephone and online counseling will be the main ways people comply. So far, all the organizations approved to offer the programs in Central Florida are based out of state.

Other changes that take effect Oct. 17 include restrictions on repeat filing and increased paperwork requirements, including proof of income.

The Justice Department has said it will cut Hurricane Katrina victims some slack in several areas, including enforcement of paperwork rules, credit counseling and even residency requirements for those forced by the disaster to relocate to a new state.

Nationwide, debt-burdened consumers have been rushing to file Chapter 7 before the new rules apply.
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Unread 02-13-2008, 06:51 PM   #12
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God forbid people having consequences for living above their means. The lenders are getting what they deserve for loaning money to people who aren't able to pay; greedy bastards deserve to lose their asses. That said, when someone offers you a loan that you can't afford, you CAN simply say "no". If you're too stupid to figure that out then you can either learn a lesson or stay poor your whole life. This has been caused by greed on both sides. Both sides deserve what they are getting.

I've seen and heard too many people planning what they are going to buy, and how long they will have to wait, before they can declare bankruptcy AGAIN and erase their debt.
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Unread 02-13-2008, 07:12 PM   #13
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God forbid people having consequences for living above their means. The lenders are getting what they deserve for loaning money to people who aren't able to pay; greedy bastards deserve to lose their asses. That said, when someone offers you a loan that you can't afford, you CAN simply say "no". If you're too stupid to figure that out then you can either learn a lesson or stay poor your whole life. This has been caused by greed on both sides. Both sides deserve what they are getting.

I've seen and heard too many people planning what they are going to buy, and how long they will have to wait, before they can declare bankruptcy AGAIN and erase their debt.
GREAT POST!! Americans need to learn to be more fiscally responsible. Not everyone is going to be able to afford a $500,000 home or 60" flat screen just because some lender who's trying to make a buck says they can. I mean, don't they (the buyer) know how much money they make before soaking themselve in debt? People have somehow gained this sense of entitlement to EVERYTHING they WANT--not everything they need. It's hard to feel sorry for people just because they don't have any restraint or common sense. But, I'm sure all these bankrupty lawyers are gonna make everything a o.k.---RIGHT.
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Unread 02-13-2008, 07:19 PM   #14
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I agree-every new house they build around here is a McMansion-huge house on an average size lot, selling for $500K and up. Who the hell can afford those? My husband and I ask ourselves what the hell these people do for a living. We were considering selling our modest house for a different one-so glad we held off. Now rents around here are higher than our mortgage (we've been in this house for 12 1/2 years now).

We choose our purchases carefully, are trying to pay down our debt, and save for the future. My grandparents had the right idea-pay your way along and don't incur debt. Too bad that's almost impossible these days.
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Unread 02-13-2008, 07:25 PM   #15
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True, you almost have to incur some debt in order to live life in this day and age unless your family has "old" money. Our local paper is full of homes being sold at the courthouse weekly not only in the lower retail prices, but $300k-up. These people knew better when they bought them or they had some major life crisis hit their family, which is doubtful.
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