Bankruptcy law is bonanza for banks
By
Larry Hales
Published Mar 30, 2005 10:49 AM
On March 14 of this year, the Senate passed the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The bill is
grossly misnamed.
This is no consumer protection act but a boon to
predatory banks and credit card companies that will persecute and prosecute the
multinational workers and the poor. The Bush administration is railroading the
bill through Congress. President George W. Bush plans to sign it as soon as the
House passes the legislation after returning from recess. It will be implemented
later this year.
Bankers’ dream, consumers’
nightmare
Banks and credit card companies are receiving presents early
this year. It’s Christmas in springtime for them, thanks to not just the
conservatives in the Senate, but the liberals as well. The bill will amend
Chapter 7 and Chapter 13 bankruptcy laws, which under current law free up
consumers/workers from the crippling debt that weighs heavily on over 50 percent
of adults in this country.
Many workers and poor people are saddled with
medical bills, have lost jobs or have been victims of predatory lending
practices such as exorbitant interest rates, illegal penalties and fees for late
payment. The new law is racist and will be especially hard on the long-term
unemployed and those exploited by poverty wages.
As prices of consumer
goods and energy go sky high, and tuition costs hit millions of students, it
becomes evident that the possibility of becoming debt-free is a myth. Under
current law, Chapter 7 bankruptcy provides at least some relief for those
burdened by unforeseen catastrophes because it virtually frees people from debt,
or the major part of it. Over 70 percent choose Chapter 7 over Chapter 13, which
merely lowers monthly payments. The courts monitor that repayment process.
Under the amended law, it will be extremely difficult, if not impossible,
for families to petition for bankruptcy. The bill seeks to establish a means
test for Chapter 7 filing; the median household income would be the bar, and if
the household income is above the state’s annual median, then the
household would be ineligible for filing under Chapter 7 and would be relegated
to Chapter 13 repayment over a five-year program.
The would-be filer
would have to attend credit counseling classes for at least six months and pay
for them. And if the hurdle of eligibility for filing Chapter 7 is cleared,
lawyers will be charging higher fees to the filer because of added paperwork and
almost inevitable increased court time. The IRS will determine what is an
essential household expense and what is not, all in an effort to force repayment
and squeeze the living standards of the people to avoid incurring debt, which is
almost impossible.
The blatant disregard for workers and the poor is
obvious and inevitable in this society. The shock waves from the ramifications
of this bill have yet to be felt.
Add the dismantling of the welfare
system and the proposed privatization of Social Security, and one gets the sense
that the boom in the prison-industrial complex will go nuclear as more and more
people have fewer and fewer options.
Rarely reported is how the bill will
affect youth, especially recent college graduates. Partly because of student
loans for rising tuition and housing costs and credit card debt, adults from 25
to 34 have the second-highest rate of filing for bankruptcy. Those in the 35 to
44 category have the highest rates.
During the first week of school on
college campuses, credit card companies are ubiquitous. They give out t-shirts,
sports bottles and key chains and entice young people to sign up for credit
cards, all the while warning that the students will need a credit card to pay
for textbooks. Many students fall into the trap and splurge, racking up credit
card debt, adding to debt from tuition and housing, if there is any, on the
campus.
After graduation, the gravity of all this sets in. Good-paying
jobs are scarce, with or without a college degree, and many youth take jobs
outside of their degree focus. The jobs are usually low-paying with inadequate
benefits or none at all. The possibility of paying back a college loan becomes
moot, and the interest accrues.
Youth are faced with a bleak future and
the new bankruptcy law will make the future even more unbearable for the next
generations, not to mention the elderly, already squeezed between the high cost
of health care and meager income from pensions and Social Security.
This
bill is very different from Chapter 11 bankruptcy, which frees corporations from
huge debt. The law entitles them, with the approval of the bankruptcy court, to
tear up union contracts, downsize wages and benefits like health care and
pensions, and increase work loads. The airlines over the past four years have
been rife with filings for Chapter 11. Big businesses will go on receiving
breaks at workers’ expense, while the bosses’ pay goes up.
The
new changes in the bankruptcy law, so typical of the abuses against workers and
the poor, prove beyond doubt that the government cares nothing about the state
of the working class and caves to its capitalist rulers at an accelerated rate.
It is becoming more evident that an independent movement is needed in the
streets. Youth need to become increasingly involved and at the forefront of the
struggle against capitalism to secure a better future for both older generations
and the generations to come.
Hales is an organizer for FIST
(Fight Imperialism, Stand Together). Contact FIST at
[email protected].
Articles copyright 1995-2012 Workers World.
Verbatim copying and distribution of this entire article is permitted in any medium without royalty provided this notice is preserved.
Workers World, 55 W. 17 St., NY, NY 10011
Email:
[email protected]
Subscribe
[email protected]
Support independent news
DONATE