A front page story in The Washington Post this morning notes the rise in consumers finding their way to bankruptcy court. For many, the decision is a move to save their houses. (As Mary notes, other desperate mortgage holders have just walked away.)
Those who file are finding a much tougher set of laws than what was in place before 2006. In 2005 Congress passed a now-infamous reform package (among those who follow this sort of thing) that makes it more difficult to file for personal bankruptcy. On top of the higher filing hurdle, once you are in court, it’s become more difficult to discharge debt.
The Post note’s the reforms toward the end of the piece:
In response to critics, such as credit card issuers who complained that people sought bankruptcy too frivolously, Congress enacted tighter income limits, tougher standards for measuring a debtor’s ability to pay and mandatory credit counseling.
While it’s true that credit card companies did kick up a stink, I don’t think it was the "complaining" that sealed their sweet deal. I’m thinking it might have something to do with the heavy giving the industry engaged in over the last twenty years. Between 1990 and 2008 the sector has forked over nearly $53 million in individual and soft donations to Republicans and Democrats, according to the Center for Responsive Politics. A solid thirty percent of that total was given in the two cycles right before the bankruptcy reforms passed. That’s a pricey complaint.
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