March 24, 2009
-
Straightening Out the Bankruptcy Debacle, Pt.2
Many Avenues are being tried; some work and others don't.The new sweeping legislation concerning credit card bankruptcy is being proposed by both Sen. Whitehouse and Senate Majority Whip Dick Durbin of Illinois. The current bankruptcy laws would be amended to do away with unreasonably-high interest credit card loans in the proceedings. Credit cards aren't the only item being addressed here. These changes would also extend to cover over-charged overdraft loans, car loans and ‘payday' loans from banks.
After eight years of lobbying with the ‘financially-enticed' Bush government, banks and credit card companies managed to put the screws to bankrupt victims by still making them pay after bankruptcy. This took place back in 2005. This is first time an income-based test was used for measuring a credit card debtor's ability to repay obligations. So, people were obligated, based on income to still repay the debts that had wiped them out in the first place. If that person lost their job later and couldn't pay it was..."Oh well. You have to wait 7 years to file again". The forced debt repayment plans remained in effect.
The House has also been busy correcting some of the ills. They have recently passed legislation to relieve strapped homeowners who file bankruptcy from unreasonable mortgage payments. The income tests that have been applied to determine the amount of payments have overburdened consumers with such substantial payment burdens that the payments in many cases, can't be kept. A federal bankruptcy judge in New Jersey, Rosemary Gambardella testified in a Senate hearing that the desired result is not coming to fruition. Last year, other plans were tried for credit card debt. The Banking Association requested last November for tax relief so they could forgive 40% of a consumer's debt. But, the US Comptroller's Office shot it down because of tax purposes. Credit card lenders still went ahead with the plan but, without any tax relief.