Monday, April 25, 2005


We have new rules regarding bankruptcy. I have some concerns about them. Two being the homestead exemption and asset protection trusts. Currently Pennsylvania does not seem to recognize these two but I wonder how long it will be before someone introduces a bill to bring them in. One pro football player wanted to use the asset protection trust to allow him to keep a multi-million dollar signing bonus during a bankruptcy. That just can’t be right. The bill seems designed to favor those who have been wealthy for some time and disfavor those of modest means who have hit a snag – health problems or job loss, two of the primary causes of bankruptcy. I contrast this bill with the 1998 government bailout of the Long-Term Capital Management trust fund, whose clients were described by Alan Greenspan as “a small number of highly sophisticated, very wealthy individuals.” Apparently if you have a little money, take a risk and lose, you are up a creek without a paddle. If you have a lot of money, take a risk and lose, the government will bail you out.

Another thing that alarms me about the bill is that is does not seem to curb the credit industry. It is rare that a week goes by without a new credit card offer coming in the mail. I have two credit cards but only use one of them. Ditto for Mr. Jane. Several years ago my primary credit card company kept raising my credit limit until I could have gone out and bought a brand new mid sized car with it. I finally called them and asked that it be lowered to about $5,000.00. This may have hurt my FICO score but I thought it might at least offer a little protection if it were stolen – hopefully I would realize it was gone and call it in by the time the thief had persuaded the company to raise the credit limit. Yet I continue to get offers in the mail and by phone for more credit cards, some with outrageous interest rates. Everyone I have spoken to, regardless of their credit history, is in the same situation.

If it is considered more heinous to sell drugs than use them, and if bartenders can be held liable for giving alcohol to those who have clearly reached, or passed, their limit, why is it still acceptable for credit card and loan companies to continue to offer, aggressively in some cases, more credit to those already deeply in debt? How ethical is it to continually offer drugs to someone trying to kick the habit, or to cajole a gambler into a quick hand of poker? If you know someone has a weight problem, do you hand them a box of donuts? Do you offer another credit card to those with medical needs and no means to pay for them? Offer more credit to someone who hasn’t worked in a year and is behind on their mortgage? I’m all in favor of personal responsibility, but I’m also well aware that tempting the weak is usually considered a moral no-no. I would feel much better about this bill if it were more equitable across monetary lines, and put some limits on the credit industry, especially those despicable payday loans with the sky high interest. We also need to try to find ways of helping those whose medical needs or loss of employment have pushed them into the economic danger zone. While my household is in relatively good shape today, I know that tomorrow may bring the type of sudden tragedy or the beginning of a long slope downward, that has brought many people to the point of bankruptcy, and I would hope in that situation society would temper its judgment with mercy.

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