'Middle-class Joe' cozied up to credit card companies and made filing for bankruptcy harder (April)

Wash Examiner ^ | April 18 2019 | Emily Larsen

[rintintin]

Former Vice President Joe Biden bills himself as one of the regular guys and gals, but as a Democratic Senator from Delaware, he cozied up to credit card executives while championing their cause in Congress, making it tougher for average Americans to file for bankruptcy.

“Joe Biden pretends that he’s middle-class Joe, and in reality he’s corporate Joe,” Adam Levitin, a law professor at Georgetown University who specializes in bankruptcy, commercial law, and financial regulation, told the Washington Examiner.

Biden was a key architect of and whip for the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, which made it harder for consumers to declare bankruptcy. At the time, bankruptcy filings were at a peak of more than 2 million and legislators worried that the system was being abused. After the bill became law, bankruptcy filings fell by 70 percent.

“Someone once analogized what happened in 2005 as someone looking at a hospital and saying, ‘oh my God, emergency admissions are way up. So the solution is to reduce the hours of the emergency room,’” Bruce A. Markell, a professor of bankruptcy law and practice at Northwestern University, told the Washington Examiner.

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Inside the Magazine: August 6

Watch Full Screen to Skip Ads Lenders like Citigroup, Bank of America, JP Morgan, Chase and Wells Fargo aggressively lobbied for changes to the bankruptcy code. Delaware-based credit card company MBNA, which Bank of America acquired in 2006, was one of the most ardent supporters of the bill.

Biden’s senate campaign committees received $208,175 from MBNA employees from 1989 through 2010, the second-largest source of contributions, according to the Center for Responsive Politics’ OpenSecrets.org.

[Cronos]

thank you. But can’t the lenders then grab the person’s assets to make good the loan?

[Cronos]

yes, people should not be living on credit so much.

What would those people do if they didn’t have credit cards?
a. live within their means
or
b. go to loan sharks

I’m going to guess they’d choose b

Debtors prisons didn’t stop people going bankrupt, but then it stopped people taking risks.

I think it is bad to stop people taking risks - the USA is innovative primarily because there is no stigmatism to going bankrupt. So people try new things and fail.

In Germany or France it is practically a sin to go bankrupt. So innovation is far lower.

that’s a trade-off, isn’t it?

[EVO X]

yes, people should not be living on credit so much.

Credit card delinquencies are near historical lows. Delinquencies are up in student and auto loans.

The 2005 Bankruptcy Bill made it harder to file Chapter 7 (liquidation of dept). I remember the stories of people running up 10's of thousands of dollars in CC debt. They would get the debt wiped out and do it all over again.

[kearnyirish2]

Because they are credit cards, they are unsecured - there is no home or vehicle specifically attached to the loan. Declaring bankruptcy prevents the lender from taking any assets of the borrower. I know people who keep their assets in family members’ names to protect them from being attached.

[kearnyirish2]

I think our personal debt issue is much more related to the fact that as our standard of living fell for the past few decades (as a result of “globalization”/competing with the developing world for jobs), people simply pretended it was 1985 and borrowed to finance their lifestyles. As they lose real jobs from the “before-times” and replace them with the McJobs available, it is impossible to repay the loans. Student loan debt illustrates this perfectly, as most students can only get McJobs (they are too young to hold any of the remaining good jobs).