Tuesday, December 11, 2007

Bankruptcy Bilge

Let me make one thing perfectly clear: I know there's a lot of bankruptcy fraud. I've had to deal with a fair amount of it over the last 20-odd years. Nevertheless, there are times when it's the only way, and that way needs to be available. In my not so humble opinion, the recent bankruptcy amendments have made it impossible for a lot of people who ought to declare bankruptcy to do so, allowed creditors to continue showing debts as good when they're actually bad (thus exacerbating the credit mess), and not rid us of any significant number of fraud-bots. In other words, the amendments have failed to do what the bankruptcy system is supposed to do.

Further, they've allowed us to feel way too good about this economy, because after all bankruptcy filings are way down. Witness a comment I saw recently by the Clerk of the Bankruptcy Court. He thinks the economy is fine, even though filings are up 23% over last year, because 1) filings are still far below the pre-amendment rate, and 2) they are not rising as fast as the rest of the country. Concerning #1: Duh! The amendments slammed the bankruptcy door on huge numbers of people. That's not a good thing. They're still broke; we just no longer have a way to recycle them back into the economy. That's not a strong economy. That's waste.

As for #2, I think a look at the underlying data would show those rosy figures are a result of Utah's entrepreneurial spirit. Utah has an abnormally high percentage of self-employed. Thanks to the amendments, these folks are ineligible for Chapter 7, and Chapter 13 is not cost effective. So they just go down the tubes. Explain to me how this is either a good economy or good for the economy.


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