Wednesday, March 30, 2011

Train Wreck Reform

Once again couldn't get this to post at Credit Slips, so here it is:

BAPCPA was a deliberate shot, below the waterline, at consumers and small businesses, and it was a highly successful shot, exacerbated by the wildly moving targets that are the courts' and trustees' expectations. Pre-filing analysis for either a 7 or a 13 has become rocket science, except that with rocket science you're at least dealing with, you know, science, as opposed to the whimsy of the gods. No matter what you're dealing with (qualifying a consumer for 7, reformatting and producing the accounting for a business 7, or dealing with a 13 trustee who has no concept of business operations or irregular paychecks), it's a labor-intensive mess.

Then there is personal Chapter 11, a saddle on a sow necessitated by the horse-and-buggy jurisdictional limits in 13 and exacerbated by the brain-dead semi-incorporation of 13 standards into 11 (but what can you expect from The Mind of Grassley). In all honesty, everyone is just making this up as they go, and I shall be long dead before any semblance of order is imposed. Pile onto this that the disparity of treatment between big and little keeps getting worse. Big 11s get away with pre-petition roll-ups and "reorganized liquidations" (*cough* Blockbuster *cough*) that would get an individual or small business bounced for fraud.

Finally, creditors are increasingly using the "reform" to take a dog-in-the-manger approach. This list is long, but these are a few notable locals: Bank of America/Chase (Why is it that every other mortgage has these two worthies in an owner-servicer pas de deux in which they torpedo short sales, proceed with foreclosure at a lower price, and then proceed with a claim for the full deficiency?), RC Willey (I shall never darken its door again. Dear Mr. Buffett, if you made your pile buying into companies with these tactics, you aren't the Sage of Omaha, you're the Don Corleone of Omaha.), America First Credit Union (With its reaffirmation policies, it needs to rename itself "America Last".), Celtic Bank (Sorry, it isn't my clients' fault your troubled assets ratio is back up to 90, six times the national median. It's a you problem.).

We're creating a bankruptcy system people either can't get into or can't stay in, and the system outside bankruptcy is reverting to debtors' prisons. Is it just me, or is there something wrong with this picture?

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