Yes, thanks to politicians like Tom Carper, whose baby it was, and Joe Biden, the former senator from MBNA, who supported it, the bankruptcy "reform" act pretty much killed off any chance at all for poor people to recover from their debts. It also made credit card companies more powerful - and profitable, so as far as the politicians are concerned, win/win!
If there's anything at all that I wish the Occupy movement would focus on, it would be overturning this travesty and getting people some relief from debt prison.
It's also why it's really, really important to support Elizabeth Warren. It will make the bankers crazy:
This year, hundreds of thousands of Americans are expected to be too broke to file for bankruptcy.
The average cost to file for Chapter 7 bankruptcy protection, the most common form of consumer bankruptcy, is more than $1,500, according to recent research submitted to the National Bureau of Economic Research.
As a result, anywhere between 200,000 and one million consumers are estimated to be unable to afford that steep cost this year.
The research, conducted by a group of professors from Columbia University, the University of Chicago and Washington University in St. Louis, examined how bankruptcy filings spiked after people received their tax rebates in previous years. They estimate that another 200,000 consumers, who would otherwise not have enough money to file, will use their tax refunds to pay for bankruptcy this year.
"For lots of people, bankruptcy has been taken off the table as an option because of the severe fees involved," said Jialan Wang, co-author of the report.
Among those fees is a charge of about $300 just for filing the paperwork with the federal court, while the rest typically goes to bankruptcy lawyers, said Wang.
And there are other expenses on top of that, including fees for mandatory pre-bankruptcy credit counseling and a pre-discharge debtor education course. These average about $85 altogether, according to a recent study sponsored by the American Bankruptcy Institute.
That means many of the Americans who have seen their debt snowball out of control due to events like job loss, foreclosure or a medical emergency during the economic downturn are now left without their last financial lifeline, she said.
"It becomes harder and harder to pay off the debt as interest payments get higher, so your debt grows larger and larger," she said.
The cost of filing for bankruptcy has risen in recent years as a result of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, which aimed to reduce the number of bankruptcies taking place by adding more requirements to the filing process -- including additional paperwork and the credit counseling and debtor education.
Yes, this really was Christmas morning for the banks and credit card companies.
But the single most important change homeowners experienced under bankruptcy reform was the removal of the bankruptcy judges' authority to grant mortgage cramdowns. Oh sure, they can still do it --- on your vacation house, not your primary residence! (Just in case you had any doubt how shameless this Act really is, and who it was supposed to protect.)
That's why so many mortgage holders went under. They no longer had any legal recourse, and as a result, it helped crash the economy. But see how well it worked out for the 1%?
UPDATE: Looks like the information about having to advertise was wrong, so I removed it.