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Nine Moons » Blog Archive : Thou shalt have no gods before me … except for MasterCard, Visa and American Express » Thou shalt have no gods before me … except for MasterCard, Visa and American Express

Thou shalt have no gods before me … except for MasterCard, Visa and American Express

Seth - September 8, 2006

The New York Bankruptcy and Consumer blog has noted an interesting development in our nation’s bankruptcy law:

The US Bankruptcy Court for the Northern District of New York recently came down with a decision that could have a thunderous impact on every religious person who tries to get protection from their creditors while continuing to make regular charitable contributions.

You see, the court reluctantly concluded that the bankruptcy law prohibits people from continuing to make their regular contributions until AFTER their creditors have been paid.

The story comes to us from Yahoo Finance. The ruling came from a case where the debtors, as part of their Chapter 13 bankruptcy filing tried to list $100 in monthly expenses for “continued charitable contributions.” For the uninitiated, Chapter 13 bankruptcy is essentially a court-administered debt repayment plan over a period of about 5 years, where the debtor seeks to repay his or her creditors a greatly reduced amount of the total outstanding debt. The idea is that the creditors are at least getting something, as opposed to Chapter 7 bankruptcy where such debts are wiped-out entirely.

All Chapter 13 repayment plans must be approved by the court. Normally, a debtor is allowed, under bankruptcy law, to list a certain amount of income as designated for religious or charitable purposes. This is not an uncommon occurrence.

However, in an opinion issued August 28, 2006, Bankruptcy Judge Robert Littlefield Jr. ruled that the new bankruptcy law (which was passed just last year with overwhelming support in Congress) requires that tithing and charity payments take a back seat to paying off those credit card bills. Judge Littlefield stated:

This change [under the 2005 law] effectively closes the door for debtors who are above the median income from deducting charitable contributions as an expense unless they can establish the contributions fall under the IRS guidelines. The court does not agree with this awkward, bifurcated Congressional framework which makes charitable giving easier for some debtors and not others. Whether tithing is or is not reasonable for a debtor in bankruptcy is for Washington to decide. However, consistency and logic would demand the same treatment of all debtors … Until Congress amends [the 2005 Act], the court’s hands are tied and the tithing principles that this court once applied pre BAPCPA (the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005) have been effectively mooted.

A frustrated president of the National Association of Consumer Bankruptcy Attorneys vented

For religious Americans who find themselves deeply in debt due to job loss, catastrophic medical expenses or other circumstances, the 2005 reform legislation didn’t just reword the federal bankruptcy code, it also effectively rewrote Exodus and Deuteronomy. Many who practice their faith and believe that they are bound by creed to tithe a portion of their income will find that Congress effectively decided that what credit cards want is more important than the deeply personal religious practices of Americans.

The judge’s ruling presents an interesting question for Mormons. Does payment of debts trump payment of tithing? Should it be a higher priority for you? How about for the nation at-large? And if payment of credit card debt does trump tithing, does that mean paying the entire bill from Visa? Or does it only apply to the original amount since Deuteronomy 23:19 frowns upon charging interest (note: written with toungue firmly in cheek)?

Or is this just another case of “rendering unto Ceasar?”

37 Comments »

  1. Why not write Senator Hatch and ask him if this was his intent?

    Comment by Stephen M (Ethesis) — September 8, 2006 @ 7:44 pm

  2. I mostly agree with this ruling. A contract was made to repay the money that was borrowed and if making charitable donations is getting in the way of repaying a legal debt, then repay the debt and start making charitable contributions later.

    Comment by mark smith — September 8, 2006 @ 11:37 pm

  3. Interesting way that this might impact those Saints who declare bankrupcy is that they would then not be allowed to pay tithing. Yet, faithful payment of tithes is required for a temple recommend. By ignoring the guidance of the brethren and getting into excessive debt, they may have made themselves no longer able to qualify for a temple recommend.

    Of course, the bishop would have to determine if the debt was due to circumstances beyond the individual’s control. But, from personal observation, it seldom is.

    Comment by Floyd the Wonderdog — September 9, 2006 @ 5:49 am

  4. if the debt was due to circumstances beyond the individual’s control. But, from personal observation, it seldom is

    That is exactly what someone told my wife after we buried Robin and then proceded to chew her out for not anticipating and being better prepared for burying three children in four and a half years.

    Comment by Stephen M (Ethesis) — September 9, 2006 @ 6:15 am

  5. Floyd,

    Are you saying that a flawless level of financial competence is required of a person before the Bishop should OK them for receiving the blessings of tithing?

    That seems a bit uncharitable. And I don’t know very many people who meet your standard, inside or outside the Church.

    Comment by Seth R. — September 9, 2006 @ 7:46 am

  6. I am (thankfully) quite ignorant about bankruptcy law. My understanding is that the courts help to establish a payment plan based on the person’s disposable income, but the debtor is left with some control over his disposable non-discretionary income. Could the debtor buy cheaper food, cheaper clothing, etc, and still afford tithing?

    This issue is similar to the one raised for people on welfare: if your money is coming from the government, should you be allowed to pay tithing on it?

    Comment by BrianJ — September 9, 2006 @ 9:41 am

  7. We’re discussing some extremely fundamental principles here, actually. Needs vs. wants. Living within one’s means. Preparing for the future. We talk about these concepts several times a year in Sunday School, Priesthood, and in other settings. I can think of several talks by Pres. Hinckley that relate to “getting your houses in order.”

    Yet, I’m dismayed by the number of people who don’t seem to get it. Just last night I was talking w/ a health-care professional in the West who said he knows of 10 LDS people who recently filed bankruptcy. These 10 were big-time wage earners (all over 100K+/year). Yet, through a combination of factors all went belly up.

    I am willing to give them some benefit of the doubt. Part of their financial collapse may have been caused by bad luck. Unexpected dips in demand, more competition than anticipated, etc. However, how much could have been avoided through smaller homes, less-expensive cars (Ford vs. Lexus), and planning for the worst possible business scenario? The application of time-tested principles of frugality and self-reliance transcend all socioeconomic classes.

    I don’t know much about these laws, yet I don’t have a problem w/ people postponing their tithing payments until their “houses are in order.” Neither do I know how the bishops would manage this. But, I imagine individuals working toward freedom from bondage/debt–who are unable to pay tithing for legal reasons–would remain eligible to go to the temple.

    Comment by Fritz — September 9, 2006 @ 11:57 am

  8. I have had two situations in my life where debt was an issue. The first was a medical crisis. I clearly had monthly bills that double and tripled my monthly take-home. I was told at the time that there are three classifications for tithe-payers. Full and partial are familiar to us. I was told there was a third which basically was exempt. I have also suffered a job loss with a large drop in annual salary which put me into some debt problems. I am very proud to say that I was able to change enough in my life to stay out of bankruptcy, but I certainly am in a poorer postion than those around me in a similar economic level and age.

    Comment by John Shaw — September 9, 2006 @ 12:20 pm

  9. From where I sit, bankruptcy is a combination of factors:

    1. Poor financial and spending habits.

    I know some bankruptcy attorneys who minimize this factor and maybe they’re right (once you get a real insider’s view of the industry, you tend to have less sympathy for Visa than delinquent debtors). But I see no point in beating around the bush. Financial illiteracy is a real problem in our nation.

    But the solution in that quarter is simply not so easy as telling the fools to “shape up.”

    2. Predatory lending.

    This is related to #1 and it is rampant. Most of us have seen this, so nuff said.

    3. Divorce.

    Divorce is a leading initiator of bankruptcy. The legal fees will wipe you out. Separating a couples property is tricky business and puts a lot of things in jeopardy.

    4. Medical bills.

    The health care safety net is failing in many respects. This isn’t really a matter of much dispute, although the solutions are. An awful lot of us live one crisis away from financial ruin.

    5. Crushing educational debt and mortgages.

    Simply living up to our aspirations and our society’s most basic expectations requires massive amounts of debt. Even the First Presidency conceeds that this sort of debt is often unavoidable. But it creates an overrarching superstructure of crushing debt that exacerbates any smaller financial bumps that may arise.

    None of these factors are alone responsible for American financial ills. But together, they create a picture that is pretty bleak. These ills suck in all kinds of folk. Many of them are not in the least the sort of people you would call “deadbeats.”

    By the way, I didn’t include “credit card debt” on purpose (except indirectly under “predatory lending”). The cards contribute. Almost every bankruptcy I’ve seen or heard of had a large amount of credit card debt involved. But if you looked beyond the surface, the cards were rarely a main reason for the financial crisis.

    What credit card debt in a typical bankruptcy represents, in most instances, is the desperate last gasp of the financially wounded. People typically resort to credit cards in an attempt to keep paying other bills they can’t meet. They try to delay the inevitability of bankruptcy as long as humanly possible. They hope that there is still a possibility that the cards can float them through. Often a pipe dream, I’m sorry to say.

    In any event, bankruptcy trends are too complex to justify broad labeling.

    Comment by Seth R. — September 9, 2006 @ 1:26 pm

  10. Seth,

    Do your bankruptcy attorney associates tell you what % of bankruptcies come from poor financial spending/habits, predatory lending, divorce, etc? I imagine many cases are a combination of all the factors you mentioned and still others.

    I guess I don’t exactly understand what you mean by “predatory” lending. Is it the phenomenon of banks loan $ to people who are already in financial trouble and shouldn’t be approved given their poor financial ratios? I have heard banks have lowered their standards. They just want more $.

    I’ve been a student for a long time and can relate to your point of educational debt. Yet, our family has made several decisions–not easy ones–that have kept our debt burden to a level much lower than almost all our LDS friends. I’ve seen minivans w/ one kid, enormous HD-TV screens, and other elective items. My point here is minimization. What can you do to your debt number as small as possible? All of us know we have to give the $ back.

    Simply living up to our aspirations and our society’s most basic expectations requires massive amounts of debt. I don’t know what you mean by this statement. Yes, it takes a lot to educate a PhD or a neurosurgeon. But, I truly believe we should adjust expectations/aspirations. Many of us feel more entitlement than we should. We should think less about “keeping up w/ the Joneses” and more about family security for the long run.

    Seth, you mentioned mortgages (Crushing educational debt and mortgages). I also know of many recent graduates (medical, law, and others) who have gotten into big-mama mortgages. Nobody makes them get into these 300-500K homes I hear about. I’d bet others (not just lawyers and doctors) stretch their incomes to meet their overpriced mortgages. If these individuals experience many hiccups, I can see how bankruptcy sneaks into view.

    By keeping things simple (saving, living at or below your means…), you are less likely to be devastated by things we can largely control. Then, you may also stand a better chance w/ things mostly outside of our control: health, some elements of the economy, etc.

    Comment by Fritz — September 9, 2006 @ 2:58 pm

  11. Brethren, sisters, you judge me too hastily. Let me give you some background for my statements. I stated that seldom are personal circumstances related to personal bankruptcy beyond a person’s control. Stephen, I appreciate your personal example of one of the cases of a circumstance beyond a person’s control. When my son died the hospital bills alone were over $850,000. I was a bishop and have seen many welfare cases. From that experience, I stand by my statement that in MY observation, personal bankruptcy is often within a person’s control. I have seen many people that feel that they deserve extravagant lifestyles although they are unwilling to work to pay for them. It’s easier to put it on the credit card and not think about the day the bill comes due.

    Comment by Floyd the Wonderdog — September 9, 2006 @ 4:24 pm

  12. Look, I could talk about this subject waaay more than I imagine anyone here would like me to.

    But I think we’re getting a bit sidetracked here.

    Why is financial savy a desirable prerequisite for enjoying the blessings of tithing?

    I’m pretty darn certain that requirement isn’t in the scriptures anyway.

    Comment by Seth R. — September 9, 2006 @ 5:16 pm

  13. No, I don’t think we’re sidetracked. Bankruptcy impacts all of us, and we all threw out our perspectives on why it happens. Bankruptcy and tithing both involve spiritual and temporal elements.

    Why is financial savy a desirable prerequisite for enjoying the blessings of tithing? I guess I don’t see it as you do. Being honest in your dealings (your debts) is a big deal to the government. We should all want the our representatives to look after our interests.

    I think, as you said originally, this is another example of “rending under Caesar.” Each of us is affected indirectly by those who fail to live up to their obligations. Consequently, Uncle Sam has an interest in protecting us from those who increasingly (the trends are alarming) use bankruptcy as a way out. This may be a lesson for some to see what blessings are lost when tithing cannot be paid.

    Being financially savvy is not a prerequisite for anything. Nothing is required of anyone in life. If kids grow up and do not heed financial principles they will reap the seeds they have (or have not) sown. Financial judgment (hard-earned blessing not requirement) is a fusion of many attributes that first helps keep the wolves away. Second, it is the one of the surest ways to increase your family’s security in this world.

    I’m pretty darn certain that requirement isn’t in the scriptures anyway.

    Seth, of course, lessons in finance, accounting, and marketing aren’t found in the scriptures. However, the scriptures are teeming w/ lessons of individuals who lived content, balanced lives. These result from (no surprise) hard work, determination, dedication to spouse/family, not worrying about the # of sheep the Joneses had, etc.

    Comment by Fritz — September 9, 2006 @ 6:33 pm

  14. From that experience, I stand by my statement that in MY observation, personal bankruptcy is often within a person’s control. I have seen many people that feel that they deserve extravagant lifestyles although they are unwilling to work to pay for them. It’s easier to put it on the credit card and not think about the day the bill comes due

    I’ve seen a lot of that too.

    I’d have to agree with you.

    My mood is off, Rachel started soccer today, I’ll have to blog about it.

    Comment by Stephen M (Ethesis) — September 9, 2006 @ 8:50 pm

  15. Why is financial savy a desirable prerequisite for enjoying the blessings of tithing?

    I’m pretty darn certain that requirement isn’t in the scriptures anyway.

    Or to ask another question why should you be allowed to enjoy the blessing of paying tithing if you owe me money and have just legally proclaimed you can’t pay it back? The scriptures certainly speak a lot of repaying debt. Is it really your money that is paying tithing or is money of your lender?

    Comment by mark smith — September 9, 2006 @ 10:52 pm

  16. I concur w/ Mark’s line of questioning. When someone squelches on loans, etc. the banks pass the losses on to others affiliated w/ that institution. Accountants know this. Companies have to account for “bad debt.” Those people who receive the “debt baton” are you and I. I don’t like that and neither should you.

    Seth, do you feel that paying tithing is a right that should not be taken away no matter what the reason?

    As the title of this thread asks, it’s clear many have made gods out of material things (thanks in part to Visa, MC, and AE) and now may need to postpone giving tithing to their church for a time. That is, until their priorities are re-aligned and their obligations are met. Uncle Sam cares only about justice at that point.

    People caught in the snare of debt have lost many freedoms. I don’t think losing the freedom to pay tithing should be their primary concern. Getting their life back on track would be my #1 goal. Personal responsibility is surely evidenced in the scriptures.

    Comment by Fritz — September 10, 2006 @ 6:12 am

  17. I should note that Mark, Floyd, Brian, and Fritz are making an important point here by referencing to the law of “reaping what one sows.” It is also helpful to remember that tithing is a privilege and a blessing, not a spiritual entitlement.

    These explanations seem directed at my query as to what you personally would feel is honorable and just. But what about lawmaking and societal requirements?

    Lets frame this another way.

    Chapter 13 bankruptcy, as I mentioned earlier, is a repayment plan. Under that plan, certain expenses and needs are allowed. The debtor is allowed, for instance, to budget for life necessities (rent, food, clothing, schooling, transportation, utilities, insurance, etc.). While “luxury goods and services” are not provided for or allowed in a Chapter 13 plan, the courts are not in the business of second-guessing borderline cases of what does and does not constitute a “luxury” (for instance, payment for a private school might not be legally considered a “luxury”). Typically, the court only intervenes when the expense’s status as a luxury is clear-cut. The cable TV bill, for instance, is probably not a luxury and would be allowed under the plan. Likewise the internet bill.

    Furthermore, the debtor is allowed to retain a “financial cushion” against unforseen life events.

    Is tithing more or less important than any of these expenses? Should the courts be in the business of making these prioritizations? If Congress were to classify tithing as less important than, say, the cable bill or a “financial cushion,” or even the food bill, how would you feel about that. Is it Congress’ business to be defining the importance of tithing in such a manner?

    Consider the old-school pioneer-style view of tithing. In those stories (I’m thinking of … I believe it was Joseph Fielding Smith’s widowed mother) where the pioneer Mormons seemed to almost look upon tithing as the ultimate investment plan and insurance policy all rolled into one.

    Can you see some individuals believing that tithing is, in-fact, more important than paying for health insurance? Perhaps in our secular society, such “mysticism” as Mrs. Smith’s is hard to take seriously. But I should note that this “mystical view” is still encouraged in Sacrament Meetings, and Church lesson manuals across the globe.

    Is this something Congress should be messing with?

    mark smith – minor clarification. You wrote:

    “Is it really your money that is paying tithing or is money of your lender?”

    Actually, it’s not the “money of your lender” in most instances anyway. Most major credit card providers insure against nonpayments. So Visa never takes even the slightest financial hit when you default on your credit card loans and get them discharged in bankruptcy. Credit card lobbyists love to spout off about how deadbeats are forcing them to raise interest rates for their other customers, but from a business standpoint, the assertion is unsupportable. Visa a Mastercard take almost zero loss when you default. The risk has been shifted away to insurance plans.

    In fact, perversely, Visa a Mastercard actually benefit nationwide from non-payers. Higher penalty interest rates, and various service changes and fines constitute the largest source of a major credit providers profit margin. They actually like having irresponsible or deadbeat borrowers. It nets them sizeable profits in extras.

    Delinquent accounts are almost always sold off at discount rates to collection agencies to milk whatever small cash amounts are left from the debtor. I repeat, Visa never feels the bite in the least.

    But what about the insurers? Well, they often aren’t really a physical company anyway. These insurance plans are actually divided into shares and sold and traded on the stock market. You can invest in one today if you so choose. Investors bank on the economy being good and the insurance plans turning profitable growth margins. Such investments are highly speculative and risky, but can sometimes pay-off big. They constitute a part of some investors’ diversified portfolios.

    So is the “deadbeat” robbing the economy? Well, on principle, yes probably. But in real world economic gain or loss …. Now we are venturing into macro-economics, a religion all of its own. That discussion could go round in circles ad nauseum.

    So the law of consequences appears to have been suspended in the world of credit on both the side of borrowers and lenders. Both often seem to be behaving accordingly.

    But the assumption your mom and dad grew up with – namely that defaulting on a debt means Joe-the-grocer down the street goes hungry tonight – just doesn’t jive with today’s reality of borrowing and lending.

    Comment by Seth R. — September 10, 2006 @ 6:37 am

  18. Fritz, I find little to disagree with in #16. I think any “parting of the ways” (if there was one) was due to my desire to address not just personal approaches to tithing and bankruptcy, but national policy-making approaches as well. So perhaps I was talking-past some of the comments in my eagerness to jump to the nation-wide level without adequately addressing the personal level. Oops.

    Comment by Seth R. — September 10, 2006 @ 7:37 am

  19. I agree with Stephen #14 and the person he’s agreeing with. I have little patience with those who use bankruptcy as another way of making a living. I see some who have to file, like in the case of catastrophic illness, but usually, people can avoid this.

    Comment by annegb — September 10, 2006 @ 10:22 am

  20. Seth, thanks for clarifying how a Ch 13 plan works. I still wonder: Say someone sets up a plan, tithing excluded but with cable, internet, middle-class food bill, etc. Then they decide to cancel the cable and cut back on food so they can afford the tithing. Is the court going to come after them and restructure the plan?

    Comment by BrianJ — September 10, 2006 @ 11:45 am

  21. The problem with anectedotal evidence is that it is, well, anecdotal.

    The fact of the matter is that the most common cause of bankruptcy isn’t personal money mismanagement, living beyond your means, or student debt. It is medical bills. The burdens of catastrophic illness are responsible for half of all bankruptcies.

    Ironically, 3/4 of those who declared bankruptcy because of medical bills actually had health insurance, yet were still saddled with huge bills (more info here).

    I’m not sure what this says more about: the sad state of our health care system, or our unfortunate willingness to think “oh well…bankruptcy is usually avoidable and the fault of those who go bankrupt.”

    Comment by doug — September 10, 2006 @ 2:34 pm

  22. I’ve read some critisism of the study that stated 50% of bankruptcies are medical bankruptcies. This article by Todd Zywicki details some concerns about the study.

    Comment by mark smith — September 10, 2006 @ 4:43 pm

  23. Prof. Zywicki makes some good points. It’s hard to pin down the exact empirical reasons for bankruptcy. Firstly, it’s really complex. Secondly, studies like the one mentioned rely on the bankrupt debtors for conclusions, which probably skews the data to some extent.

    Zwyicki has the distinction of being one of the few bankruptcy experts who actually supported the new bankruptcy legislation and has been a vocal defender. Aside from him, the new legislation was largely a creation of the credit card lobby. Congress stonewalled all input from bankruptcy judges, attorneys, and most law professors. Even the US Trustee’s office didn’t get much of a say.

    So most of us are rather miffed with Zywicki. He’s often seen as champion of an unholy cause. But I suppose that doesn’t mean he’s necessarily wrong… Maybe…

    Comment by Seth R. — September 10, 2006 @ 6:35 pm

  24. I think that in principle the new bankruptcy legislation is a good thing. In practice it looks like a bureaucratic nightmare.

    There are two things that I would like to see. The first is a re-regulation of the lending industry, in particular usury regulations, restrictions on the amount of late fees, and a prohibition of any form of variable rates on already incurred debt (rates on new debt should be able to rise to the limit set by the usury regulation).

    The second thing I would like to see is a legal harbor for qualified debtors comparable to credit counseling, but with more teeth. A plan that could be entered into when it is apparent that a future bankruptcy is likely save some sort of relief be granted. The main form of relief should be a cessation of all unsecured interest and late fees and other collection activity for a renewable period of five years. If the debtor is not able to make his payments under those conditions, creditors should be required to petition the court for involuntary bankruptcy.

    One last thing – this country needs a restoration of the medieval doctrine of a fair price (as opposed to the doctrine of strategic exploitation) in the worst way. It really ought to be a crime for a large, competent business to write terms that they would not be pleased to have the tables turned upon.

    Comment by Mark Butler — September 10, 2006 @ 10:45 pm

  25. re: Predatory Lending

    I had no idea what sort of interest rates those payday loan places charge because I’ve luckily never had to use one. Then I had to pay off some of those loans as part of my calling. In Utah they charge over 400% annual interest. How this isn’t usury (as in illegal) is beyond me, but if you use such a service for a substantial amount of money relative to your income then you’ll never pay it off.

    Comment by a random John — September 11, 2006 @ 8:39 am

  26. arj,

    Many Americans still live by the motto of “buyer beware.”

    If you’re dumb enough to not scrutinze all ten pages of fine print, that’s your tough luck.

    So it would seem…

    Mark,

    That seems like a fair summary of the “Bankruptcy Abuse Prevention and Consumer Protection Act” (BAPCPA) or “Bankruptcy Abuse Reform Fiasco” (BARF) as we attorneys prefer to call it. Nice idea, but horrible in its execution.

    Comment by Seth R. — September 11, 2006 @ 10:08 am

  27. Seth R,

    The information I provided was in response to comment #10 by Fritz.

    I personally think that you’d have to be some sort of moron to even consider entering one of those establishments, and doubly so if you actually get money from them after being told the terms.

    Comment by a random John — September 11, 2006 @ 10:24 am

  28. That seems like a fair summary of the “Bankruptcy Abuse Prevention and Consumer Protection Act” (BAPCPA) or “Bankruptcy Abuse Reform Fiasco” (BARF) as we attorneys prefer to call it. Nice idea, but horrible in its execution.

    I realize it makes attorneys lifes more difficult but does that really make the legislation bad? A lot of the complaints I’ve seen from attorneys come down two points. I’ve got to sign that my client isn’t lying, and I’ve got to do a lot more paperwork.

    Comment by mark smith — September 11, 2006 @ 11:28 pm

  29. Something doesn’t quite sound right. It’s been stated that most bankruptcies are due to medical problems. Utah has some of the highest bankruptcy rates in the nation. It also has the highest LDS population in the US.

    From this, one might deduce that LDS have poorer health than the population in general.

    Comment by Floyd the Wonderdog — September 12, 2006 @ 8:51 am

  30. Floyd,

    I think Health Care costs are a factor. But only one of them.

    Mark,

    You used to be able to get a Chapter 7 bankruptcy done by a competent attorney for about $750 on average. Thanks to this legislation, that fee has doubled across the nation to an average of $1,500.

    That really hurts people who are in a position of looking at Chapter 7. In fact, for many, it almost makes getting competent legal representation impossible. I predict we are going to be seeing a big rise in pro se filings. And we’ll see a lot of people getting their bankruptcies dismissed for failure to meet all the technical requirements.

    It doesn’t help the BARF raised the court filing fee by about $100 and added another $100 (average) in fees you now have to pay for credit counseling and debtor education classes. All told, you’re looking at paying close to $1,900 for a “safe” Chapter 7 bankruptcy.

    It tears me up. I’ve encountered several people who really, REALLY need Chapter 7 bankruptcy to literally survive. But when I cite my own fee, you just hear the discouragement in their voices. They hang up, and I don’t hear from them again. I don’t know how they’re going to manage, honestly.

    Ironically, while hammering largely ethical small-practice attorneys, the law almost gives a free pass to the credit counseling industry – one of the most fraud-ridden industries in America. Go figure.

    It really was a mean-spirited law in many respects, not to mention being one of the most stupidly-drafted peices of legislation we’ve had in years.

    Comment by Seth R. — September 12, 2006 @ 9:30 am

  31. of an unholy cause. But I suppose that doesn’t mean he’s necessarily wrong… Maybe…

    but

    It really was a mean-spirited law in many respects, not to mention being one of the most stupidly-drafted peices of legislation we’ve had in years.

    Sure looks like it from my perspective.

    Anyway, I’ve always been amazed at people paying for cable tv and not seeing it as a luxury. I’ve also been so very positively impressed by many very hard working and diligent Hispanics I’ve met.

    For Utah bankruptcies, it is more how close to the edge many people in Utah live. Once you correct for age, number of children and income levels, Utah’s bankruptcy level doesn’t look so bad.

    But the entire area is a conflux of so many unfortunate things.

    Comment by Stephen M (Ethesis) — September 12, 2006 @ 10:21 am

  32. It doesn’t help matters that (according to an NPR news story this morning) many Americans are basically using their home equity like an ATM machine. This means that when the housing market goes south – like it is right now – it really knocks a lot of people out.

    Even better if you’ve signed up for one of those “50 year mortgages” that some lenders are pushing lately.

    Comment by Seth R. — September 12, 2006 @ 11:07 am

  33. Parts of Seth’s comments in #17 are so economically incoherent, it’s hard to know where to begin.

    Perhaps a start would be to point out that the very same arguments could be used to support shoplifting. As long as the store is insured against losses from “shrinkage,” what’s the big deal…it’s all just “macroeconomics” anyway.

    Some more specific points:

    - The “insurance” rates that the credit card companies (i.e. banks) must pay to insure against default must obviously be set higher when more people default. There is no free lunch here…saying Visa never takes “the slightest financial hit” when you default on your credit card loans is highly misleading.

    - True that credit card firms make a lot of money out of fees from irresponsible borrowers, but truly deadbeat borrowers are another story, especially those who default through bankruptcy.

    - Saying that the “insurers” aren’t really a “physical” company…what does that even mean? What difference does it make?

    Comment by ed johnson — September 17, 2006 @ 8:41 pm

  34. ed,

    My comments were never intended to justify filing for bankruptcy.

    They were simply meant as a critique of the lending industry – namely that such infrastructure divorces the behavior of lenders from real economic consequences. I was also making the point that credit card companies’ cries of losing money due to Chapter 7 bankruptcy (resulting in higher fees and interest rates for all of us) are largely unfounded. The financial hit is shifted away from the lenders to the national economy in general via various mechanisms. Any smart national lender does this.

    Bad behavior on the part of debtors doesn’t hurt the lenders even half as much as they would like us to think it does.

    And no, that absolutely does not make it OK to cheat on your credit cards.

    As to your allegation of “incoherence” … to be honest, you’re probably right. But thanks for reading and commenting in spite of my deficiencies.

    Comment by Seth R. — September 18, 2006 @ 10:26 am

  35. Seth,

    Thanks for your gracious response…I feel a little bad about the harsh tone of my earlier comment.

    I have no love for the credit card companies, and I think that they do in fact essentially try to entrap people into paying exhorbitant fees and interest rates. On the other hand, frugal people like me make out like bandits, even getting 5% “rewards” back on cash and groceries. (I’ve never understood how they can do that, but I’ll take it as long as it lasts.)

    The main thing that bothered me is your assertion that just because debts are “insured” it changes things in some fundamental way. I don’t see anything immoral about creditors selling off their debts to spread risk. The average risk still must be paid by the creditor, because the insurers want to make money too. Or, alternatively, the insurers themselves can be seen as part of the credit system, and they don’t deserve to be ripped off. Just like I don’t think it would be any more moral to go smash up somebody’s car just because their car is insured.

    Comment by ed johnson — September 18, 2006 @ 10:48 am

  36. Oh, I agree. Shifting the impact doesn’t make it any less right or wrong, morally, on my end. We’re agreed there.

    My concern is that since the credit card companies don’t take the financial hit from the defaults, it can often lead them into irresponsible lending patterns. I actually think there was a family who applied for a credit card for their dog Fido (or whatever doggish name he had).

    And Fido got approved! They sent the card in the mail!

    Don’t worry much about your tone. This is the Bloggernacle, and I “came to play.” If I was going to wilt under every criticism thrown my way, I’d have left a long time ago. I’m sure the same is true for you.

    Comment by Seth R. — September 18, 2006 @ 5:02 pm

  37. [...] I wrote a post a while back on Nine Moons detailing a recent New York court decision which concluded that, under the recently reformed Bankruptcy Code, paying your creditors must take precedence over payment of tithing/charitable contributions. [...]

    Pingback by Bloggernacle Times » Sens. Hatch and Obama Protect Tithing — October 25, 2006 @ 12:45 pm

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