Relationship between Bankruptcy Bill and Subprime Mort. Mess?

[Balta1701]

I wasn't exactly sure where to stick this one since there were plenty of Dems in the pocket of the banks who voted for this bill, but it's interesting, and I pretty much figure this is my thread.

 

Credit Suisse has put out an interesting analysis of one of the effects of the new bankruptcy bill that the Congress passed in 05, making it much harder for people to declare bankruptcy. Their conclusion? By making it much harder for people to declare bankruptcy, Congress may have inadvertently exacerbated the sub-prime and foreclosure issues currently plaguing the housing market.

 

Their argument is pretty simple; it's now much harder for people to file bankruptcy, which used to be an option for people who wound up in financial messes. But without that option, people who can't pay their bills wind up having no other way out of debt other than to completely lose things they'd bought on credit, i.e. their mortgages.

 

 

Based on that graph, there has been a 50% drop in people who are in foreclosure filing bankruptcy. This clearly can't just be from fewer people getting in financial trouble, and the pre-law change small spike doesn't nearly make up for the 2 year drop. In other words, 50% of the people who used to be able to stave off losing their homes by filing bankruptcy are now going straight to foreclosure, and therefore, helping feed into the mortage issues plaguing the economy right now.

[FlaSoxxJim]

I wasn't exactly sure where to stick this one since there were plenty of Dems in the pocket of the banks who voted for this bill, but it's interesting, and I pretty much figure this is my thread.

 

Credit Suisse has put out an interesting analysis of one of the effects of the new bankruptcy bill that the Congress passed in 05, making it much harder for people to declare bankruptcy. Their conclusion? By making it much harder for people to declare bankruptcy, Congress may have inadvertently exacerbated the sub-prime and foreclosure issues currently plaguing the housing market.

 

Their argument is pretty simple; it's now much harder for people to file bankruptcy, which used to be an option for people who wound up in financial messes. But without that option, people who can't pay their bills wind up having no other way out of debt other than to completely lose things they'd bought on credit, i.e. their mortgages.

 

 

Based on that graph, there has been a 50% drop in people who are in foreclosure filing bankruptcy. This clearly can't just be from fewer people getting in financial trouble, and the pre-law change small spike doesn't nearly make up for the 2 year drop. In other words, 50% of the people who used to be able to stave off losing their homes by filing bankruptcy are now going straight to foreclosure, and therefore, helping feed into the mortage issues plaguing the economy right now.

 

I started wondering about this connection when the New Century story broke last week. Scary.

 

This is probably worthy of it's own non-Buster thread - it would make a good discussion.

[Balta1701]

I started wondering about this connection when the New Century story broke last week. Scary.

 

This is probably worthy of it's own non-Buster thread - it would make a good discussion.

Well, for some reason they don't let me moderate in here...almost as if I'm too partisan ...So I'll leave it to someone else to break that one out if they want it.

[kapkomet]

Well, the software did something weird, but here's the split topic. Actually this is a pretty interesting topic.

[Balta1701]

Well, the software did something weird, but here's the split topic. Actually this is a pretty interesting topic.

Woo-Hoo! One of the Republicans called one of my topics "Interesting"! Yayayayayayayayay!

[kapkomet]

Woo-Hoo! One of the Republicans called one of my topics "Interesting"! Yayayayayayayayay!

 

Except I ain't a "Republican".

[Balta1701]

 

Except I ain't a "Republican".

Closer than me! (does happy dance)

[kapkomet]

We went over this topic in another way about three or four months ago when southsider and I were both saying that ARM loans, etc. were "bad"... well, gee, here we are!

[NorthSideSox72]

We went over this topic in another way about three or four months ago when southsider and I were both saying that ARM loans, etc. were "bad"... well, gee, here we are!

And I think that's important to keep in mind, about high-risk mortgages. The bankruptcy bill exposed them, and more people are falling into that trap. But that doesn't make the bankruptcy bill bad - in fact I think it makes it good, in the long run. We're removing some of the unnecessary crutches from the system, which will result in people either learning and growing, or not. But its on their shoulders in any case.

[Texsox]

As far as the ARMs etc. It's the guns don't kill people logic. By themselves, they aren't bad and actually are good in some areas. I'm trying to decide if there are advantages to foreclosures over bankruptcy for someone. I am thinking the unsecured lenders may benefit if equity in the home is forced into their hands.