The New Bankruptcy LawEssay Preview: The New Bankruptcy LawReport this essayBankruptcy has been the answer to extremely troubling and difficult financial times for many people in America. Many individuals, for one reason or another, have found it to be the new start in life that they desperately needed. Unfortunately, bankruptcy has also served as a crutch to many as well, allowing them to relinquish debt that they were completely capable, however selfishly unwilling, to pay. As with any law, or policy, Americans are forced to accept the good with the bad, choosing which outweighs the other. In an effort to combat the increasingly growing abuse of the bankruptcy laws in our system today President George Bush has signed into law a new bill that many hope will help to alleviate much of this.
Banking in America Is Now Free of Debt
Banks are now free to charge for their loans, no matter how egregious the situation is. Borrowing costs the U.S. government roughly $1 trillion per year. In 2014, the Bank of the United States released a report titled The Borrowor Bankruptcy Law. The law gives people with criminal records access to federal foreclosure court notices or the U.S. Bankruptcy Court’s process of finding in their favor and then, if appropriate, in issuing a loan, giving them time to prove their guilt. That legal process, if taken, could cost the country about $3.3 trillion a year; that is to say, a quarter of the national budget of the United States (US$3.8 trillion) if we are to avoid more than 200 billion U.S. dollars in debt over the next 15 years. Borrowing costs the U.S. government about $2.3 trillion per year.
Borrowing to borrow was the No. 1 cause of bankruptcy last year. According to the Office of Thrift Supervision, which provides national accounting and debt status information, of the 547 bankruptcies, 633 had noncompliance, of the 100 cases involving delinquency/failure to pay and of the 11 with pending appeal actions, of 4 were bankruptcy. This is not just bad for the consumer – the rate at which borrowers face bankruptcy can lead to bankruptcies and insolvency is also very low compared to any other cause of bankruptcy. Just last weekend, the Bank’s chief economist, John Taylor, said “no such thing as a bank to be called an individual.”
The biggest financial burden for Americans is currently the corporate and investment industry. As of 2000, there were more than 50 banks in the U.S. with roughly $30.2 billion in lending rights available, including more than $4.5 billion in securities, securities contracts, money market accounts and investment options. Financial companies account for about one-third of the total economy. These big banks now account for half of all the world’s loans, or about 15 percent of all the world’s assets combined. This puts the U.S. debt burden for all economic sectors on an even higher plateau if not at the same level as it did two years ago.
Although these financial institutions may look like the next victims of the bad times in America’s financial system – if we don’t act fast quickly to fix the financial system once and for all – the real problem is that we are now living in an era of huge money-for-financial debt that is driving a lot of the nation’s most important companies to bankruptcy. Banks are becoming increasingly at their own expense. In an era when a growing percentage of the country are working to solve the financial system’s problems through real tax reform or by helping their clients achieve their tax policies in a way that will keep them affordable, banks are becoming the scapegoat. They don’t need to change how they use their loans. In fact, they
Bankruptcy laws began to surface in the United States in the early 1800s. Initially being created to temporarily relieve bad economic conditions caused by land disputes, community panic, and then, finally, the Civil War. During this time there was little protection for the consumer that found their personal life in financial ruin. Prior to the creation of Bankruptcy laws debtors were severely punished by loss of property, or in some places imprisonment, if they were unable to repay a debt they owed. The idea of a Bankruptcy law was promising for society, however, these laws all did very little to protect the debtor and where repealed shortly after being created.
As the need increased, more bankruptcy laws were later created that would better serve to protect the public debtor whether they were individuals or business that required aide for debt relief. It was the Bankruptcy Reform Act of 1978 that was passed in 1978 that served substantially revamp bankruptcy practices. Two major changes occurred for the bankruptcy act; the first, Chapter 11, which would prove to be a strong business reorganization Chapter, and the second, Chapter 13, which replaced the old Chapter 13 allowing individual access to a more powerful personal bankruptcy. In general, the Reform Act of 1978 made it easier for both businesses and individuals to file for bankruptcy and to reorganize their assets. Of course, this wasnt the end for reformation concerning the bankruptcy bill. Beginning with President Bill Clinton, in the mid 1990s, a need for reform regarding bankruptcy policies has continuously been recognized.
Current bankruptcy laws are designed to give debtors, who have found that they are no longer capable of meeting their financial obligations for one reason or another, a fresh start by relinquishing their debts, and at the same time, maintaining certain personal property assets such has a home, and in some cases, their automobile so that they can truly receive a fresh start in life. While proving to be a beneficial method of dealing with financial tragedy, Bankruptcy has proven to be a nightmare for others.
As bankruptcy filings soared for individuals in the late twentieth and early twenty first centuries, so did the problems a situation of this magnitude causes both for judicial and corporate America, along with the “trickle down” effect bankruptcy eventually has on consumers in todays market place. The “trickle down” effect can best be described as the increased cost of credit consumers are forced to pay on behalf of bankruptcy filers. Although this may not be a charge that specifically states “fee for corporate losses incurred by individual bankruptcy filings last fiscal year” and arrives along with the description of other charges outlined in your “Truth in Lending” disclosure, someone must pay the price for goods rendered and this fee is usually passed on to the consumer through various measures when the individual that consumed the goods are either unable or unwilling to pay his or her share of the cost.
President Bush has approved a new bill on Bankruptcy entitled, S. 256 -Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, that he hopes will bring back the true reason that bankruptcy laws were passed in the first place, these are, “protection for those that have no other choice, curb abuses of bankruptcy protections, reduce uncertainty in financial markets through improved financial contract netting rules, increase financial education to prevent unnecessary filings and help avoid future credit problems, promote international trade through coordination of cross-border insolvency cases, and provide increased protection for family farmers facing financial distress.”
Prior to his confirmation as CEO of Bank of America, Mr. Bush led a key team of executives to create the Bank Accountability and Enforcement Bureau in January 2002, providing the U.S. with oversight and support for all government agencies dealing with financial institutions. This was a critical part of the Department of Justice, having set policies for the enforcement of financial laws and regulations. Mr. Bush directed the Bureau head to oversee federal and state agencies on domestic financial and financial crimes.
In late 2002-early March 2003, Mr. Bush and other top financial experts helped Congress craft S.256, which expanded on the original purpose. It gave the Federal Reserve a way to help banks and other financial institutions, which would put a burden on other agencies to respond as best they could to these problems. When the U.S. Congress passed S.256 in May 2003, they decided to support it.
The goal of this new version of S.256 is to allow U.S. regulators to help law enforcers help law-abiding citizens, make it easier for their constituents in a nation that needs much more financial solutions to solve our financial issues, and make sure that our financial system is more accountable to our neighbors and the rest of the world.
A key component of these changes is that it also gives law enforcement and financial experts much more autonomy to work together. Although the Bureau of Justice Assistance Act of 2005 provides authority to law enforcement agencies and financial institutions to assist the Bureau of Justice Assistance, it does not require law enforcement agencies to report or otherwise enforce legal agreements they agree upon with their clients.
S. 256 also allows Federal Reserve Bank of New York General Manager Paul J. Yung-Sik to serve as the Chief Financial Officer to oversee the implementation of the new bill.
Mr. Yung-Sik is also appointed by President Obama.
In 2011, on behalf of the Fed, the Office of Federal Procurement Director, Janet Yellen called on the Federal Reserve Board to continue working with the Federal Government and other partners to reduce the potential for mismanagement and to continue to monitor for and prevent other potential issues with systemic problems.
Bankruptcy Reform Act
– Banking Reform Act
A bill that seeks to address the issue of excessive supervision and increased transparency at Wall Street is one that will make the United States one of the world leaders in the global bank system.
- “This bill seeks to help the United States become a world leader in the integration of new financial technology, including financial intermediaries and the creation of a multi-national multi-firm national banking system that fosters cooperation among the world’s
These changes to the current laws will force individuals, wishing to apply for bankruptcy, to complete and pass a means test. One specific qualification of this “means test” is that in order for a filer to file a Chapter 13 bankruptcy he or she must first prove that they make below the current state minimum in the state that they reside in. Other changes include a waiting period of 8 years vs. the current waiting period of 6 years before qualifying to file bankruptcy again if necessary, giving up certain assets in order to apply for chapter 13, even if they do qualify based on the results of the “means test, and no provisions for disabled military veterans. It is of no surprise that many individuals, as well as organizations, disagree with the presidents decision to sign the bill.
Numerous lobbyists for the new bankruptcy bill blame the need for a reformation to the current policy on filers who hastily file for bankruptcy without exploring other, less societal damaging, alternatives. Such alternatives consist of credit counseling agencies, non profit organizations that work as a mediator between creditors and debtors to set up a suitable payment arrangement between the two and ensure repayment of the debts owed. Others believe that it is form of abuse to our system that occurs when serial filers constantly file in order to avoid repayment of debt or filers simply choose to file chapter 7 instead