Years from now October 17 will be an anniversary. Today is the day the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 finally takes effect. Today follows years of fighting on Capital Hill between consumer advocates and the credit industry. Today follows weeks and months of what time will reveal was a mad rush to the bankruptcy courts to file bankruptcy petitions by both consumers and businesses. It will be an anniversary of the day everything changed.
First and foremost, know that I will not refer to the new law as BAPCPA when publicly expressing my disdain for the law. Certainly, if I am discussing legal cases and decisions on the this blog, I will appropriately and respectfully refer to the law by its given acronym: BAPCPA.
However, as many of my colleagues can attest, BAPCPA is little more than a Bankruptcy Abuse Reform Fiasco. Thus, I shall use the term BARF when appropriate (and in fairness, I admit that I was not clever enough to think of this acronym myself).
While the statistics are not out yet, I can say from my own experiences and from those shared by my colleagues all over the country that in the last several weeks thousands of people dashed to the bankruptcy courts trying to get protection under – what can now be referred to as the “old law.” Why? Well, it’s simple: the war in Iraq, Katrina and the credit card industry, but not necessarily in that order. Or, as Bill Clinton’s 1992 campaign astutely noted: “it’s the economy, stupid.”
The war in Iraq pushed fuel costs up. The cost to drive to the grocery store increased. The cost to bring food to the store increased, and thus, the price of food increased, as well as the cost to bring the food back to the family table (anyone who shops in a grocery store can undoubtedly attest to that).
And then, there was Katrina.
It’s disingenuous to place the entire blame of inflation on a hurricane, but let’s face it: she did exceptional damage to the economy and to the energy infrastructure. The cost of filling my gas tank more than doubled. Indeed, it’s almost three times as much to fill my car than it was when I first drove it off the lot in 1995. Fortunately, I live in the City, and use my car for limited purposes: getting out of the City being primarily one of them. Others however, aren’t so lucky.
Like many cities, hundreds of thousands of people commute into Boston or the Greater Boston area to work each and every day. What was once budgeted at $200 per month (filling the tank once or twice a week) has easily doubled almost overnight to $400. It now takes more cash to get to work.
It’s not just gasoline. Electric bills are creeping up, home heating oil is at a ridiculous high for this time of year, and if you ask someone how high their natural gas bill is, the response you’re likely to get is “don’t ask” or “um, you think the Red Sox can do it next year?”
Then, there’s the darling of them all: the credit card industry. I have no fondness for the industry. For years, they have been making it absurdly easy for folks to borrow $10,000 or more and pay back only 2% per month at an interest rate (and with various fees) that ought to make the no longer common corner loan shark cramp with jealousy. Now, under pressure from the federal government, the industry must require payment of 4% per month. So, for most, minimum payments on credit cards are doubling by the end of the year. Do bear that in mind while shopping this holiday season.
I cannot tell you the number of people I have spoken to in the last several weeks who have said to me: “I was making it work, and then first there’s a hurricane, the price of gas, my utilities and now my credit card minimums…I’ll be broke by Christmas if this keeps up.” Plus, with the real estate market now showing signs (at least in the Boston area) of strain (and I’m being polite with using that term), folks are now beginning to question whether they can, should or should have used their homes as an ATM machine.
These aren’t folks with perverse senses of entitlement. They are your neighbors, your friends, your coworkers and your colleagues who silently suffer with these ever changing economic conditions. Most thought, believed and/or assumed they were doing (1) the right thing; (2) the best thing or more likely (3) the only thing they could do (which is another way of saying the “right” thing). Some regret decisions they made while others are paying the price for decisions they never had any say in (like losing a job or getting an illness).
So with all of this, what was a consumer to do last week? A smart one got a bankruptcy petition filed under the old law. No silly “means test.” No analyzing “Current Monthly Income” under BARF, which as this blog will demonstrate over time, is not “current” nor “monthly” nor “income.” No presumptions of abuse for those folks earning more than the state’s median income. No extra – and frankly utterly pointless but nonetheless legally required work for attorneys representing debtors in distress and no extra fees to pay for that extra work. And thousands did – tens of thousands of distressed debtors went to bankruptcy courts all over the US in the last several weeks to seek protection.
The result? Millions, if not billions of dollars in debt (which is also referred to as money owed to someone…ultimately, someone) will either be written off completely or paid for at less than what the lender expected and was perhaps foolishly relying on. The days and weeks to follow will reveal how Wall Street will react to this. And Wall Street’s reactions have a penchant to be felt in the deepest far reaches of this great land, and of our lives.
And what can we Americans expect in the days, months and years to follow? Expect foreclosures to sky-rocket. Expect real estate values to plummet. Expect a slow down in consumer spending. Expect lay offs and business closings. Expect the price of gold, an indicator of inflation, to push past its now 18 year high (a fact which is curiously under reported in the main stream media). Expect history, on some level, to repeat itself. And expect a lot of finger pointing. Especially here.
Expect me to talk about it in this blog. Expect me to rant, and to rave. Expect me to analyze and discern and expect me to criticize and to be criticized. Expect me to get it wrong sometimes, but expect nothing short of my very best effort to fight along with my colleagues all over this country for those who cannot – for one reason or another - fight for themselves.
Many of my learned colleagues are discovering creative and important new ways to fight for consumers distressed by debt. As a member of the National Association of Consumer Bankruptcy Attorneys, I am fortunate to be allied with thousands of exceptional lawyers all of this country who are working day and night to ensure that the laws (especially those that Congress and the special interests have been able to keep their mitts off of) will continue to protect debt distressed Americans.
But for now, we have only October 17. Today. The day when it all changes. The day when we BARF.
And for now, we can only wait, see, hope and perhaps more than ever, pray.
