In 2005, a charade took place on the floor of the House and Senate. It is now called the "Bankruptcy Abuse Prevention and Consumer Protection Act" (BAPCPA). Proponents willfully deceived the American people in arguing that the bill would 'protect consumers' from those who abuse the system. It only protects creditors and caused foreclosures to soar.

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In 2005, a charade took place on the floor of the House and Senate. It is now called the “Bankruptcy Abuse Prevention and Consumer Protection Act” (BAPCPA). Proponents willfully deceived the American people in arguing that the bill would ‘protect consumers’ from those who abuse the system.

The new law strengthened bankruptcy laws not for we the people, but for creditors who make it a business practice to exploit American consumers for the purpose of profit and gain.

Assault on the Middle Class

I have never wondered why our congressmen and women are called “Representatives,” not is it a mystery as to why the body of government to which they are elected is called the “House of Representatives.” It is our Congress’ sole duty to serve the interests of the people who sent them to Washington.

The framers of our Constitution gave Congress the power “to establish… uniform Laws on the subject of Bankruptcies throughout the United States, (Article I, Section 8)” not for the protection of creditors, but in order to protect hard working citizens. However, the BAPCPA is a perversion of ideals.

When signing the act into law, President Bush said, “In recent years, too many people have abused the bankruptcy laws. They’ve walked away from debts even when they had the ability to repay them. This has made credit less affordable and less accessible, especially for low-income workers who already face financial obstacles. The bill I sign today helps address this problem.”

His words could not be further from the truth. Less than 2% of all bankruptcies filed were filed under fraudulent motives.

Unlike when they issue credit, the credit companies perform a number of income, asset and debt verifications when a consumer files for bankruptcy. They have the right to interview the consumer, while under oath, and they receive a representative from the US government to look out for the interests of the creditors during the bankruptcy proceedings. All of this before the BAPCPA.

What the actions of the Congress and the President have done, in actuality, is place the “low income workers” in a state of financial bondage. If their jobs are lost, if they get sick, if a spouse dies, they cannot file bankruptcy protection to protect their assets thanks to the true constituency of the House and Senate; the greedy gluttonous creditors, who now can and do take their home, vehicles, and any other assets.

BAPCPA Constrictions: Income as a litmus test to file Chapter 7  

As a former professional credit counselor, I was a training specialist for the largest non-profit credit counseling agency in the country. I developed training material to ensure that my agency was certified by the Executive Office of the United States Trustee (EOUST). At one time, I referred several of my clients to seek legal advice regarding a Chapter 7 bankruptcy on a daily basis. I am intimately familiar with the circumstances surrounding bankruptcy and the provisions of the BAPCPA.

A Chapter 7 Bankruptcy allows a consumer to receive full debt relief from creditors, and write off unsecured debts. If the debtor owns assets, the assets may be used as compensation to creditors.

The BAPCPA prevents average Americans who need creditor protection under the full extent of the law from receiving this right that the framers of the Constitution clearly envisioned by requiring applicants to earn less than the median amount of income for the state. Taking into account even part-time employment, this number is always below any livable wage, often times less than $19,000 a year. All other consumers are forced into a constrictive Chapter 13.

In a Chapter 13, consumers are forced to pay all income that is in addition to their housing and food costs to a trustee, who in turn disburses it to the creditors. This provides no emergency income in the event of the smallest surprise, such as a flat tire. As a result, two thirds of Chapter 13 bankruptcies fail in the first year.

BAPCPA supporters ignore the facts in falsely claiming that the bankruptcy system was ever abused. The top three causes for the filing of Chapter 7 Bankruptcy are medical expenses, which typically surround medical emergencies, such as cancer or automobile accidents; divorce, and reduction of income, and layoffs. All of these causes for bankruptcy are completely out of the control of the consumer and are subject to misfortune, random chance, and swaying markets.

The typical scenario…

Suppose a two income family (the Johnsons) has an income of $100,000 a year. The husband makes $50,000 a year at the Post Office, while the wife makes $70,000 a year as a programmer. They have two children, two cars, and a mortgage. Their savings, debts, and expenses are reasonable for their income.

Then, the wife’s job is moved overseas - to India - for example. For a while, the Johnsons use their savings to stay afloat, and perhaps begin to use credit cards to help afford gasoline and groceries.

After a while, time runs out. Mrs. Johnson can’t find a job in her salary range. The jobs simply no longer exist. She is forced to accept a job at a $40,000 pay cut. Mr. Johnson takes a part time job to make up for lost income, but Mrs. Johnson must stay home with the kids after school. The increasing cost of daycare simply outweighs any benefit that taking second job would have had.

Struggling, the family can afford to pay their mortgage, utilities, and car payments. With help from their church, they can even afford enough food for their children to eat. However, they cannot afford their Credit Card payments.

Now imagine if Mr. Johnson passed away and there was only enough life insurance to cover the bills.

What if Mrs. Johnson got cancer, and could not work?

Even in the face of these types of hardships, many American families could persevere and overcome such financial adversity if it were not for the creditor’s policies, which literally force consumers in to a position where they require bankruptcy protection.

Unfortunately, under the BAPCPA, the Johnsons would lose their home, and their vehicles, because their Chapter 13 payment would be too high in all three scenarios.

None of these situations are fictional; they are all based on real events.

Adding Injury to Injury

In its lines and lies, the BAPCPA contains an unfunded mandate. It requires that consumers participate in a credit counseling session with an accredited agency. The mandate is unfunded, because Congress provided no funds to pay for the counseling.

Credit Counseling agencies typically provide free counseling to all consumers. This is because a certain percentage of those who go through counseling will elect to participate in a debt management plan (DMP); the number is approximately 25%.

The creditors of these 25% pay for a portion of the DMP through what is called “fairshare.” Consumers pay for the rest of their own program through an initial setup fee and/or monthly fees.

These consumers are also coming to a Credit Counseling Service because they think that they can avoid bankruptcy. None of them want to file – no one does. Studies prove that over 90% of Americans think that filing bankruptcy is immoral. As a counselor, when it was a clients only option, I often had to talk them into it just to avoid losing their home.

With bankruptcy counseling, however, the consumer already has no option. There is not a chance that they will go on a debt management plan, and the counseling agency is forced into a position where they have to charge for a service that the consumer does not need in the first place, and that the agency doesn’t want to provide.

Ivan Hand Jr., the president and chief executive of Money Management International Inc. (MMI), the nation's largest credit counseling organization, and this reporters former boss, told the Washington Post, “Typically, consumers are too far gone by the time they get to us.”

Of the 15,000 bankruptcy counseling sessions that MMI conducted within the first four months of the law going into effect, only 43 consumers were eligible for a DMP, and of those only four signed up.

The President of the Consumer Credit Counseling Service of Greater Atlanta also reported that virtually none of the 12,539 sessions it had conducted found debtors that qualified for anything other than bankruptcy.

Immoral Practices of the Credit Industry
 
It is a common practice for creditors to increase a consumer’s interest rates upon an inspection said consumer’s credit report and discover that the consumer has additional creditor debts. These types of interest rate hikes often times exceed 29.0% APR.

The rationale behind such a move on the part of the creditor is that they believe that the consumer will inevitably file bankruptcy, so they may as well force the consumer into making a minimum payment that only covers interest and does not effectively reduce the principle balance charge accounts. Now, with Chapter 7 nearly impossible, the interest rates continue to rise.

On numerous occasions, the creditors charge interest rates that are so high that the finance charges actually exceed the minimum payments. Before long, a consumer who was making their creditor payment in full and on time is now over-the-limit due to extreme finance charges is subject to hefty over-limit penalties. Such penalties make bad situations worse, and forces consumers into the dire position where they are unable to purchase food, or even afford their housing and utility payments.

It is irresponsible for the men and women currently seeking the office of the President of the United States, whose constituency is the people, to leave in place laws that reward creditors for their own irresponsibility and insatiability.

I hereby submit that creditors are not responsible in the issuing of credit. When applying for a home loan, a mortgage lender or brokerage will perform a budget analysis and verify the income of their potential customers. The question needs to be asked, why do creditors not also verify proof of income and a consumer’s capacity to repay debt before issuing high-limit unsecured revolving charge accounts? From the candidates, the answer must be demanded.

Exploiting the elderly, children, and the under-educated

Every day elderly American citizens on a fixed Social Security income, the labor of whom this country was built upon, receive letters from creditors offering high-limit credit cards. These are Americans who are retired; because of their age, and perhaps also because of illness, they cannot work, and because of the nature of their limited income they often times cannot afford necessary medications, an adequate amount of food, or to turn on their heat in winter and their air conditioning in the summer. To these Americans the gifts of credit cards are received as “a miracle from God,” as I was told so often by elderly consumers.

It is only until the creditors increase their minimum payments do these consumers realize that they cannot afford to juggle a debt load that will take over forty years to pay off making the minimum payments, which is an absurdity to a seventy year old consumer.

Opposite of the class of our citizenry who laid the groundwork for today’s America, the creditors also find easy prey in America’s future; our high school and college students. At the age of eighteen, when most teenagers are either preparing to graduate from high school or go into college, they are bombarded by a barrage of offers for “free money” from a never-ending slew of credit card companies.

Eighteen and nineteen year olds do not yet have the life experience to understand such financial concepts that are necessary in order to responsibly manage one or more unsecured revolving accounts. After all, they do not even possess the responsibly to consume alcohol, which is why the drinking age is twenty-one.

For the creditors to take responsibility for their own actions would be as simple as requesting a recent pay stub from a consumer to verify that the income is available, along with standard credit checks which are already in place.

The McCain Response

In 2005, I attempted to contact both of my Senators, including Arizona Sen. John McCain, who is again running for President. I provided them both with facts about how the bill would hurt working class Americans. Yet, in light of the issues, McCain calls the legislation, “…an important step toward a fair and balanced approach to restoring personal responsibility to our federal banking system,” saying nothing of the person responsibility of the creditors, who prey on the weak.

McCain expressed his “surprise” that bankruptcies were being filed in record numbers at a time of “low unemployment” and “high wages.” Perhaps he meant low unemployment in the Philippines, China and India, where many of our jobs have gone. As for high wages, he could only be referring to his campaign contributors, because wages for average Americans are at an all time low.

The content of the letter is unaltered. 

Only my personal mailing address is blacked out and replaced with the URL of this website. The backside of the letter has been added to the front.

Thomas Jefferson’s forewarning 

One President once said, “I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a moneyed aristocracy that has set the Government at defiance.

“If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.” It was Thomas Jefferson, and he said it in an 1802 letter.

I urge all world citizens tell the presidential candidates to heed the warning of Thomas Jefferson, the drafter of the Declaration of Independence, the third President of the United States, and key founding father.

If they act in support of the BAPCPA to strengthen bankruptcy laws for the creditors and weaken them for citizens, then you they will have ignored Jefferson’s warning from 200 years ago, and you will have brought his fear to realization.

Please, do not let America’s sons and daughters wake up one day homeless, not in this country, which was founded on principals of liberty and equality; as opposed to the exploitation and prejudice that the credit industry fosters for profit.

Authors Website: www.revrob.com

Authors Bio:
Founder of "The Rev. Rob Times," (www.revrob.com) Rev. Robert A. Vinciguerra has been a longtime student of journalism. From Phoenix, Arizona.