The Bankruptcy Reform Act--Posner
An excellent Read as always, coming as it does from the Becker-Posner blog. Judge Posner lauds the new Act, saying it will lower Credit extension Interest rates, and Means-Tests those requesting 'Discharge' of their debts. The Author finds the former reason somewhat doubtful, thinking Credit Card companies hold the philososphy of Loan Sharks; they desirous of economic Profits, not normal Profits. The later rationale only transfers applicants from Chapter 7 to Chapter 13, meaning the Debtor must make Periodic payments of the Debt for the subsequent Five years; this only if the Applicants possess higher than the median Family Income for their respective State of filing.
The Author sees much potential Abuse within the new projected Bankruptcy law. This does not mean he sympathizes with the Debtors. He personally thinks a new Bankruptcy law should favor neither Debtor or Creditor. He would like the new Law to state:
1) Debtors will not be discharged of their liability, but Relief will be offered.
2) Debtors will not have to pay the Principal, but must continue to pay some Interest on it.
3) Said Interest will be the average national Interest rate on a 10-Year Certificate of Deposit.
4) Said Interest will be paid until an amount 110% of the original Principal has been paid.
5) The Debtor cannot apply for further Debt discharge before all previous Discharge payments have been made.
Such a Bankruptcy law would assure return of all Funds extended to Creditors. It also signifies the law will not support usurious Interest rates; potentially curtailing Credit Card companies enticements of unsound debt Acquisition by Consumers. It will send a clear warning to all Debtors that the Courts demand they pay their full debts. It finally provides a social insurance relief sufficient to give Debtors the time to pay their Debts. lgl