Wheel, Of, Fortune !!!

$800... $200... $1000... BANKRUPT! Well, we have some very nice parting gifts for you. Do you think that next week, in order to keep pace with the new federal guidelines for bankruptcy that the people at Merv Griffin entertainment will make the black "Bankrupt!!" spaces on the wheel smaller?

The news lately has been that right quick, new legislation effecting the thresholds for different bankruptcy procedures kicks in. The lobbyists all got together for the banks and the credit card companies and got our representatives to decide that it needed to be harder for us to find relief if we had a disaster and went broke.

Can I just say this is the worst possible kind of government? Everyone involved ought to be ashamed. Government is supposed to be there to protect the interest of the little guy. Something tells me that even if most people didn't pay, Citicorp is going to be ok.

I do think, in general, that bankruptcy is a bad thing. The utilitarian in me thinks that when people declare bankruptcy that they are in some way getting away with something. So on the surface, you would think I would agree with making it more difficult to get out of one's financial obligations.

Except, really that's not what has happened here. Really what this is, is a corporate bandage for poor business practices and failures of government. If that's what were protecting, well, then the laws are upside down.

Do you know the best way to keep people from welching on creditors? How's this? Pay attention to who you are lending money to. At several times in my life I have had more available credit on credit cards then I had grossed in income for the prior 3 or 4 years summed together. What kind of moronic company looks at a potential creditor, gets to see all their other creditors and all their assets, and then gives them a credit line of more than 5 or 10 times their net worth? I'll tell you what kind, the kind that then lobbies congress to make it harder to declare bankruptcy.

I have to wonder how many people that are somewhat less insane about debt get into the same credit place I did, and what they let themselves run up. When I graduated from grad school, I owed thousands of dollars on credit cards - and that was after not having a job for more than three years. All the while through school I kept getting card pitch after card pitch. I would open one account to transfer the balance from another card I couldn't pay. They have to know we do this, shouldn't offering credit to people in those circumstances be their risk. If people wash out of school with mountains of credit card debt - well, I mean I know they spent the money, but what in God's name were the card companies thinking when they authorized the loans?

Want to protect yourself from people declaring bankruptcy while you are holding their note?

Don't write the note.

It's only going to get worse too, and once again it is hard to blame the consumer when the financiers are coming up with such crazy schemes. I've been paying on my house for a year now. Not a day doesn't go by without my getting some hit up for a home equity loan. Most of the lines of credit are far beyond the amount of money I have into the place. Yet I am sure each and every one of these institutions would love to write me a check. In some ways I'd be a fool not to take it, the interest is so much lower than a credit card.

Except this is really a mortgage. Taking a home equity loan is borrowing against your house. For most people that real estate is their financial anchor. These loans are predatory.

And speaking of mortgages, wait until some of these variable rate "interest only" or "fixed payment" loans really start to kick in. When I was shopping for a mortgage, I stumbled across someone that wanted to write me a loan at 1.5%. Luckily my "something for nothing" filter kicked in and I figured it out before jumping at what looked like a fantastic deal. You know how these work, yes? The monthly payment requirement is capped, but the interest rate is variable - and very volatile. So, if your rate goes up you don't have to make a higher payment... Wonderful, yes? No, because the difference between the new monthly payment and the capped payment gets added to the principal. Its like making a minimum payment on a credit card. You never catch up.

These products are all over media right now, and people must be using them. Why wouldn't you, rates are low, payments are capped, and you get twice the value for your money. As long as things stay peachy. Otherwise, you've sold your soul to the company store, so to speak.

If you will.

As it were.

I tell you what.

Oh, no you didn't.

Want another? (he says as the entry just gets longer and longer) Most bankruptcies in young people are due to lack of heath insurance. I broke my wrist playing ultimate fairly soon after grad school. I was lucky enough to have health insurance at the time. The care for that one injury was more than $15,000. How many 20-25 year olds do you know with $15,000 liquid? Trip on a stair... Poof! Broke. Bankruptcy?

The Federal government says "Not so fast!"

Here's an idea. Want to help financial institutions keep from losing money to bankruptcy? Two things:

1. When they are stupid with how they lend money, they ought to lose money. Some common sense would save them quite a bit of cash, and the people - although perhaps not being able to have that big screen they want - would be better for it.

and

2. Get off your collective asses and figure out how to make health care affordable.

Those things would help both the consumers and the lenders. What we'll have next week protects the lenders and screws consumers. That's not what good government is about.