Sunday, April 17, 2005

Broke? How About A Loan?

This Washington Post story on giving credit to bankrupt people is an eye-opener. Like this; "Bankruptcy attorneys say that immediately after debts are discharged, lenders come calling. "It's a very common occurrence," said Texas attorney Alvaro Martinez, who recalls a couple whose debts were discharged in January. The discharge occurred on a Monday; by Thursday, a large national bank had granted a $70,000 mortgage to the couple."

14 Comments:

At 3:42 PM, Anonymous Anonymous said...

The credit card industry is run by scum. Here is the ultimate example of hypocrisy.

These leeches pushed the bankruptcy "reform" bill for years because they said they were being victimized by rampant fraud from people who ran up huge debts with no intention of paying it back. (Never mind that the industry is one of the most profitable anywhere.)

But now, this quote from the article shows that argument was nothing but a lie:

"Just because someone files for bankruptcy doesn't mean they should be denied access to credit, nor does it mean that they cannot handle a credit card," said Tracey Mills, spokeswoman for the American Bankers Association. "People file for bankruptcy for many reasons, including job loss, divorce" and medical bills."

There you have it! How often do you see an example of someone talking out of both sides of their mouth?

 
At 5:11 PM, Blogger J. Stanley said...

If you think the fraud is bad now, wait until the bubble bursts. Scams, Con artists and the likes will prey on previous beamer owners with a vengence.

We'll see a prevelent increase in the 3am get rich quick infomerials along with non-stop spam urging us for a one-time small S&H fee, we can learn how to create instant wealth overnight.

Unfortunately hard times often bring out the worst in people, the subject of my next commentary posting in a few days on realtybites.blogspot.com

 
At 5:14 PM, Anonymous BKlawyer said...

A recent study concluded that 50% of all bankruptcy filings were as a result of medical problems. There is no widespread bankruptcy abuse; what we have is abusive lending.
My office files about 600 BK cases a year here in San Diego so I'm not talking through my hat. My clients receive tons of credit card offers DURING the bankrupty case. As a parent I was proud when my son received his first pre-approved credit card offer for $5,000. The problem was that my son was 5 years old when he was approved. It is not uncommon that my clients, over 70 trying to "live" on $750.00 per month, "live" off their credit cards to the tune of $40-50k. The credit card companies didn't blink an eye at lending them the money (at 24% interest I might add). The debt in most people's lives is terminal: they will take it to the grave with them.
With the bankruptcy laws changing the effect will be to shut off the ability to file and wipe out you debt. Look for a spike in the suicide rate.

 
At 5:28 PM, Blogger Dan said...

BKLawyer,

If this country is ever to experience an uprising, this bankrupcy law might be the catalyst.

Debt is such an integral part of the American experience that having no way out will create a defacto slavery. Even in biblical times, a slave was to be released after seven years.

What's next? Debt inheritence to your kids?

Dan

 
At 5:53 PM, Anonymous BKlawyer said...

Dan- funny you mention it. Japan introduced the 100 year mortgage to the world, pitching it as "multi-generational". We are following with our recently-introduced 40 year mortgages and 7 year auto loans. Debts that follow you to heaven. . .At least we know there won't be any debt collectors there. . .

 
At 5:59 PM, Blogger John Law said...

I'm firmly in the "US is Japan" camp. but I think things will happen much quicker here. we have a ton of debt, no savings and a consumer orientated society. I'm no expert on Japan, but I think they have an export driven economy. when the boom went bush in Japan, they still could make money off of the US 1990s bubble economy. I don't think they US will be so fortunate. we import a lot of goods. I don't think we can benefit right now from china's rise.

 
At 6:05 PM, Anonymous Don said...

Amen John Law. BTW, I'm reading Devil Take the Hindmost right now :)

Short positions going up on Monday at the open.

 
At 8:27 PM, Blogger Sunny said...

The mounting credit problems and bankruptcy difficulties might push more people to go into cash businesses. If you are paid in cash and you have no conscience, then there are no payroll taxes, no income taxes, no wage garnishment, just money in your pocket. Imagine that a manual labor job paid in cash would net as much as a "professional" job with twice the nominal income. Illegal immigrants do it all the time, and it might be the only way to get out of the indentured servant status.

 
At 9:18 PM, Anonymous BKlawyer said...

Sunny's comments have weight. There is a feeling that, with the BK laws changing, people will be more willing to just walk away, change their phone numbers and buy the fake nose, mustache and eye glasses. I asked one client how he kept his stress down with the debt collectors and he told me that he just changed his telephone number every few weeks. How will those of you with debt deal with the future?
Check out www.cardweb.com and creditcard calculator. Put in $4500 at 18% interest and minimum payments of 2%. DO you ONLY have $4500 in credit card debt? I'm only 44 but don't really think I'm gonna live another 45 years. . . .

 
At 9:20 PM, Anonymous Anonymous said...

Guys,Did you know that 42% of first-time home buyers in the U.S. purchased their first home with nothing down? I understand keeping a cash cushion but what is the wait? Please spare me "I'm waiting for a market correction" -- that has been proven dead wrong!

The only thing dropping now is IQ...

 
At 9:48 PM, Blogger Ben Jones said...

(Look for a spike in the suicide rate)

One of the reasons I started this blog was the experience of watching so much individual and family stress coming out of the RE bubble in the Texas bust. It is serious and not an issue Washington should be ignoring now.

 
At 11:15 PM, Anonymous bedridden said...

It's not just credit card companies getting in on this. Many retailers and others are running similar con games.

Just heard a radio ad for a local mattress company (biggest in NorCal). No money down. No interest for 12 months. 12 months to pay.

Sounds great. Here's how it really works. Buyer buys a $1,500 mattress with zero cash. If he pays it in full within 365 days, he only owes the $1,500. But if he waits until the 366th day to pay, he will owe 22.99% on that $1,500 (or $1844.85). And the longer he takes to pay it off, the more interest keeps accruing at 22.99%.

I'm sure the mattress co. hopes like hell that the poor schmuck runs into money problems and has to pay the 22.99%.

By the way, the 22.99% interest was mentioned sotto voce at the end of the ad so you could barely hear it.

Lots of retailers getting in on this. I have no problem with the notion of extending credit over time . It greases the wheels of commerce. But so many businesses are finding it tough to make money selling stuff so they are resorting to credit mumbo-jumbo to try and squeeze more $$ out of folks.

I'm sure the margins on mattresses are pretty slim. A very competitive business. So if you can get an extra 22.99% out of every fifth or 10th customer, i'm sure it adds up.

 
At 11:26 PM, Blogger Ben Jones said...

bedridden,
Your right, and it fits in with my suggestion that this is a credit bubble fueling the housing market, among others. Thx.

 
At 11:25 PM, Anonymous Anonymous said...

Nice ! When can I borrow ? So I have to have less than ZERO ASSETS to get some more money. Wow ! Wow !Banking is really an extraordinary industry in 2005. Which proves that the secret of success is never paying your debts and start again. I think I will have to try this one day. That's what you can call "the New American Dream" !!

 

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