Bankruptcy Law Change Could Help Consumers Recover: Experts

Hmmm so more brilliant ideas to jump start the economy, change the laws to help people who are underwater on their mortgages, to give them even more financial relief....how much more financial relief do consumers need, I mean enough is enough, between the trillions already spend to prop up the economy along with all the bailouts how much more does this economy need to get it back to where it was, this is why the economy is where it is today. They cant just sit back and let the free markets take care of it. Ever since this financial crisis began the only thing propping it up is trillions in worthless dollars BUBBLE ben has thrown into the system, thats the only thing this economy knows is worthless dollars.



Bankruptcy Law Change Could Help Consumers Recover: Experts
CNBC.com | October 14, 2011 | 04:48 PM EDT

As Americans struggle to pay off underwater mortgages and student loan debt, some experts say simple changes to bankruptcy law could provide many with financial relief and potentially help the economy.

These experts say Congress should amend the Bankruptcy Code to allow people burdened by underwater mortgages and student loans to discharge their debts in bankruptcy, which is extremely difficult to do under the current law.

“I emphatically believe that the bankruptcy system is the best place to sort out the current consumer debt mess,” says Jason Kilborn, scholar in residence at American Bankruptcy Institute.

The pool of potential beneficiaries could be substantial.

Almost 11 million homeowners are currently underwater on their mortgages, and outstanding student loan debt is approaching $1 trillion, with delinquencies continuing to rise.

Kilborn believes the amendments could help put more money in consumers’ pockets.

Chris Christopher, a senior principal economist at IHS Global Insight, says it would be “a very positive development” since consumer spending represents more than 70 percent of the U.S. economy.

Dean Baker, co-director of the Center for Economic and Policy Research, agrees and says: “People can overplay the importance of debt relief, but it would certainly help if people could get out from under their burdens.”

The bankruptcy mortgage-debt modification would only help underwater homeowners avoid foreclosure. They would be able to write down mortgages to the current value of the home and make reduced payments.

But bankruptcy would do little for people with inadequate income whose houses are properly valued.

Kilborn believes the mortgage-related amendment would bring back stability into the housing market and by extension help put economy on a path to recovery.

“Right now, we have a valuation problem—we don’t know what these houses are really worth,” says Kilborn. “That what bankruptcy courts could solve.”

But Joshua Shapiro, chief economist at MFR Securities, doesn’t like the idea.

“In the longer-term it would diminish the availability of credit, as lenders balk at extending credit to borrowers who have easy means of shirking their debts,” says Shapiro.

Julia Coronado, chief economist for North America at BNP Paribas, agrees and says it punishes those who were prudent. “They may also be having hard times because of the tough job market but would not receive any assistance as they never took on debt they couldn't afford.”

Kilborn disagrees and says history has proven these arguments to be baseless. He adds that the topic of debt forgiveness has always been controversial.

In 2009, lawmakers already shot down the legislation introduced by Sen. Dick Durbin to allow mortgage-debt modification in bankruptcy.

A proposal to allow a discharge of private student loans is currently pending in Congress.

Some economists go even further and call for a "Debt Jubilee" to forgive excess mortgage, student loans and credit card debt for some borrowers.

Prominent economist Stephen Roach, who is also a non-executive chairman at Morgan Stanley Asia, is one of them.

“The American consumer is going nowhere,” Roach said in an August appearance on CNBC. “If we don’t address that, all the public policy aimed at the fiscal and monetary stimuli are going to be pushing on a string.”

But Michael Feroli, chief US economist at JPMorgan Chase, says he is not convinced debt relief through bankruptcy is the best way to address the consumer debt crisis.

“Making existing contract invalid is not conducive to a healthy economy,” says Feroli.

 

I think it is a good idea. What this nation needs is a year of Jubilee. Allow the middle class to stick it to the bankers for a change. The bankers forced the taxpayers to bail them out at the threat of economic collapse. They then turned around and gave everyone the finger while they cashed their twenty million dollar bonus checks.

 

Someone needs to go all the way to the Supreme Court to challenge the ridiculous law that prohibits bankruptcy protection for student loans. What makes a student loan so special that you can't even get the same protection that a serious homeowner gets when he realizes he got into a bad deal?

Bankruptcy is where it's at, also just walking away from underwater mortgages.

If you're stupid enough to loan to me you deserve to be screwed. You mean you loaned me 80k to get an Art History degree and I'm the stupid one?

 

They changed the bk laws in 2005, figure it out, Congress along with the bankers probably started working on this change back in '03 to get law passed in '05. They knew the shtf sometime in the future as a result of low interest rates and free money soon after 9/11.

Actually though, they don't need an amendment, people just won't be able to pay, game over.

 

Speaking of student loans, anyone see the returns of the Yale Harvard, etc endowments, well over 20 +%. No way any of that money is going to be used to reduce tuitiion costs.

 

Bankruptcy laws should be the same for people and corporations.

 

What makes student loans special? Its because the fucking tax payers have guaranteed these loans. Don't like the deal? Don't borrow the money.

If you are stupid enough to borrow 80k to get an art degree, then you deserve to be saddled with the debt. Yeah, nobody wants to take responsibility for their own actions these days. Screw them. Pay up assholes.

 

haha an art degree....


I never understood the mentality of going to school for art, isnt art anything you make of it, why do you have to be educated in art to teach art, art can be anything....ever see what some of those priceless pieces of art look like, check out the work of Pollack or Basquiat, they didnt go to school to learn how to draw and paint, they did what they wanted to do, not what someone was telling them to do, does anyone get the difference.........

 

Obama should announce $500B plan to help more students pursue art degrees. There are no real jobs out there and this may not change for years to come. It's a good idea to keep people occupied otherwise they may start riots.

 

All the libertard commies protesting at Wall Street should have their financier George Soros pay off all their student loans, instead of him providing all his degenerate followers with heroin, marijuana, condoms, and more Doucheocrat ignorance.