February 14, 2005
All I can say as the odious bankruptcy bill, also known as Everything The Financial Services Industry Ever Wanted In One Convenient Package, wends its way once again towards passage is that I hope no one currently reading this ever gets seriously ill. Among other things, making it that much harder to recover from financial misfortune (whether largely self-inflicted or not) would seem to increase the likelihood of children being forced to inherit their parents' crushing debts. Doesn't sound very family-friendly to me.
DavidNYC and Tom Kirkendall offer a variety of reasons why this bill sucks. As Senator Santorum says, "This is the best case to point out where the 55 Republican senators will make a difference." Yes, indeed it is. And I'm sure there's plenty more where that came from.
UPDATE: Commenter John Greenman says that children do not inherit their parents' debts; rather, creditors can make a claim against one's estate, and once the estate is gone, that's that. Fair enough. It's still my position that making it harder for people to recover from financial misfortune will have a deleterious effect on those people's children.
Posted by Charles Kuffner on February 14, 2005 to National news
I'm sorta curious how many hospitals have gone bankrupt recently.
I've lived in Houston since 1980 and during that time, especially during the bust years of 85-88, many high profile people declered bankruptcy, Denton Cooley, Kickerillo, John Connally
and on and on. I recall the paeans in the press to these folks as visionary's who were caught in circumstances beyond their control and how, as a society, we should all wish them a speedy financial recovery because we are all better off. I guess that sentiment doesn't apply to 'jus folks'.
People don't inherit debt in this country. If someone dies in debt, the creditor has a claim against the estate--that is, the assets left by the decedent (dead person) to her heirs. But the heirs are not personally liable for any debt of the decedent. If the debt exceeds the assets in the estate, it is extinguished, not passed on.
Why are credit card companies SO in favor of bankruptcy reform? It protects their cash cow.
On a credit card @ 18%, paying on the minimum payment:
A $2,000 balance will take 18.50 years to pay off
A $4,000 balance will take 24.25 years to pay off
A $6,000 balance will take 27.50 years to pay off
A $10,000 balance will take 37.75 years to pay off.
But do you know how long it takes for the credit card company to get back what it loaned?
51 months.....no matter how much you borrowed.
That means after 51 months of carrying a balance on the credit card, every penny paid to the credit card companies for as long as 33 years, is profit.
At 24%, it would take only 45 months to get back the balance but to pay off?
$2,000 would take 33.5 yrs
$4,000 would take 45.17 yrs
$6,000 would take 51.75 yrs and
$10,000 would take 60.25 yrs
ONE $6,000 credit card with a full balance would take someone their ENTIRE working life to pay off at the minimum payment. If the credit card companies have their way, the new law will make anyone with $100 a month extra repay their $6000 in ....5 years.
Let's make this easy. Instead of allowing credit card companies to structure their repayment plans over 30, 40 or 60 years, require them to schedule minimum payments based on the highest balance ever held.
$2,000 highest balance @ 24% would be $40
$4,000 highest balance @ 24% would be $80
$6,000 highest balance @ 24% would be $120
$10,000 highest balance @ 24% would be $200
In each case, the balance would be paid off in just 5 years....just like in bankruptcy....
Bet they will not like it...MBNA, the largest issuer of credit cards earns almost a billion dollars a year PROFIT.....cash cow indeed.
Tracy Coyle's calculations are fascinating. Wonder if the greedy credit card issuers have even considered that when and if they manage to remove the bankruptcy safety net consumers might get card shy and thereby kill the cash cow.
Mother, age 71 passed away 1-26-06 with cancer. She was low income, making only $930 a month. The last few months she was in a health care center. I was her DPOA and designated VA & SSA PAYEE. I paid her phone, cable, and health care portion, etc. I just received several letters from SSA asking for $230 over payment to be returned. Also a debt from the Health care center for $1,400 for mom's medication that Medicare did not pay! She only has $240 left in her account after buying her headstone, tranportion from one state to another and other, grave opening fee and flowers. Am I responsible for Mom's debt if I was her DPOA and excetutor? What do I do?