Consumers League of New Jersey

Volume 62, No. 1 . . . . . .Founded in 1900 . . . . . .May 1999

Banks Buy Congress:
Full House Passes HR 833,
Bill to Restrict Bankruptcy

The lesson to be learned from HR 833, a bill to horsewhip bankrupts, is that money talks. Lenders have invested tens of millions in a lobbying campaign to buy a bankruptcy bill. Our representatives consider that banks make a lot of campaign contributions. Bankrupt consumers send no money to Congress. So guess who is winning?

Congressman Donald Payne of Newark gets a "hero" button since he was the only Representative from N.J. to vote against the monstrosity. Senator Torricelli is a sponsor of the "moderate" Senate bill, which merely puts the bankrupts in the stocks.

Why is HR 833 so bad? The bill does nothing to stop the main cause of bankruptcy: lenders send out four billion pre-approved credit cards each year. The bill is hypocritical because it would force the middle class into payment plans which the average bankrupt has no chance of paying. Current law gives consumers incentives to choose a Chapter 13 payment plan. HR 833, by expanding the list of debts which must be paid 100%, makes these payment plans impossible. A study by Creighton University professors, available at, shows that only 4% of bankrupts can pay 20% of their debts in a 5 year plan. So 96% of actual bankrupts are justly in Chapter 7.

The real agenda of lenders is to place so many obstacles in the way that consumers get no protection from the U.S. Bankruptcy Court. First, everyone would have to make a useless trip to nonprofit credit counseling agency, who have no capacity to take on an additional million clients per year. If you can't get an appointment, too bad, no bankruptcy for you.

HR 833 has a "fairy tale" world in which debtors are not allowed to tell the Court what their real-life monthly expenses are. Rather, expenses will be set by an arbitrary IRS list (one set of expenses for all!). Payment plans which do not measure the debtor's actual expenses are bound to fail— how can the debtor pay without actual dollars? In another hypocrisy, high-income debtors can deduct $10,000 of grade-school tuition per year! Educational IRA accounts of up to $100,000 would be exempt! But HR 833 intends the payment plans to fail, so banks get to sue the debtors all over again.
HR 833, to please credit card lenders, would send into Chapter 13 payment plans persons above the median family income levels. HR 833, to please the mortgage lenders, has made it near impossible to finish a payment plan to save your home from foreclosure! HR 833 intends failure then foreclosure. Section 130 of the bill seems to state that all the debtor's payments must be paid to unsecured creditors! This would leave nothing to catch up on mortgage arrears and car payments!

HR 833 hurts tenants by making it very easy for landlords to evict bankrupts.

HR 833's unprecedented and unconstitutional idea would fine attorneys for the debtor simply if a debtor filed Chapter 7, then was transferred to Chapter 13. Favored creditors would not get fined unless their motions were "substantially unjustified."

The bottom line on HR 833 is involuntary servitude for the debtors, and the transformation of the U.S. Bankruptcy Court, from a former protective refuge, into the private collection agency of the banks who bought Congress.

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