LOOKS LIKE TROUBLE
Ed Barna
One of my journalistic duties, for the past 15 years or so, has been going to the U. S. Bankruptcy Court in Rutland to scan the information on filings and find any related to businesses. (Vermont Business Magazine publishes these monthly because it can be of importance to ongoing businesses if they are not going to be paid by debtor or they are no longer going to be able to count on that business for services or supplies.)
I’m glad of the chance to see downtown Rutland, usually, but going over the case reports never fails to hurt. Jimmie’s auto shop, Tammy’s day care—the courage to take risks, the hard work, now declared to the world to have not been enough. Bigger companies adding to the unemployment rolls. And the number of the filings that come from northern Vermont, from “the real Vermont.” One time I was combing through the cases when a lawyer came in and began working on something from his satchel. I said to him, “Can’t you fine legal minds devise a class action bankruptcy suit and put the whole Northeast Kingdom through at one time? It would save everyone a lot of trouble, and probably half the debts would cancel out.”
The only response was a sardonic smile. Working in bankruptcy court is like working in a hospital: no matter how many times you are reassured that certain conditions aren’t contagious, you can’t help but wonder. People I knew in high school have gone bankrupt, why not me, too? One current saying is that anyone in the middle class is only one serious illness away from bankruptcy (divorces and layoffs are two other main factors, and credit card debt makes almost all of the situations worse). Ring true for you?
Extracting the business bankruptcies took longer than usual this month. To do it, I need to give each case at least a cursory review, and from July 16 through August 15 there were 84 of them. I tried multiplying that by 12, to get the yearly total if things continued at that rate for another 11 months, and got the figure 1,008. Businesses? More filings last month than I’ve seen since the new bankruptcy law took effect.
That law was signed by President Bush in April of 2005 and went into effect in October of 2005. In between, the Rutland court saw the largest surge in filings ever, as people tried desperately to come under the provisions of the old law. Hailed by its promoters as “The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,” and characterized by associations of judges, lawyers, elders and advocates for those of lower income as “punitive,” “mean-spirited,” and “written by the credit card industry,” the new provisions succeeded in choking off what had been a rising tide of bankruptcies. After October 17, it was like right after 9-11, for those of us familiar with the court—it felt like the emptiness of the sky when all commercial flights stopped.
To have filings coming in now at the 1,000-a-year level, despite the higher fees (debtor pays) and required credit counseling (debtor pays) and inflexible paperwork requirements (debtor pays more) and reduced exemptions (credit card companies get paid), was shocking. It tells me that America’s radical division of income between the wealthy and the woeful, now as severe as the disparities we used to criticize in Latin America, has become like those corroding bridge supports in Minnesota.
The idea behind the BAP+CPA was to push more filers out of Chapter 7, where most debt was being liquidated, and into Chapter 13, which emphasizes a five-year repayment plan for anyone capable of paying a portion of their debts. I have never heard a good explanation of what happens if someone can’t make their repayment plan payments. They can’t declare bankruptcy again, at least for seven years. We already have a greater proportion of our population behind bars than any other industrialized country. My guess is that a lot more people will give up trying to make something of their lives and drift, escaping when they can into alcoholic or drug-induced stupors, now that our bankruptcy system has deemphasized the old tradition of giving people “a fresh start.”
I hope it doesn’t come to that, but I’m afraid we’re about to find out.
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