I was lucky enough to be invited to the Presidential Bill Signing Ceremony for the Bankruptcy Reform Legislation on Wednesday, which turned out to be a real treat. After eight years of seeing defeat clutched from the jaws of victory, I half expected that the President would get lost on the way over or that the pen would run out ink while he was signing it. But everything went off without a hitch and it was quite a festive occasion. Needless to say, I was the only law professor in the room, but it was sort of funny seeing about 3 generations of Senate and House staffers who had worked on the bill over the past many years.
I thought the President’s remarks at the ceremony were right on target:
Our bankruptcy laws are an important part of the safety net of America. They give those who cannot pay their debts a fresh start. Yet bankruptcy should always be a last resort in our legal system. If someone does not pay his or her debts, the rest of society ends up paying them. In recent years, too many people have abused the bankruptcy laws. They’ve walked away from debts even when they had the ability to repay them. This has made credit less affordable and less accessible, especially for low-income workers who already face financial obstacles.
And he concluded:
America is a nation of personal responsibility where people are expected to meet their obligations. We’re also a nation of fairness and compassion where those who need it most are afforded a fresh start. The act of Congress I sign today will protect those who legitimately need help, stop those who try to commit fraud, and bring greater stability and fairness to our financial system. I’m honored to join the members of Congress to sign the Bankruptcy Abuse Prevention and Consumer Protection Act.
The Washington Times also noted yesterday that 73 Democrats voted in favor of the bill in the House, one of the more bipartisan bills among the important pieces of legislation enacted so far this session.
I sat next to a man and his son who own a small family-owned lumber store in rural southern New Jersey (250 residents in their town). The father testified before the National Bankruptcy Review Commission almost 10 years ago in favor of reform. They said that for their small family-owned business, losses due to bankruptcies often determines whether they turn a profit or end up losing money in any given year. They also talked about the unpredictability that they now face in trying to determine whether a consumer is going to end up buying lumber from them on credit (say to build a new deck) only to end up stiffing them in the end by filing bankruptcy. A consumer who buys $500 worth of lumber then doesn’t pay up is a big loss for them, and it isn’t that easy for them to just raise prices to offset it when they are competing against rivals like Home Depot and Loews.
A timely reminder that Citibank isn’t the only creditor affected by this legislation rebalancing the consumer bankruptcy system.
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