Bankruptcy Article of the Week
Democratic Candidates on Bankruptcy Reform: An Analysis of Last Week's Debate in Nevada
After spending the first portion of the January 15th Democratic presidential candidate debate in Las Vegas laboring over questions of race and gender, the big three – Hillary Clinton, Barack Obama and John Edwards – addressed an issue close to our hearts: bankruptcy reform.
In actuality, bankruptcy reform has proven to be an issue close to the hearts of Nevadans. Court records examined by Automated Access to Court Electronic Records (A.A.C.E.R) show that Nevada had the highest year-over-increase in bankruptcy filings in 2007. There were approximately 10,666 bankruptcy filings in Nevada last year, marking a 110 percent increase from 2006.
So with an audience eager to hear how the candidates would address the problems with the economy and current bankruptcy law, Russert first addressed Edwards on the matter. After Russert rattled off some statistics, including how 5 percent of credit card debts are now delinquent and that bankruptcy filings were up 40 percent last year (Russert failed to comparatively note how 2006 filings were down in wake of the mass filings prior to the Bankruptcy Abuse Prevention and Consumer Protection Act's enactment on October 17, 2005), the moderator from NBC's excellent Meet the Press brought up a questionable part of Edwards' past.
Edwards' Bankruptcy Voting Record Gets Called Out!
Russert noted how Edwards voted for the 2001 bankruptcy bill, the precursor to 2005's fateful BAPCPA, which we all know made filing bankruptcy more difficult, and then asked the former U.S. Senator and candidate for Vice President whether he regretted that vote.
In polite terms, Edwards' response to the question was less than satisfactory. While quickly saying that he did in fact regret that vote and shouldn't have voted for the bill, Edwards did what any crafty and experienced politician would do when posed with an uncomfortable question: he deflected it without explaining why he was wrong.
Edwards noted a recent National Consumer Bankruptcy Project finding which stated that nearly half of all bankruptcies are the result of medical costs and then strategically went into his campaign message of being a champion for the working class.
After noting the struggles of the middle class—including rising costs for nearly everything while incomes remain unchanged—Edwards addressed various ways in which he would help struggling Americans, including:
- championing universal health care;
- developing a better energy policy (which would spur on more jobs);
- raising the minimum wage from $7.25 to $9.50 an hour; and
- making college more affordable for students.
Clinton's Take on Bankruptcy Reform
Following Edwards' various suggestions on how he would improve the economy, Russert then put Senator Clinton's bankruptcy voting record under the spotlight. After noting that Clinton voted on the 2001 bankruptcy bill and how Edwards admitted it was a mistake, Russert asked the former first lady if she regretted her vote.
Clinton did admit her regret for voting on the 2001 bill but then added how that bill never became law (leaving one to wonder how that mattered; Clinton still voted in favor of it!).
In Clinton's defense, she provided a better explanation than Edwards in explaining her vote for the bill. She noted how she agreed with some things in the bill and disagreed with others and then shrewdly pointed out how she opposed the 2005 bankruptcy bill.
From there, Clinton expressed an urgent message for bankruptcy reform, hitting on her previous suggestions for a 90-day moratorium on foreclosures, freezing interest rates for five years, and making the actions of mortgage lenders much more transparent. Clinton pointed to the recent Countrywide fiasco as a perfect example of her last point.
Clinton then actually talked about a problem with current bankruptcy law: people victimized by subprime loans and predatory lending are struggling to get relief from such debt. In addition to indicating that bankruptcy law needs to protect such people, Clinton finished off by once again expressing the urgency for action by noting how minorities (she specifically referenced African American and Hispanic communities in Nevada) are disproportionately affected by these issues and then stating that another million Americans will lose their homes to foreclosure.
Obama Personalizes the Need for Bankruptcy Reform
When his turn came to address bankruptcy reform, Senator Obama stated how he opposed both the 2001 and 2005 bankruptcy bills because they were both the work of special interest groups like banks and financial institutions. Obama then detailed how these bills are typical of current Washington politics and divulged the need to rid the influence of special interest groups in the nation's Capitol.
Obama then went into detail about how he's already addressed this issue by proposing a bill a year and a half ago that would modify predatory lending practices and recently pushing forward a $10 billion housing fund to help people who have traditionally made their mortgage payments but have fallen on hard times.
Like Edwards and Clinton, Obama addressed the relationship between bankruptcies and health care, and the consequent need for change; however, he did so in a different, more personal light by telling the story of a Nevada woman he recently met on the campaign trail who can't pay her mortgage because of the medical costs that her police officer husband incurred after contracting cancer and getting hit by a car in the line of duty.
So What Did We Learn in Nevada?
So how did the candidates fare when discussing bankruptcy reform? While they all did a sound job of connecting the issues of bankruptcies and health care, Clinton and Obama were more specific in addressing bankruptcy reform while Edwards took a more holistic approach to the question, proposing some interesting ideas along the way but not offering nearly enough specific information about bankruptcy law.
With that said, they all were effective in using the question of bankruptcy reform to advance their respective political messages: Edwards as champion of the working class, Clinton as an instrument for immediate change, and Obama as this fresh face from traditional Washington politics.
If you did not see last week's Democratic Presidential Candidate debate on bankruptcy reform, watch it here (note that the discussion on reforming bankruptcy begins around the 6:35 mark and extends into Part Six of the debate).
Please feel free to share your opinions on the debate at newsletters@startfreshtoday.com.
Examining Tax Relief Plans
On January 18th, President Bush proposed a temporary, broad-based tax relief package as a means to stimulate the economy.
While Bush did not divulge any of the specifics of his plan, some believe that it will be very similar to what administration officials and Republicans have been favoring: a proposal offering rebates of up to $800 for individuals and $1,600 for families as long as they paid that much in taxes last year.
Such a plan has drawn the ire of Democratic presidential hopefuls Clinton and Edwards, who have both said that it excludes those who need help the most: low-income people.
Analysts of the Republican plan have said that families of four with an income of $24,000 would not receive any government payments while families with incomes below $40,000 would only receive partial payments. On the contrary, households with an income of $100,000 or more could get $1,600 back, according to these same analysts.
In contrast, Senator Obama has already proposed a $90 billion program of rebates and supplemental Social Security payments that his advisors say will reach 95% of all workers. Under this plan, all working adults would be offered $250 in government payments, with the potential of $500 payments if the economy worsens, while people receiving Social Security benefits would receive up to $500 in government payments.
Did You Know.
that the Tennessee State Board of Education will vote this Friday on a policy that would require high school students to take a personal finance class?
The proposal, which is expected to pass, comes in a state that had the most bankruptcy filings per capita in 2007. More specifically, there were 38,891 total bankruptcy filings in Tennessee last year.
According to a National Council on Economic Education survey, at least seven other states offer similar courses. Topics typically covered in this personal finance class include investing, credit cards, balancing a check book and other record keeping techniques. Local districts would specifically determine when Tennessee students would have to take this class in high school.
With all this considered, what are your opinions on personal finance classes for high school students? Shoot us your comments and responses to newsletters@startfreshtoday.com, and perhaps we'll share some feedback in a future newsletter.
Kevin's Corner
Practice Management Tip of the Week:
Employee Incentive Programs
"Because you can't answer every phone call or sign up every client to your law firm, you need to make sure that your employees have a stake in treating your potential business the same way as you would treat it.
"Starting an employee incentive program is a great way to make your attorney and non-attorney employees feel more invested in your business. By tying your employees' compensation in some way to how they perform, an incentive program which is creative, challenging and even fun can motivate your employees to go beyond doing just the norm.
"Perhaps your employee incentive program consists of giving non-attorney staff members an incentive each time they set up an appointment and that person shows up in your office.
"Maybe it's paying your attorney employees based on a percentage of collected revenue, thus motivating your attorneys to not only sign up clients but to also make sure that they get clients to make payments, whether it's stressing this at the time of sign-up or reminding clients to use payment envelopes.
"Perhaps you start a contest in which employees are incentivized based on who has the highest ratio of set appointments to show-ups or actual sign-ups.
"As long as your incentive programs are ethical—for example, you can't pay non-attorney employees on whether or not a client is retained—you will find that there is plenty of room for creativity and collaboration on your part.
"And don't forget the cross-marketing possibilities that may exist with a well-thought-out incentive program—you could pay $50 to an employee every time he identifies a workers' compensation case that could be referred to another attorney.
"As you may very well find out, getting employees fully invested in your business because they have a direct financial incentive rather than just collecting the same, regular paycheck may not only be a great motivator but also a boon to your bottom line, employee morale and overall job satisfaction."
- Kevin Chern
President, Start Fresh Today
The Numbers Game
There were nearly 819,000 total bankruptcy filings in 2007, according to A.A.C.E.R.
And according to a recent story in The New York Times, Mark Zandi, the chief economist of Moody's Economy.com, expects bankruptcy filings to surpass the one million mark in 2008.
The Numbers Game, Part II
In the two weeks since our last newsletter, news reports have provided some interesting information on the state of the economy.
Here's a refresher:
- Just yesterday, the U.S. Federal Reserve Bank cut the interest rate for federal funds from 4.25 to 3.5 percent in an effort to ease the market and housing crunch.
- The Mortgage Bankers Association detailed in a January 17th report that approximately 13,000 of the 54,000 loans modified in the third quarter of 2007 were on subprime loans. That report also detailed that 384,000 borrowers began the process of foreclosure in that period.
- Federal Reserve statistics from early January revealed that U.S. consumer debt rose $15.4 billion in November to $2.51 trillion overall. In comparison, consumer debt rose by $2 billion in October.
On the Bankruptcy Calendar
Here a few bankruptcy events in the next couple of months to keep on the back burner of your mind:
- NACBA Members-Only Capitol Hill Meeting
(Jan. 29-30, Washington, D.C.) - ABI's 13th Annual Rocky Mountain Bankruptcy Conference
(Feb. 14-15, Denver, Colorado); - ABI's 16th Annual Bankruptcy Battleground West
(Feb. 22, Santa Monica, California); - ABI's 26th Annual Spring Meeting
(April 3-6, Washington, D.C.); - University of Illinois College of Law/ABI "A Debtor World Conference"
(May 2-3, Urbana, IL); and - 16th Annual NACBA Convention
(May 16-18, Los Angeles, CA).
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