Thursday, March 03, 2005

Good Lord -- it's as if we're watching It's a Wonderful Life II: This Time Potter Wins:

 ...Mostly along party lines, the GOP-controlled Senate voted 59-40 [yesterday] to reject an amendment that would have granted to older people special homestead exemptions to keep their homes when they file for bankruptcy. Such exemptions now are determined by the states.

Also rebuffed, 58-39, were two proposals focused on people whose significant medical expenses for illness force them to file for bankruptcy. The first would have allowed them to keep at least $150,000 of the equity in their primary residence. If, in addition, the medical bills exceed 25 percent of the person's income, the second proposal would have exempted the person from a new test in the legislation measuring income and assets of bankruptcy applicants to determine if his or her debts can be discharged.

By another 59-40 tally, the Senate defeated a Democratic proposal to require that credit card statements show how long it would take a consumer to pay off a debt by making only minimum monthly payments.

It was the second day of defeat for Democratic amendments to the sweeping bill to overhaul the bankruptcy code. On Tuesday, the Senate accepted a more limited GOP provision that would give a break to active-duty military personnel and some veterans who file....


Oh, but as Gretchen Morgenson reported yesterday in The New York Times, not everyone is being cast out into the cold -- everything's copacetic if you're rich: specialists say the proposed law leaves open an increasingly popular loophole that lets wealthy people protect substantial assets from creditors even after filing for bankruptcy.

...since 1997, lawmakers in five states - Alaska, Delaware, Nevada, Rhode Island and Utah - have passed legislation exempting assets held domestically in [asset protection] trusts from the federal bankruptcy code. People who want to establish trusts do not have to reside the five states; they need only set their trust up through an institution in one of them.

"If the bankruptcy legislation currently being rushed through the Senate gets enacted, debtors won't need to buy houses in Florida or Texas to keep their millions," said Elena Marty-Nelson, a law professor at Nova Southeastern University in Fort Lauderdale, Fla., referring to generous homestead exemptions in those states. "The millionaire's loophole that is the result of these trusts needs to be closed."...

This loophole actually protects people who run huge companies in a sleazy way:

Asset protection trusts have become increasingly popular in recent years among ... corporate executives, whose assets are at greater peril now because of new laws. The Sarbanes-Oxley legislation, for example, requires chief executives and chief financial officers to certify that their companies' financial statements are accurate; anyone who knowingly certifies false numbers can be fined up to $5 million. In addition, under Sarbanes-Oxley, executives may have to reimburse their companies for bonuses or other incentive compensation they received if their company's financial reports have to be restated in later years.

"Given all the notoriety of what we're seeing today, from HealthSouth to WorldCom, there is probably more of an impetus for executives to consider going this route," said Scott E. Blakeley, a lawyer at Blakeley & Blakeley in Irvine, Calif. "And yet in the bankruptcy bill, this topic is not touched."...

The vote totals make it clear that some Democrats are signing on to this -- but remember, a bill like this one simply wouldn't be a top agenda item if Democrats ran Congress. This is why we have to be very, very careful about rooting for Joe Lieberman to have a primary challenge -- in the long run, sure, but not now, not until Democrats are the majority. In fact, instead of eating our own (even just the ones who deserve it), we really need to concentrate on going after vulnerable Republicans (even the ones who seemingly don't deserve it, like the ladies from Maine).

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