Chapter 1 Featured Submissions

The following is one attorney’s review of the 2005 Backruptcy amendments and their real purpose in helping the banking and credit card industry to subvert the original purpose of this law:

The 2005 Bankruptcy Amendments
A Law Passed for the Rich People, by the Rich People

News Report (8/26/2010): Bankruptcy filings are up, the highest since 2005 when the Bankruptcy Code was amended to make it harder for all the little people to file.

The reference to 2005 is made without any explanation, but with things out here going from worse to downright awful, it has to be examined.

Was the Bankruptcy Code so broken before 2005 that it needed an overhaul?

Absolutely not.

From 1989 to 2005 I worked on loads of business and consumer bankruptcy cases. The system worked well. People needed financial relief, and that need grew more and more as time went on. The United States Trustee’s Office, the bankruptcy cops, did a good job at spotting abuse and acting on it.

Abuse, such as hiding assets and understating income, was rare.

The reason for this was that most people filing for protection did not have any assets. One cannot commit fraud if one has no money with which to behave in a fraudulent fashion. These people did not game the system. They were all just broke, and needed a new start.

They were not committing abuse, but rather were seeking protection from it.

So why did the law change in 2005? Who changed it? More specifically, (which) elected officials got paid by the credit card industry while drawing a salary from us, to make the changes?

People filed in 2005 to get in under the wire, to get bankruptcy relief before the changes made it much harder to walk away from a financial disaster. The changes were designed to make people enter repayment plans under Chapter 13, rather than for liquidation under Chapter 7.

The premises for the changes were several, all pushed by the credit card industry.

First, the lending industry successfully sold Congress on the notion that the law should presume that people out there were committing bankruptcy fraud.

Second, the lending industry shelled out 100 million dollars lobbying for the changes.

Bankruptcy reform had been kicked around for a decade before 2005, but no one was really biting. Unless you were a big business looking to reorganize in a Chapter 11, nobody in the world cared.

The poor regular working family, so behind that they needed a Chapter 7 case, was and still is perhaps the most little noticed event imaginable, except to the credit card industry.

Up until 2005, these unneeded reforms had also been sidetracked by sheer idiocy.

For example, one of the biggest holdups to passage of any reforms had been an annual fight over whether damages awarded in connection with violence at an abortion clinic would be dischargeable under the reformed Code.

Every year I would read this and wonder what kind of idiots worry about such things? Whether you favor or oppose abortion, this type of award happens infrequently. Someone with the gumption to shoot up an abortion clinic is extraordinarily rare. Nevertheless this issue, which had nothing to do with the reasons people file for bankruptcy protection, stalled the reforms year after year.

So who passed it?

The millionaires in Congress finally concluded, with the credit card industry’s urging, that poor people should be forced into repayment plans. They did so only two years before our economy entered a depression in which more people than ever would need relief of some sort.

One of the main sponsors of the reforms was some Congressman named Jim Sensenbrenner from Wisconsin.

From what I read about him, he looks like a pretty rich guy who, just maybe, might be a little out of touch with the plight of the ordinary poor American citizen. In fact, someone like old Jim will probably never meet people whose lives are so wrecked that they need to file.

Americans who are so pressed that they need to file for bankruptcy protection do not hang out at country clubs like Jim’s and millionaires’ clubs like Congress. That is because they don’t have the money or time to golf and don’t have a million dollars.

Aristocrats in Congress helping aristocrats in the lending industry by squeezing the last few bucks out of impoverished bankruptcy filers. It’s a beautiful thing when people help each out like this, isn’t?

Maybe Congress can help us out America just a little bit now, and repeal one of the most unnecessary, poorly thought out, badly timed legislative moves of all time.

G.K., Pennsylvania, USA

The following piece is being shared with us by a former banker and author-in-the-making. Called “Diatribe – A Scathing Journey into the Heart of the Corporate Financial Circle.” it is presently being circulated among editors and agents for publishing.

Our good luck – to capture the author’s attention and, by way of this submission, see that Written Off – America and Americans lives up to its goal of being “crowd-sourced.” We promised to welcome a wide variety of wisdom sources into our pages – always from knowledgeable people with something significantly personal to say. Here is the first fruit of that promise. Enjoy.

“If we’ve arrived at a stage where the write-offs of our worth, the fabric of our economic system, and of moral-equity have come to pass, then it’s not possible to arrive here without a subversion of principles and ideals that have served the citizens of the United States for almost two centuries.

This can be attributed to two factors.

The first has to do with how ideals and principles have evolved during a two-decade era of immense economic activity.

The second has to do with the sense of responsibility of the individual.

Both are crucial, and the subversion of one of these dimensions will almost always affect the other. I will focus on the first one which relates to my professional experience as an analyst and planner in the banking/financial community.

The immense fallout in the Great Recession of 2008/2009 has been alarming. This has been a credit crisis, a financial crisis, and an economic crisis.

I would add another dimension to it: a ‘management crises.’

It began as a ‘credit’ crisis. In 2008, my then employer, Citigroup, announced in its 2nd quarter earnings that it will be taking an $8 billion loss on its portfolio of securitized sub-prime mortgages. This ignited a conflagration across the industry as we discovered the extent to which sub-prime was woven into the fabric of the credit markets.

A few quarters later Citigroup had racked up $58 billion in sub-prime related losses—the industry suffered $500 billion. This in turn ignited a wider economic fallout. The natural question was: How can a high-risk fringe-instrument like sub-prime that catered to high-risk borrowers become so central to our financial system?

Sub-prime was a rather large tip of the iceberg. We then learnt that the GSEs (Government Sponsored Enterprises) of Freddie-Mac and Fannie-Mae had indulged in an orgy of high-risk mortgage-products such as no-down-payment, interest-only, short-term ARMs—even a combination of these.

According to the US Congressional Budget Office, the fallout in Freddie-Mac and Fannie-Mae would cost the tax-payer around $291 billion. These numbers do not even begin to speak to wider economic problems with millions of jobs lost and the devastation in the housing market and businesses which has no doubt caused significant damage in the enormous trust the public places in our government and business leadership.

These problems emanate from the subversion of principle and the fundamental laws that uphold it.

My former employer was at the forefront of the lobbying effort to repeal the Glass-Steagall Act that was instituted as a clear and determined step to prevent another Great Depression by sequestering street-banking, insurance and investment-banking from each other. 

 This repeal allowed Wall Street to reintegrate these fundamentally different segments of finance.

Citigroup then went on to manufacture high-risk portfolio vehicles called Structured Investment Vehicles (SIVs) that concentrated credit card and sub-prime debt. Investors as well as banks were able to subscribe to these vehicles.

The proponents of this scheming argued that since this debt was now taken off the books of banks and lenders, and subscribed by multitude of investors, the risk was well diversified and we could push the envelope and increase the portion of US household debt.

This activity was small in comparison to the expansion of high-risk mortgage debt perpetrated by Freddie Mac and Fannie Mae. If economic activity is based on the expansion of consumer debt, then not only is this flawed planning, fictitious economic-growth, but it has compromised the economic integrity of individuals and households.

Such a lapse had occurred because too many CEOs from Wall Street have been handed the reins of the Deptt. of Treasury and the Federal Reserve.

For example, the former Secretary of Treasury, Robert Rubin (also a former Goldman Sachs Chief) was recruited by Citigroup and is accredited with infusing the campaign to repeal Glass-Steagall.

The issue with Freddie Mac & Fannie Mae is similar. Permitted to operate as private enterprise, their executives rivaled the compensation packages of Wall Street CEOs; they pursued profit at the expense of the public trust.

Government subsidies and tax payer dollars made their way to lascivious lifestyles in a saga of corruption at the helm of the free and civilized world. Former Fannie Mae CEO Franklin Raines took in $91 million in compensation between 1998 and 2003.

Even as late as 2009, the compensation of Freddie & Fannie executives was around $19 million. This is evidence of the moral deficiency of business leadership, dysfunction of government, and the robbing of public trust.

I don’t see how, under these circumstances, we can afford to sit back and hope for the best.”

-Excerpt from “Diatribe,” a book-in-process by Amer Chaudri.
More about Amer at: or on Twitter.

And finally, here is a new submission we received in October of 2011. The conclusion is particularly interesting, as the debt trap has humbled many of us to the point where we are happy living within certain limits.

“At the age of 22 I had a credit score of over 700, I had two credit cards that I rarely used and always paid at least 60% of the balance each month. Also at the age of 22, I got married to a soldier who had no credit, no car, and no concept of managing finances. Naively, I created joint checking accounts for us, and obtained one more credit card so that we could have more benefits through our military bank. This gave us $22,000 in available credit…which did not stay available for long. During the course of a 4 year marriage, there were 2 deployments and 1 permanent change of station which lead me to taking a teaching position at a $7,000/year cut in pay. The debt piled up and was all in my name. In 2009, at the age of 26, I found myself abandoned by husband who had just returned from deployment. He had maxed out all the cards and completely drained our joint checking account. Faced with the prospect of no job, as the school year was over and I was not staying anywhere near his duty station, I filed for divorce and moved back in with my parents. I tried with all my might to pay my bills, but was left with no choice but to file for bankruptcy. The divorce finalized in mid 2009, the bankruptcy finalized in mid 2010, I am now completely rebuilding my credit. My score was 524 only a year ago, and has gone up just over 100 points. I have a secured credit card which is helping me slowly rebuild my credit. I have a $225 limit and I think that is just fine.

-Therese, Tulsa, OK, USA