Pretty strong words, from someone who admitted that she approached the required class with low expectations.

She announced that she intended to get her child and her step children to watch the class as well, so they go out into the financial world well prepared to deal with money and credit.

The bankruptcy “reform” act of 2005 did little good for debtors or bankruptcy law or practice, but debtor education is a winner.

• Notices of foreclosure sales must be single handedly supporting my local newspaper, the Mercury News.
• AP and the NYTimes write with amazement that mortgage loan modifications aren’t happening.
• The Mortgage Bankers write letters to the editors opposing a bankruptcy solution to the housing debacle.

Meanwhile, the average income of people through my door  has to have increased $75K a year in the past four months.  Bankruptcy now looks good to people making well over $200,000 a year.

The formerly well to do are following more and more long established small businesses that have hit a wall.

The news tells us the recession is ending;  if that’s so, the casualties will persist long after  the economy is supposedly recovered.

Credit card merchant fees are a much bigger piece of the small business expense picture than are taxes for most of my clients.  Each merchant pays a percentage of each credit transaction to the card issuer.   7-Eleven store owners are petitioning  Congress for regulation of the fees charged merchants  by the card issuers .

Everywhere you look you see the impact of credit cards on the economy.  Often it’s suit by American Express that brings a small business owner to my office.  Or the businessman makes a list of their credit card debt and the interest rates after the recent round of increases and realize that they can never pay off the debt at 28% interest.

I’m certainly not an economist and don’t have a Moran Plan for reinvigorating the economy, but the people I see in trouble aren’t there because of their tax burden.

Often, the business has been supported on the credit cards of the business owner, so the solution is a bankruptcy filing for the shareholders, freeing the business of servicing that debt.  I can’t tell if that will be enough, but often a small business can survive when relieved of the debt service from the past.

The trend, though, is ominous when you look at the economic health of the country.

What they don’t explain is why this very same power to modify mortgages has not crushed the market for rental property, second homes, and commercial buildings. A bankruptcy plan can, today and for decades past,  change the terms of a loan on any of those kinds of property. Last I looked, the world was still turning.

The prohibition on altering the terms of a home loan is a 1984 addition to the bankruptcy law enacted in 1978. It is a special carve out for the home lending industry. Congress was told that it was necessary to promote home ownership. Perhaps a change is necessary to preserve home ownership.

My veterinarian father used to say that a goose is so stupid that it wakes up in a brand new world every morning. He probably didn’t know any lobbyists.

Should I thwart efforts to bail out my next door neighbor who was foolish because it rewards the fool, and gives me nothing?

Personally, in these circumstances, I am not offended by mortgage bailouts.  Seems to me to argue that the improvident (or the simple) should pay the price by loss of their homes to preserve the high moral ground for those who didn’t succumb  is short sighted.

If my neighbors lose their homes in foreclosure, the value of my house goes down.  If several neighbors lose homes, I’m neighbor to the bank’s REO department and the neighborhood becomes at best less sociable, at worst, less safe.  I don’t count on the bank in the house next door to loan me a cup of sugar.

The beauty of the bill to permit judicial modification of home mortgages is that it costs the taxpayer nothing; preserves families and neighborhoods; and merely recognizes the loss in home value that the homeowner and the lender have already experienced.

I’m perfectly OK with that.

This blog got its start when bankruptcy “reform” legislation was under consideration in Congress and I had heartfelt views about the defects of the proposed changes.  Bankruptcy in Brief has attempted for 10 years to be objective and informative.   I needed to advocate, and thus on the Bankruptcy Soapbox was born.

Yesterday, S. 2136 was introduced in the Congress, which would enable bankruptcy judges in Chapter 13 to modify mortgages on people’s homes. The experience of most all professionals in the housing world is that voluntary loan modifications are infrequent and inadequate.  Extending  the mortgage cram down provisions to homes would utilize the existing infrastructure of the bankruptcy courts to make meaningful modification possible, under court supervision.

My colleague Carmen Dellutri recounted the history of the mortgage modification provision, which prior to the current meltdown, was defeated by the arguments of the mortgage bankers.  They asserted, falsely it appears, that to do so would increase everyone’s mortgage interest rate.  Prof. Adam Levitin of Georgetown University Law Center   analyzed that claim and found it baseless.

(One might also ask, why should the mortgage bankers, who had a large hand in bringing the American economy to its current strait, have any credibility on this issue?   But, it seems, they are wrong as well as guilty, so we can move on.)

So, once again I’m calling on the interested public to contact their representatives in Congress.  Voice support for this change and urge your Senators and Members of Congress to pass this bill immediately.  Every day without it, more families lose homes to foreclosure.

• Project calm
• Work hard to hone my skills
• Share what I learn
• Stay healthy since it will be a long haul

My hopes are that hard times will reset our personal and societal values, so that “things” and personal consumption will recede in importance in favor of family, friends, and community.

Perhaps we come to understand that the things that taxes buy us are, by and large, positives:  better schools, roads without potholes, bridges that don’t collapse, decent care for the unfortunate.

Maybe even we come to value living below our means and taking responsibility for retirement.

Since my magic wand is out for servicing this  week, maybe it’s enough to hope for clients who will come organized and prepared to help me help them.

The cost of living in the Bay Area is some 150% of the national average; our salaries are higher, but not 150% higher. The vital, start up, high tech, high risk economic climate makes huge winners of some, and economic losers of others. The availability of credit cards and the energy with which those cards are marketed have made it easier to mask the fact that a middle class life is more expensive than some can afford.

The other issue that makes credit card debt so poisonous is that it bears interest that a generation ago would have been criminal. California concepts of usury generally prohibit individuals from charging more than 10% on loans, yet banks can regularly charge twice that to borrowers in good standing and twice that again to borrowers in default. The FRB proposed rules don’t deal with that issue.

At base, the problem with an indebted middle class is more profound than accounting rules on how payments are to be applied will solve.

This “equity”, the increased value in the surrounding homes, never would have existed had it not been for mortgage lenders passing out money like flyers at a rally. It was artificial from the beginning.

The correction is painful to those who bought or borrowed at the top, but the top was a man- made illusion.