Homestead mailing list

[Gene GeRue <genegerue AT ruralize.com>]

I'm going to go out on a limb here and presume that most of the members of 
the homestead list are not millionaires. If that is the case, then please 
write to your elected representatives and tell them you are fed up to here 
with the favoritism handed out to rich people at the expense of the common 
people. The pending bankruptcy legislation seeks to ignore the condition of 
our military personnel--often preyed upon by clever salespeople, 
check-advance people, insurance people, and more--and give big-time 
preferential treatment to millionaires.
        
Proposed Law on Bankruptcy Has Loophole
By GRETCHEN MORGENSON

Published: March 2, 2005
The bankruptcy legislation being debated by the Senate is intended to make 
it harder for people to walk away from their credit card and other debts. 
But legal 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.

The loophole involves the use of so-called asset protection trusts. For 
years, wealthy people looking to keep their money out of the reach of 
domestic creditors have set up these trusts offshore. But since 1997, 
lawmakers in five states - Alaska, Delaware, Nevada, Rhode Island and Utah 
- have passed legislation exempting assets held domestically in such 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."

Yesterday in Washington, Republicans in the Senate beat back the first in a 
series of Democratic amendments aimed at softening the effects of the 
bankruptcy bill on military personnel, and the majority leader of the House 
vowed to get quick approval of the bill if the Senate did not significantly 
alter it.

"We will grab hold of it just like we did class action if it is a good and 
clean bankruptcy reform bill," said Representative Tom DeLay, a Texas 
Republican, referring to the quick action the House took last month on a 
measure limiting class-action lawsuits.

The Senate bill is favored by banks, credit card companies and retailers, 
who say it is now too easy for consumers to erase their debts through 
bankruptcy.

It is almost identical to previous versions that have been introduced in 
Congress, unsuccessfully, since 1998. Perhaps because the current bill was 
written so long ago, some legal authorities say, it does not address the 
new state laws that have allowed asset protection trusts to flourish.

"This is just a way for rich folks to be able to slip through the noose on 
bankruptcy, and, of course, the double irony here is that the proponents of 
this bill keep pressing it as designed to eliminate abuse," said Elizabeth 
Warren, a law professor at Harvard Law School. "Yet when provisions that 
permit real abuse by rich people are pointed out, the bill's proponents 
look the other way."

Senator Charles E. Grassley, an Iowa Republican, is the main sponsor of the 
bankruptcy bill. His press secretary, Beth Levine, said the senator's staff 
was unaware of the trusts and the loophole for the wealthy that they 
represented. "The senator is always open to suggestions for closing these 
loopholes," she said.

Money held in asset protection trusts can elude creditors because federal 
bankruptcy law exempts assets governed by "applicable nonbankruptcy law." 
Intended to preserve rights to property under state law, the exemption 
makes it difficult for creditors to get hold of assets that they would not 
be able to seize through a nonbankruptcy proceeding in state court.

Asset protection trusts have become increasingly popular in recent years 
among physicians, who fear large medical malpractice awards, and 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.

The rest of the article is at:
http://www.nytimes.com/2005/03/02/business/02bankrupt.html