To: "homestead AT lists.ibiblio.org" <homestead AT lists.ibiblio.org>
Subject: [Homestead] Self-service and more payback to big contributors by the DC Whorehouse
Date: Wed, 02 Mar 2005 05:28:02 -0700
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.