Citibank at war with its customers, BEWARE! Sioux Falls South Dakota

As Elizbeth has so aptly pointed out, yes, I have fallen into the trap, and I shouldn't have. I was ignorant about how money really works, and I have a business degree with a concentration in Finance! I did what everyone else does. I believed that the best way to build wealth was through the use of "leverage" or debt, in business, as I was taught in business school.

It is called "optimal debt to equity ratios" to maximize Return on Equity. I'm not trying to avoid responsibility, just pointing out that I've been duped, all the way from childhood to building a business that became one of the two largest companies in it's market niche. And my way of making the best of it is to help others avoid the same mistake. We are all being duped!

It is not my intention to put anyone down, only to point out a danger others may not see, and suffer as I have. Our whole system is now built on credit. Even the cash we use is based on debt - they are Federal Reserve Notes (promissory notes), based on our government's guarantee to make good on the note even though they don't have the resources to do so. Sort of like the "personal guarantees" that small business owners are required to sign on business loans they could never pay back if their business failed, because the numbers are much larger than their personal assets.

The system we founded this country on has been tampered with and completely changed. The system that worked so well in the beginning has been corrupted through continuous chipping away at the original constitution, and the ideals it was founded on. Yes, this is the system we have, but we need to protect it by using the system as it was intended - government by the people - not government by the banks.

Borrowing money for your education is certainly not as bad as buying a TV on a credit card, but it has the same net effect on the economy. There certainly is a few instances where borrowing may make you better off. However, those loans should be backed by money with real value, in a system that keeps lending in check. Not the unlimited credit available now. Also, we have forgotten how to plan ahead for major expenses. One should save for their child's education BEFORE they need it. But most people don't because they place a higher priority on buying more things now, and let the future take care of itself.

Let me give you an example to simplify the effect, that is causing our monetary system to be "built on a house of cards" as was put earlier. Suppose you had 10 shares of a stock from a public company. Those shares were worth $1 a share (for simplicity sake). The board of directors vote with shareholder approval to "split" the stock. So now you have 20 shares worth 50 cents a share. You still have the same number of dollars - the same buying power, or value.

In the case of the government and the Federal Reserve. What happens is the government has 10 dollars in the economy (for simplicity sake) and decides to loan the government another 10 dollars. So they create 10 dollars and give it to the government. Now there is 20 dollars in the economy. Your 10 dollars is now worth 50 cents, and the government just confiscated half your buying power.

What is more, the Federal Reserve is charging the government interest on that money, which the government is unable to pay since it doesn't produce anything. So the government taxes your income and your spending to pay that interest, in addition to the expenses not covered by the loan. (Did you know that the interest on the debt to the Federal Reserve Bank takes the entire amount collected by the IRS for income tax?)

So not only has the government confiscated half of your buying power, it has also passed on the cost of borrowing that money on to you, confiscating more of the wealth you produced through your labor. You are literally left with a fraction of what you earn. If the Federal Reserve Act of 1913 had never passed, this would not be the case today. Instead, the Federal Reserve now collects about one third of the income produced in the economy for money they created out of nothing. They are slowly siphoning off the wealth in the economy and redistributing it to themselves, because they control the money - not the people - as originally designed in the creation of this great country.

Eventually, the Federal Reserve Bank (a private corporation, a cartel which is the very thing it promised to eliminate in the bill that created the Federal Reserve Act of 1913) will have enough wealth to control the government and the people, and take away all our freedom and liberty.

As for being an agent for change. That is why I posted the original article. It is the kind of actions that need to be taken from the grass roots level to make a difference. I am also in the process of writing a book about the experience. Somehow, someway, people need to get this message and start taking action themselves, before it is too late. Thank you for listening.

My response is based on the assumption that you have read what I have written. If you haven't then your statement is made without the facts. Please read for your own good.

My business was built on trade credit - not credit cards. Yes, I was probably too highly leveraged, but not with credit cards. It is standard business practice to expect trade credit from your vendors, and you aren't competitive in business without offering it to your customers. I was doing high enough volumes of business that the trade credit taken from vendors, and the trade credit given to customers was staggering.

The only way out of the trade credit trap with vendors was by leaving profits invested. At one point it means I am getting a return on investment that amounts to what I could earn in a savings account. Either way, in this scenario, I would have still lost everything that I lost, and still had the credit card debt in the end, due to credit card practices - not my own. (read on for an explanation.)

This kind of leverage is standard in the staffing industry. That is my point - I could have chosen not to participate in those standard industry practices - and it would have been better to put my money in a savings account. The industry practice required that level of risk tolerance.

I learned that the industry was built on a house of cards, to put it in your terms. My problem was not with the leverage as much as the legal protections I should have been able to rely on when the house of cards fell. I was snookered by the credit card companies.

However, my point is that this type of tolerance for debt and legal scamming by the banks is the problem. You are a small business owner, and you probably have personally guaranteed loans. You are being conservative, it seems. If you are so successful in your business, you shouldn't have to personally guarantee the loans.

It is foolish to do so, period. You still have loans that are personally guaranteed. That means if all the assets in your business disappeared overnight, you'd be left with the personally guaranteed loans. Could you pay them? You will also get credit card balances racked up, if you are using them for business, because your vendors will charge them without your permission.

You'll have to personally cough up money for that. Could you still pay for overlimit credit card balances, that suddenly have jacked up interest rates and penalties beyond comprehension? I hope so, most business owners can't.

If you are in an industry where your return on investment is high, even without leverage - great - then you are in a great business. As long as you are ready for it to disappear overnight, you're set. Just don't use credit cards to facilitate purchases in your business - your vendors will take advantage of them.

My credit card debt came primarily from unauthorized charges to my credit card accounts, that had been used to make purchases during the normal course of business. They didn't "finance" the business, they simply facilitated transactions.

When the market for my services disappeared, customers stopped paying and reduced purchases to 35% of normal levels, I was naturally in a cash crunch due to the trade credit cycle. When I slowed the bill paying down, paying as cash was available, the vendors who took credit cards started charging my credit cards without my permission because they had taken the credit card for payment in the past. (A little trick called, account on file.)

That is what made me very angry. I had no idea that my cards could be charged without my permission, and then be held personally responsible for the charges - despite the fact that they were corporate accounts.

What is worse, you aren't protected under the Fair Credit Billing Act for charges on corporate accounts. So you can't even dispute the charges under normal consumer protection. You aren't considered a consumer under the law, if your account is used for business.

So my beef with Citibank has to do with the one sided laws emerging, that consumers are unaware of. I got caught by surprise, as fiscally responsible as I tried to be, given the circumstances. Then on top of that, their being completely unreasonable when it came to settlement negotiations.

If I had no net worth left, they would have left me alone, or I could have let them get their judgement. But I do have net worth left because I chose not to file bankruptcy to give it all away to the credit card companies. I chose to keep my family fed, and a roof over their heads. The whole transaction with Citibank was too harsh for words.

If you'd prefer to pat yourself on the back for a job well done in your business - great. If you want to choose to ignore the warning for your own benefit - it is to your own peril. If you think the government is working to protect the people today - you haven't been paying attention.

The middle class are paying the bill for both the rich and the poverty stricken. The rich are only the ones who have powerful influence in Washington, and they confiscate wealth from those who don't have influence. (see Alan Greenspan quote from 1966 on the Gold standard - before he was part of the Federal Reserve Board.

As an example of one way this is done. Another is seen in a quote from Woodrow Wilson after he left office.) If you aren't paying close enough attention, you will wake up one day and it will all be gone.

Alan Greenspan said in 1966, "The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit...
The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of society lose value in terms of goods. When the economy's books are finally balanced, one finds that this loss in value represents the goods purchased by the government for the welfare of other purposes...In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as this was done in the case of gold... The financial policy ofthe welfare state requires that there be no way for the owners of wealth to protect themselves.
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is merely a scheme for the "hidden" confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."

Woodrow Wison said a few years after approving the Federal Reserve Act, about the private corporation called the Federal Reserve Bank, "I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world - no longer a Government by free opinion, no longer a government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men."

I wish you the best.

Jim, not to put you down as you have me, but if you're so smart and you know all of this, then why did you fall into the trap of credit? It sounds like you wanted all the rewards, but none of the responsibility. When you got into this system you must have thought you would benefit. Then when you didn't, you cry out "Not my fault, not fair."

Like it or not, this is the system we have in our country. You either accept it and use it responsibly or you don't accept it and you find other means. I happen to think credit is great because I get to live comfortably.

I surely didn't want to depend on my parents or others to support me while I saved up money. That wouldn't be fair to them. Credit/loans even put me through college. Without it I could have never gone beyond high school because a lack of funds.

In this situation, no job where I was earning minimun wage (about the only jobs available to a person with only a HS diploma, if I could even get one of those with my disabilities) would have been enough to support me and be enough to save for college in any reasonable amount of time.

This way I get the degree, get a good job that will accomodate my disabilities, pay back the loans in a short period of time, and then profit from there. So far, all I see is benefit from taking out loans from others and paying them interest, which they deserve for their investment.

The only way I ever see credit costing me is through higher prices on goods because others don't pay what they owe. Still, I think I'm ahead in the game of benefit/loss tally.

Heck, if you really feel this adamently be ambitious and try to change the system. Change has to start somewhere right? A man with as much knowledge on what this horrible system does surely shouldn't have fallen into this trap.

If you educated yourself on all of this after the fact and then came to these opinions, then I say shame on you for not doing the research before you used the system.

You said that you had "a highly successful business". I sure doesn't sound like it to me. It sounds like you built your company on credit cards. A true house of cards. A good company plans for turns in the market and doesn't stick their necks out to be chopped off. Almost all businesses have personal guarantees of which you speak, otherwise banks would never be paid back. If you choose to run your company on credit cards, racking up huge frequent flyer miles, or other bennies that was your choice. There is nothing wrong with that, if you had paid them off each month. But as you state, you racked up huge balances on multiple cards which is an extremly poor business practice and dangerous and risky. A true successful business would not have operated in such a manner. Where did all the profits go during the good times? It sounds like sour grapes when Citibank won't settle for less then 80 cents on the dollar. I've had my business for 10 yrs and make these kinds of choices all day long.

I appreciate your response, and how you feel you are being treated well, but I still believe you would benefit from looking at Edward Griffin's well researched book "The Creature From Jekyll Island". It is apparent in your response that you still don't understand what is happening. Somehow I haven't made myself clear. Maybe what I have written is too much for you to read. You may think you understand, but like most Americans, have bought the idea that the Federal Reserve Bank is working in our best interest. In fact, here is a quote from Woodrow Wilson a few years after he approved the Federal Reserve Act in 1913 that has not been widely publicized:

"I am a unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of a nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world - no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men." Woodrow Wilson

The Federal Reserve Act took the control of the money supply out of the hands of the American people and put it into the hands of a private corporation representing a cartel. That private corporation is not Federal, there are no reserves, and it is not a bank. It was formed for the purpose of redistributing wealth to the banks through credit. Since 1913, the Federal Reserve and it's member banks have been slowly influencing legislation to fulfill their original vision - He who controls the money, controls the country.

If you really understood, you would recognize that your freedom is slowly being siphoned off, no matter how responsible you are with your personal debt. Don't kid yourself. Just because you don't pay interest on your credit card, doesn't mean that the credit card company didn't make a lot of money off your transactions, and that you didn't pay for it. There is nothing wrong with making money, but in the case of banks and credit card companies, there is more going on than meets the eye.

Citibank is one of the largest and most powerful banks in the country, and they are getting away with things that would ordinarily be considered scams. However, because of the concentration of power, and now the use of it against unsuspecting consumers to lure them into using credit cards, along with their influence on the laws that govern the use of credit, they are exercising their power to take our liberties granted to us under the constitution. They are luring us to make lifestyle choices that increase their power, and because it was a choice freely made, can argue that we must take responsibility for that choice and submit to them.

The argument that "no one forced you to borrow that money, and it is your responsibility to pay it off." Is a powerful one because it is true. But it is only a partial truth, and the whole truth is too terrible to consider in the minds of most people. How can you overcome the most successful marketing job in the history of the United States? We not only believe the message, we defend it. And we have allowed laws to be passed that reinforce it.

My point is that we need to recognize when our freedom is being taken away, and take it back. We are being sold on making bad choices, that waive our constitutional rights. If you start reading the fine print, and you understand what constitutional rights you have, you'll see how they are being given away in exchange for some cash now to buy a car, or consumer goods, or a house. Is that a fair price to pay? It is kind of like selling your soul to the devil.

So like I said, Citibank is at war with it's customers, and they are fighting a battle now that could be very costly to us as American citizens.

If you are happy with that, great. You've made your choice.

Sorry to dissapoint you, but I am very well educated on economics and the rise of capitalism, etc. I happen to have many college credits in these areas. I know that the $150,000 garauntee created after the depression is no real garauntee at all.

The government does not have the money stored away to pay all of these debts if the banks go bust. It merely was a tactic to give trust and credibility back to the monetary system. They knew people would be warey of investing money or using a bank after the depression. Please don't assume I am uneducated because I do not agree with you.

I completely understand your plight. I know that you could not control what happened with the dot com bust. I was just relating my experiences with this company and stating my opinions on debts and debtors. I am not rich, believe me. I actually fall into the poverty class if you go by my income. I do get my bills paid though.

Before anyone jumps on me, I know there are other circumstances that other people may have that I don't, but let me just also say that I am disabled. I feel for you if they are unwilling to work with you, but you must understand that it is not their fault that your company went bust. I was just relating above that Citibank has been very fair with me in my dealings with them, even when I had a potentially negative interaction.

I also think that people have personal responsibility. I have dealt with banks and creditors on many occasions. I have limits between all of my cards tripling what I earn in a year. I however, CHOOSE not to run up balances that I know I cannot pay. I also have been offered more money in student loans than I need to live off of and pay tuition.

I simply decline and take only the bare minimum. When my husband and I purchaed our car, we were offered a much higher loan amount (which would have meant new car, higher value), but we figured we didn't need it and went with a used car so our payments would be lower and would match our income. We are the only ones who truly have anything invested in keeping ourselves on track. The banks just want the interest.

I do agree with many of your points. I do think we have too much debt in this society and year-by-year the average debt an American has increases. We have more bankruptcy cases now than ever before. I refuse to fall victim to this though, even though by no choice of my own, I must pay higher interest rates for the mistakes of others.

I do not claim to be perfect, but I do pay my debts, no matter how slowly (and yes there have been times after being laid off where it was a choice between humiliating donations of food and clothing from friends or paying say my car loan. I chose to pay my car loan and take those humiliating loans. In the end I think it was actually a dignified decision).

I agree that banks and corporations have too much power, but I do not let them have power over me. I have successfully received $190 in cashback bonuses for purchases put on my credit card this year, only to be paid off that same month so no interest was charged.

To this date, in the year 2004, I have not been charged one penny of interest to a credit card. I in effect have maintained a power over them. I keep my credit clean so I can receive the lowest interest rate, and I keep my bills up to date. That way I cannot be used and abused by the system.

A revealing lawsuit on the character of Citibank's leadership:

On August 7, 2002, an investor represented by the law firm of Cohen, Milstein, Hausfeld & Toll, P.L.L.C. filed a class action suit against Citigroup, Inc., (NYSE: C) ("Citigroup"), Sanford I. Weill and Todd Thomson (collectively, the "Defendants") in the United States District Court for the Southern District of New York. The lawsuit was filed on behalf of all persons who purchased, converted, exchanged or otherwise acquired the common stock of Citigroup between July 24, 1999 and July 23, 2002, inclusive (the "Class Period").
The complaint alleges that the Defendants violated the federal securities laws. Specifically, the complaint alleges that, during the Class Period, the Defendants failed to disclose material facts concerning Citigroup's relationship with Enron Corp. ("Enron"). The complaint charges, for example, that Citigroup never disclosed it was structuring financial deals for Enron so that Enron could falsify its financial statements and defraud its investors. After Enron's collapse, Citigroup continued to misrepresent its potential Enron-related exposure by failing to disclose the true extent of its potential legal liability arising out of its transactions with Enron.

As a result of the Defendants' failure to disclose the true nature of Citigroup's relationship with Enron, Citigroup's stock price was artificially inflated during the Class Period, trading as high as $57. Upon news that the Senate Committee found evidence that Citigroup was involved in Enron's collapse, the stock fell to $27 on trading of 121 million shares. A copy of the complaint can be obtained from the clerk's office of the court or from Cohen, Milstein, Hausfeld & Toll, P.L.L.C.
Cohen, Milstein, Hausfeld & Toll, P.L.L.C. has significant experience in prosecuting investor class actions and actions involving financial fraud. The firm has offices in Washington, D.C., Seattle and New York and is active in major litigation pending in federal and state courts throughout the nation.

The firm's reputation for excellence has been recognized on repeated occasions by courts which have appointed the firm to lead positions in complex multi-district or consolidated litigation. Cohen, Milstein, Hausfeld & Toll, P.L.L.C. has taken a lead role in numerous important cases on behalf of defrauded investors, and has been responsible for a number of outstanding recoveries which, in the aggregate, total over a billion dollars.
If you purchased Citigroup common stock during the Class Period, you may move for appointment as Lead Plaintiff on or before September 23, 2002.

Another lawsuit with a mortgage subsidiary Associates Financial in 2001:

A Stockton attorney has filed a class-action case in Sacramento County Superior Court against CitiGroup Inc., alleging that one of the companies the banking giant bought last year used fraud, deceit and misrepresentations in making a subprime mortgage loan four years ago from an office in Citrus Heights.

Subprime loans are typically made to poor credit risks who don't qualify for standard or prime rate mortgage financing. Subprime loans typically cost a lot more than standard loans, but often the borrower has no other choice.
This suit, filed by a couple in San Jose, concerns the way they were treated by Associates Financial Services Co. of California, whose office in Citrus Heights handled the loan.
Associates Financial Services Co. was a subsidiary of Associates First Capital Corp. of Texas, which was bought by CitiGroup in a $31 billion deal that closed in November.
CitiGroup of New York City, with $902 billion in assets as of June 30, is the nation's largest bank. Associates had been the nation's largest publicly traded finance company and among the largest subprime lenders.
A spokeswoman for CitiGroup said the company typically doesn't comment on matters in litigation. She said CitiFinancial, the new group that has taken over the operations of Associates Financial Services, is held to CitiGroup's standards of customer service.
"We have very high standards and compliance," said Christina Pretto, a CitiGroup spokeswoman, "to ensure consumers are treated properly."
The complaint: Roberto and Laura Alvarado of San Jose wanted to help Laura's parents keep their home in Stockton, according to the suit, which was filed Aug. 17. The parents were ill, disabled and having difficulty making payments on their mortgage and on a second deed of trust to Associates Financial Services.

According to the suit, Associates refused to let the children assume the loan and instead offered a "relative transfer" loan. That loan was for $77,509, which included a charge for credit life insurance of $6,024 on a loan secured by the home.

The couple questioned the insurance, and were told by representatives of Associates that it was a standard requirement of this type of loan -- and that the loan wouldn't be made without it.
The suit alleges that Associates knowingly falsified representations of what the loan required. The suit also alleges numerous nondisclosures on the part of Associates employees in its Citrus Heights office.
"They had to pay $6,000 for insurance that they didn't really have to pay," said William Parish, attorney for the Alvarados. "They didn't want to pay it, but they were not given a choice."
The couple got a new loan at an interest rate of 11.5 percent, and then had to pay 5 points to close the loan. The 5-point charge is basically an origination fee that is added to the entire loan amount. The insurance also was added into the loan, increasing the size of the loan and generating more interest fees for Associates.

Parish said that he hasn't yet fully calculated damages and that the amount will come out as the case moves along.
"It may not seem like a lot of money, but was a tremendous amount of money to them at the time," he said, "and it was done to people who were in a desperate position."
The Alvarado suit alleges that "when the time for closing came, defendants trained their employees to rush customers through the process, presenting them with lengthy, complex form contracts and related documents, badgering them to sign them quickly, while discouraging them from reading the contracts and related documents."
The Alvarados subsequently were able to refinance their Associates loan with a prime loan.
After making its purchase, CitiFinancial reviewed the brokers who worked with Associates Financial, and has suspended relationships with more than 1,000 of them. It's not known whether the Alvarado case included any of the suspended brokers.

Other suits from L.A., Bay Area: The Alvarado suit likely will be coordinated with other suits against Associates First Capital in Los Angeles and in the Bay Area into a California class action, Parish said.
The Los Angeles case alleges that hard-sell techniques, targeted at poor people, didn't disclose the true payments that borrowers would have to pay, and failed to include high up-front closing fees and loan fees that would get added to the loan.

If CitiGroup agreed to a class-action settlement, it would be obligated to find everyone in its records who might be affected, notify them and potentially pay them, said William Kershaw, an attorney with Kronick Moskovitz in Sacramento. He is not involved in this case.
People who discover they have had similar experiences, Kershaw added, could join the complaint, wait for the outcome or file their own actions.

Other info:
Seven class action suits allege financial misconduct on the behalf of Citigroup, Inc. In Albert Fadem Trust v. Citigroup, Inc., the plaintiffs allege that the CEO and the CFO made deliberate misrepresentations, including failing to disclose that Citigroup misrepresented a 1999 transaction with Enron that was structured as a commodity trade but served the same purpose as a loan to help Enron keep $125 million in debt off of its books. The complaint also alleges that the bank misrepresented Citigroup's potential Enron-related exposure in its 2001 Annual Report and elsewhere, and failing to disclose the true extent of Citigroup's potential legal liability arising out of its 'structured finance' dealings with Enron. Another class action suit regarding Enron was filed on Aug. 7, in Burton v. Citigroup, Inc.

I personally had a second mortgage with this company and experienced the rushing of closing with empty promises. I qualified for the class action suit, but haven't seen a dime.

The bankruptcy bill that Citibank responsible for getting on the agenda in congress:

In the last year Congress, final passage of the one-sided anti-consumer bankruptcy bill (HR 333) was narrowly averted at the end of the session. Now, bankruptcy proponents have announced they seek swift passage in 2003 of virtually the same unfair legislation. HR 975 has already been introduced. Language opposed by pro-life protestors, which helped kill the bill, was removed. Its companion Senate bill should be introduced shortly and its chief sponsor, Senator Orrin Hatch of Utah, wants to skip the committee process and go straight to the floor.
The unfair bill is opposed by every consumer group and many unions, minority and womens' rights organizations. Pro-life groups opposed the bill last year because of certain language that would make civil penalties involving abortion clinic protests non-dischargeable in bankruptcy. We expect that language to be reinserted in the Senate bill at some point, although it is not in the new HR 975.

The bill is supported by a coalition of powerful financial interests, led by credit card banks. Unfortunately, member-owned credit unions also support the bill. In most other cases, credit unions make the right choice to offer their members better deals than banks. Credit union support of the unfair bankruptcy bill, which will dramatically hurt their members, is evidence that credit union management has completely lost touch with with the original goals of the cooperative credit union movement.

While little to no evidence exists that consumers are abusing the bankruptcy system, evidence is mounting against irresponsible credit card companies. Credit card banks are being sued for deceptive practices by consumers. Credit card companies are paying civil penalties and being ordered by government regulators to pay restitution to their victims for duping consumers. Credit card companies and their parent companies are also being sued for securities fraud. See PIRG's Lawsuits And Regulatory Orders Against Credit Card Companies page for more information.

The most recent smoking gun against the credit card companies is a recent proposed guidance (July 2002) from the four leading bank regulators -- the Federal Reserve Board, the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision and the FDIC. It documents that many credit card companies are making loans to consumers already in debt trouble. It documents that some credit card companies charge monthly minimum payments that are so low consumers end up owing more than they did before (negative amortization) instead of ever paying off their credit cards.

Why, so soon after passing a corporate responsibility law (see PIRG's Enron Watchdog page for details) is Congress helping the credit card companies, despite their irresponsible acts?
One big reason: MONEY. Bank, credit union and finance company donations to Congress in support of this bill have been massive. One of the largest credit card banks, MBNA, was President Bush's leading corporate contributor in 2000. Since 1990, banks alone have made political contributions totaling over $106 million to Congress, the parties and Presidential candidates. For more information, see the Center for Responsive Politics website on banking contributions, on MBNA, and on the bankruptcy bill generally. Note that the links on this page jump to accurate current contributions pages, but this page itself is out-of-date on the status of the bill. In July, the conference report was filed and the bill is ready for final floor approval of the conference report in both houses and then ready for the president.

Background: The bankruptcy bill was pushed by the credit card industry so that they could recover more unpaid credit card debts. At its core, its two goals, designed to help the credit card industry, are to put more people in harsh repayment plans and make them owe more, especially to credit card companies:

Makes it harder to qualify for Chapter 7 "fresh start" bankruptcy, so more consumers must go into Chapter 13 "5-year repayment plans." The bill takes away flexibility of bankruptcy judges to determine a consumer's ability to pay and imposes a harsh "means test."

Changes the definition of what kinds of debts can be discharged (written off) so that unpaid credit card debts will (most of the time) need to be paid off in those repayment plans.

The Problems With The Bill:
There's no evidence of bankruptcy abuse. Bankruptcies have gone up, but so have credit card debt and credit card profits over the years. Independent studies, such as those of Harvard Law School professor Elizabeth Warren, show that the 90% or more of bankruptcies are still filed by people who get sick, get laid off, or get divorced, not by abusers. The industry can only document that 3% of filers may be abusers, yet the bill would harm all debtors.

The bill has a millionaire loophole: The bill will hurt these hard-working Americans, but it includes a provision to protect millionaire deadbeats, who would be allowed to keep their mansions in bankruptcy. Current law in a few states, notably Texas and Florida, allows this. The proposed bill expands the millionaire mansion loophole nationwide. Oh, Congress does say that if you are convicted of securities law violations, you cannot use the loophole. Very few people are ever convicted of securities law fraud.

We agree that people who can afford to pay their debts should be required to pay them off: That's what the old law required. The new law says people who cannot afford to pay off their debts should go into repayment plans anyway. The new law imposes an overly harsh means test-- it completely eliminates the ability of judges and magistrates to review a debtor's unique circumstances. Contrast the millionaire's loophole with a provision of the bill that presumes that a struggling family spending more than $500 on credit card purchases in the three months prior to a bankruptcy (about $42 a week) is guilty of "fraud."
Or the bill's irrational new expense limits, which would make it harder for a family to declare chapter 7 bankruptcy if they spend one dime on public transportation and also own a car. (What if both parents commute to their jobs-- one by car, the other by subway?) Or a provision that would not allow a bankruptcy judge to take into account whether a debtor is blameless for his or her financial problems -- because of high medical bills, for example -- when deciding whether the person can declare chapter 7 bankruptcy. (Only victims of terrorism can receive this consideration.) Or a revision to current law that would allow landlords to evict tenants who have declared bankruptcy, even if the tenant is caught up on back rent and making current payments. Or the excessive and expensive new "red tape" lower income debtors must cut through at their own expense in order to file for bankruptcy and fend of challenges from creditors.

The bill will make it harder for modest-income Americans to get financial relief in chapter 7 and increase the likelihood that they will lose their homes and cars in chapter 13 restructuring plans. The means test to determine which debtors can file chapter 7 bankruptcy (instead of chapter 13) is arbitrary and inflexible. It is based on IRS standards not drafted for bankruptcy purposes that do not take into account individual family needs for expenses like transportation, food and rent. It disfavors renters and individuals who rely on public transportation and unduly benefits higher income individuals with more property and debts. Moreover, the bill's cramdown provision will make it much harder for families to use chapter 13 to save their homes and cars.

Women Would be Among the Hardest Hit. Women represent the single largest group in bankruptcy, with households headed by women accounting for about 40 percent of all bankruptcies today. By creating new types of "nondischargeable" credit card debts, the bill puts banks in competition with women trying to collect child support from a former spouse after bankruptcy. This is why more than 20 national women's organizations have opposed the legislation. Supporters' of the bill assert that it "puts child support first" by making the payment of child support a top priority when distributing debtor assets in chapter 7 cases. This claim is highly misleading, since more than 90 percent of all chapter 7 debtors have no assets to distribute. But these debtors will have to pay back more money in credit card debts after clearing bankruptcy, leaving less money for child support and alimony.
Worst, the bill lets the credit card companies get away with cheating and tricking their customers: The bill does nothing to rein in the unfair credit card marketing and interest calculation practices that have led to increased credit card debt that's put a burden on working families. Evidence of abuse by credit card companies is growing. Many of the nation's biggest credit card companies have recently paid court-ordered settlements or government-ordered civil penalties for duping their customers. The alleged practices include "down-selling"--a bait-and-switch where a favorable offer becomes a high-priced sub-prime account, imposing late fees on consumers who paid on time, knowingly allowing customers to exceed credit limits, and illegally hiking interest rates. Back to Top
Even the Office of the Comptroller of the Currency (OCC), the obscure chief national bank regulator not usually known as a consumer champion, is taking notice of unfair credit card company practices.

In the last two years, the OCC has imposed civil penalties or restitution orders against three credit card companies, Providian, Marin and Metris, for unfair consumer practices and shut down a fourth, NextCard, for unsound lending practices. OCC Comptroller John Hawke said of the once high-flying Providian, ordering to pay $300 million in restitution, "Providian engaged in a variety of unfair and deceptive practices that enriched the bank while harming literally hundreds of thousands of its customers." See PIRG's Lawsuits And Regulatory Orders Against Credit Card Companies page for more information. Repeat: "enriched the bank while harming literally hundreds of thousands of its customers."

In July, the OCC joined four other leading bank regulatory agencies to issue a proposed guidance. The agencies had uncovered a pattern of inappropriate practices that both placed the banking system at risk and over-extended credit to consumers, for example: "some institutions have granted additional cards to borrowers already experiencing payment problems on existing cards."

Consumer groups have long argued unsuccessfully that the bankruptcy bill should include a provision to require banks to disclose to each consumer the number of months and years it would take to pay off their balance if they only make the requested minimum monthly payment.

EXAMPLE: If you owe $1000 at an 18% APR% and make the minimum payment, it would take you 73 months to pay off that card and accumulated interest. The new guidance criticizes banks for offering some risky consumers minimum payment terms that result in "negative amortization," meaning the minimum requested payment is so low that your debt keeps getting bigger, not smaller. You would ride a perpetual debt treadmill. See PIRG's TruthAboutCredit.org website for more information about how you can deflate your credit card interest rate and more information about credit card tricks. Back to Top
Many banks continue to make risky loans to risky consumers, even though those consumers have no visible means to repay. The regulators are quite aware of the risks. In addition to evidence from the guidance, The Wall Street Journal reported on 19 August on Page One that regulators have ordered some of the largest credit card lenders (including MBNA Bank, the driving force behind the proposed bill and President Bush's leading corporate contributor in 2000), to add hundreds of millions of dollars to loss reserves.

Making matters worse, many large credit card banks or their affiliated holding companies are facing increased scrutiny over irresponsible accounting practices. See PIRG's Enronwatchdog page. Some, including Citigroup and JP Morgan Chase, are even under investigation for their involvement in the Enron fiasco itself. See PIRG's Lawsuits And Regulatory Orders Against Credit Card Companies page for more information.
Congress shouldn't cut the bankruptcy safety net during an economic downturn: It's puzzling that Congress, despite a depressed economy, would make things worse for consumers by eliminating the bankruptcy safety net, especially when many victims may be laid-off employees of companies that cooked the books or may be consumers who ran up large credit card debts because they were deceived by their irresponsible credit card company. Do these unfortunate consumers belong in debtor's prison for the next five years.

Here is what the National Consumer Law Center says about the bill:

What's Wrong with H.R. 975, Let Us Count the Ways ...
The latest adaptation of the bankruptcy bill, H.R. 975, is now poised for consideration by the Senate after having passed in the House by a vote of 315 to 113.1 The bill is identical to the Conference Report from the last Congress, except that it is stripped of the Schumer clinic violence amendment that prevented the bill from passing at the end of last year's lame-duck session. The bill remains unbalanced and unfair, and is certain to work havoc within the bankruptcy system. In case you have forgotten just how bad this bill really is, here is a rundown of some of the key problems.

1. Subjects Debtors to a Means Test that Fails to Screen for Abuse and Instead Penalizes Honest Debtors by Imposing Additional Costs and Filing Burdens
The bill amends Code 707(b) by adopting a rigid formula to determine whether a debtor is presumed ineligible for a chapter 7 discharge. Unlike the present system that screens for substantial abuse by comparing the debtor's actual living expenses to income, the means-test formula uses pre-determined budget amounts based on the Internal Revenue Service's National Standards and Local Standards. For example, if the IRS Local Standard sets a debtor's monthly housing and utilities allowance at $756, this is the expense amount used in the means-test formula even if the debtor's actual rent and utilities are $950 per month. Similarly, a debtor whose actual food bill is $350 per month because of a special diet prescribed by her doctor for health reasons will be limited to the IRS standard of $196 per month.
On the equation's income side, the formula uses the debtor's average prior 6 months' income to project what can be paid creditors under the plan. This current monthly income is used even if some or all of the income counted during the six-month test period is no longer available because of job loss, temporary disability or divorce. Trying to fix this problem requires the debtor to incur unnecessary litigation costs, petitioning the court to ignore the income definition.

Ironically, since the formula compares presumed income and expenses with the amount of unsecured debts, debtors who have large amounts of credit card and other unsecured debt are more likely to flunk the means test and will be permitted to obtain a chapter 7 discharge. In addition, since the debtor is allowed to deduct on the expense side the actual amounts payable on priority and secured debts (including for example the monthly installment payment on a luxury auto), and actual amounts for Other Necessary Expenses listed in the IRS collections standards manual,
the so-called high-rollers that proponents claim the bill was aimed at will likely escape scrutiny under the means test, particularly since they have the means to litigate application of the presumption.
As another example that the bill sponsors are not interested in curbing real abuse, the bill does not change the current limitation in 707(b) that the abuse provisions apply only to debtors who have primarily consumer debts. Why exclude from the means test those primarily with business debts, such as corporate executives, or celebrity or sports figures? Even if the means test does not presume abuse, the bill changes current law by permitting creditors and other parties in interest to file motions seeking a dismissal of the case under the general abuse provisions in 707(b) if the debtor's income exceeds the median income. The bill will create much litigation on the front end of bankruptcy cases, with hearings on challenges to the application of the means-test presumption presumably deferred until after the meeting of creditors. While debtors with real ability to pay should make their best efforts to do so, the means test does a poor job of finding those debtors and increases costs for all other debtors.


2. Low-Income Debtors Have Safe Harbor from Means Test, But Are Subject to Increased Costs and Filing Requirements, Including Credit Counseling and Education
Debtors with incomes below the applicable median family income will not be subjected to the means test. The bill provides that the bankruptcy judge, trustee, or other parties in interest are prohibited from filing a motion seeking to apply the means test if the debtor's current monthly income multiplied by is equal to or less than the highest median family income based on family size for the debtor's state as reported by the Bureau of the Census.

For debtors below the median income, the court may still dismiss or, with the debtor's consent, convert the case to chapter 13 if the granting of the discharge would amount to an abuse. Unlike debtors above the median income, this can only be done on the court's own motion or the motion of the trustee, not a creditor or other party in interest.

Though the means test does not apply to low-income debtors, they are not exempt from a whole host of new requirements that apply to all consumer debtors, such as credit counseling and education, tax return and other filings, and random audits.

Credit Counseling and Education
The bill will require all debtors in chapter 7 and chapter 13 cases, including low-income debtors, to obtain pre-bankruptcy credit counseling as a condition of filing eligibility and post-bankruptcy education as a condition for discharge.11 Debtors will be required to file a certificate from an approved non-profit credit counseling agency stating that the debtor has been provided a briefing on credit counseling options and assistance in conducting a budget analysis during the 180-day period prior to the bankruptcy filing. If a debt repayment plan is prepared by the counseling agency, a copy must be filed with the court along with the certificate.
Forcing all debtors to obtain credit counseling, even those who are hopelessly insolvent and have no ability to form a repayment plan, will do little to increase the payment of consumer debt or reduce the number of bankruptcy filings. While the requirement may simply delay the inevitable in most cases, it could subject some debtors to the deceptive practices and excessive costs of certain low-quality credit counseling mills who would target consumers seeking bankruptcy relief. NCLC and the Consumer Federation of America recently released a report on the credit counseling industry that describes these abuses.
The bill also requires debtors to complete a personal financial management course.13 Code sections 727(a) and 1328 are amended so that debtors who fail to complete the course will be denied a discharge.14 Though well-designed and implemented educational programs can help some debtors avoid future financial problems, such programs do not currently exist (with a few notable exceptions),15 and there is no reason to believe that quality programs will be created since the legislation provides no funding for such programs. In fact, most credit counseling agencies today have cut back significantly on education programs due to financial concerns. While it would be far more sensible to delay this requirement's implementation until the United States Trustee's office completes a study on pilot test programs, the education requirements take effect immediately upon passage.
The bill has a limited exception, permitting waiver of the pre-bankruptcy credit counseling requirement based on exigent circumstances,18 and the bill specifies that the counseling services may be provided by telephone or over the Internet. However, there are no similar exceptions for the post-bankruptcy education requirement. This is likely to prove a particular hardship for rural debtors, the homebound, and debtors who will lose wages or incur daycare costs to attend a required education program. There is also little provision made in the bill for families with limited financial resources to afford these programs in addition to their bankruptcy filing and counsel fees.

The bill will most certainly impose a difficult burden on the United States Trustee's office to provide oversight over these agencies and protect debtors from consumer scams. Regretfully, some of the less reputable counseling agencies, particularly those that will not be approved by the United States Trustee's office to provide services, will still view the bill's requirements as a marketing opportunity and attempt to profit off debtors seeking bankruptcy relief.
Tax Return Filings, Income Statements and Pay Stubs
Various provisions of the bill require that tax returns be filed with taxing authorities and the court.21 The debtor is also required to provide copies of tax returns to creditors when requested. No provision is made for low-income individuals who may have no legal obligation under the Tax Code to file returns. Failure to file the returns will result in automatic dismissal of cases, the denial of chapter 13 confirmation, and the denial of discharge.
The debtor must also provide copies of pay stubs or other evidence of payment from an employer for income received within 60 days of the bankruptcy filing. The debtor must prepare a statement listing the debtor's monthly net income, showing an itemization of how the amount was calculated and a statement that discloses any reasonably anticipated income and expenses for the one-year period following the bankruptcy filing. In chapter 13 cases, the debtor will be required to file an initial detailed statement of income and expenses based on the preceding tax year, and a similar statement for each year during the plan. In chapter 7 cases, the debtor must prepare and file a statement as to the calculations under the means test (which is served on all creditors) even if the means test does not apply because the debtor is below the median family income.

Audits
The bill provides for random audits of a significant number of debtors. There will be a random selection process providing for the audit of at least 1 in every 250 cases and a targeted selection process for debtors whose schedules reflect greater than average variances from the local statistical norm.
No provision is made for the costs of audits, loss of wages to attend an audit, or the attorney fees that might be applicable to representation during an audit. How low-income debtors who have just scraped together enough money to pay fees for credit counseling, the bankruptcy filing fee, a financial management course, and representation for the initial bankruptcy filing will now find money to pay their attorney for representation in the audit remains a mystery.
To compound the matter, the bill's many new requirements imposed on the court system and the United States Trustee's office, and the cost of the audits themselves, will almost certainly require an increase in the bankruptcy-filing fee. And bankruptcy remains under this bill the only federal court proceeding in which a poor person cannot obtain a waiver of the filing fee.


3. Requires Stricter Scrutiny of Low-Income Debtors' Expenses in Chapter 13 Than Higher Income Debtors and Makes Some Debtors Too Rich for Ch. 7 and Too Poor for Ch. 13.
The bill amends 1325(b) of the Code by replacing the existing chapter 13 disposable-income test with the means test. However, perhaps due to a drafting error, the means test is only applicable in chapter 13 cases for debtors whose income is above the median family income. This means that for higher income debtors, monthly budget payments on many secured debts, priority debts, and other expenses allowed under the means test will be deemed reasonable for chapter 13 plan confirmation. On the other hand, lower income debtors will need to prove that all of their expenses are reasonably necessary for the maintenance and support of the debtor and the debtor's family. This creates the absurd result that a trustee may not be able to challenge a higher-income debtor's mortgage payment on a vacation home under the means test, since it is an allowed expense for secured debt, but would have the ability to question the reasonableness of all expenditures of a low-income debtor.
The bill also leaves unanswered the fate of a debtor who initially flunks the means test, thereafter files or converts to a chapter 13, but then is unable to obtain plan confirmation or has the chapter 13 dismissed because of inability to make plan payments. For debtors who are just above the median income and struggling to make payments under a plan crafted with unrealistic budget amounts using the means test formula, this is not an unlikely outcome. Under existing law, the debtor would be permitted to convert back or refile a new chapter 7 case. A strict reading of the bill, however, would require a court to reinstate the means test thereby denying the debtor the opportunity to obtain a discharge. The debtor is effectively shut out of the bankruptcy system, unable to obtain relief under either chapter 13 or chapter 7.


4. Erodes Bankruptcy's Fresh Start by Making More Debts Nondischargeable in Both Chapters 7 and 13.
The bill contains provisions that would expand the presumption of fraud related to nondischargeability of credit card debts. Fraud would be presumed for debtors that incur $500 for luxury goods and services within 90 days or $750 in cash advances within 70 days before bankruptcy. These provisions will most heavily burden low-income debtors who do not have the financial resources to overcome the presumption and debtors with genuine financial emergencies who do not have the ability to plan the date for their filing to place purchases or cash advances outside the extended presumption period.
The bill also eliminates the chapter 13 superdischarge for certain debts. It will make debts incurred by fraud, as provided under current 523(a)(2) and (a)(4), and unscheduled debts under current 523(a)(3), nondischargeable in chapter 13 cases. It also creates a new type of chapter 13 nondischargeability for debts based on willful or malicious injury. Another section of the bill makes certain tax debts nondischargeable in chapter 13.
The new chapter 13 fraud exception will exacerbate current problems debtors face in chapter 7 cases with certain credit card companies and other creditors who file meritless claims of fraud hoping to strong-arm a reaffirmation agreement, knowing the debtor will want to avoid significant litigation costs to defend the action. Low-income families in chapter 13 cannot afford the defense costs in these nondischargeability cases when their income is fully committed to necessities, mortgage payments, and plan payments, putting further stress on the feasibility of chapter 13 plans. A finding of nondischargeability of a substantial credit card debt will almost certainly be the death knell of the chapter 13 case, particularly if the debtor is not permitted to amend the plan to provide for favored treatment of the nondischargeable debt based on 1322(b)(1). Not surprisingly, the same bill that on the one hand pushes more debtors into chapter 13 at the same time makes it more difficult for them to stay in chapter 13.


5. Promotes Predatory Lending by Encouraging Creditors to Take Liens on Household Goods of Nominal Value.
Prior to the enactment of the Code in 1978, finance companies often made small loans at high interest rates that were secured by the borrower's household goods. Although the goods were of nominal value, the security interest was a valuable collection tool for the lender due to the leverage that came with the threat of repossession. In enacting the Code, Congress recognized the true value of such liens and gave debtors the right to avoid non-purchase money liens on exempt household goods under 522(f)(1)(B).
Current law does not define household goods for purposes of 522(f) lien avoidance, though most courts consider that it includes certain basic items as clothing, furniture, and other personal property kept in or around the home and used to facilitate the day to day living of the debtor and the debtor's dependents.
Now Congress plans to turn back the clock and change the lien avoidance provisions in a way that encourages more predatory lending practices. The bill contains a very narrow definition of household goods that would be applicable under 522(f) in all states in lien avoidance proceedings. It expressly does not include any work of art (unless by or of the debtor or a relative of the debtor), no matter how small the value, and electronic equipment other than one television, one radio, one personal computer, and one VCR. The Conference Report added some limited additional protection by providing that other electronic equipment totaling $500 or less in the aggregate will be household goods, but this probably will not deter lenders who rely upon inflated valuations of the goods.
Non-purchase money liens on items excluded under the new definition will no longer be avoidable. Undoubtedly this will lead to more aggressive finance company policies of taking liens that have threat value in bankruptcy and more reaffirmations will inevitably result.

6. Creates New Creditor Opportunities for Reaffirmation Abuses by Weakening Current Debtor Protections and Giving Creditors Safe Harbor from Liability

The bill contains amendments to current 524 of the Code that purport to protect debtors from reaffirmation abuses by creditors. Unfortunately, the changes will do far more harm than good. Since creditors will have substantially more leverage to obtain reaffirmations based on other bill provisions (discussed below), this weakening of current legal protections will have a devastating impact on the fresh start.
The bill will require that debtors be provided with a reaffirmation disclosure statement. This lengthy statement contains little in actual substantive or useful information. And for those disclosures that could be meaningful, such as the annual percentage rate and repayment schedule, creditors are given much latitude in how these terms are disclosed, making it virtually impossible to prove inaccuracies. Even worse, despite the well-known abuses by department store creditors in coercing reaffirmations based on inflated values for secured household goods, the new disclosure form does not even require that the creditor to disclose the current value of the secured property. The form only requires a listing of the items and their original purchase price, or the original amount of the loan for a nonpurchase-money security interest. In addition, several of the disclosures, such as the annual percentage rate, assume that the underlying credit contract will remain in effect upon reaffirmation.

By far, the most troublesome aspect of the reaffirmation provisions is the broad safe harbor afforded creditors. The bill provides that the new disclosure requirements and the current disclosures under 524(c) are satisfied if the disclosures are given in good faith. A creditor can even accept payments made under a non-compliant reaffirmation, either before or after the filing of the reaffirmation, as long as the creditor believes in good faith that the agreement is effective.43 Of course, litigation costs are greatly multiplied whenever the debtor has to prove, as a condition of recovery, that the creditor acted in bad faith.

7. Undermines Debtors' Ability to Save Homes and Cars in Chapter 13
Numerous provisions in the bill will make chapter 13 a much less viable option for debtors attempting to save their homes from foreclosure or cars from repossession. By greatly limiting debtors' ability to cramdown secured claims in bankruptcy to the value of the collateral, the bill will force debtors to direct more of their limited income to undersecured car loans and department store debts, making it more difficult for them to come up with the money currently being committed under plans to make mortgage payments. Since lower income debtors have tighter budgets, these debtors are likely to be the most seriously affected by the changes.

Cramdown Provisions
The bill provides that a claim based on a purchase money security interest in a motor vehicle acquired within 2 years of the bankruptcy filing cannot be crammed down. Other secured debts will be protected from cramdown if any (non-vehicle) collateral is acquired within 1 year of filing. Since some department stores claim to take a security interest in everything purchased with their store card, their entire debts would be treated as secured under this provision if the debtor used the card at all within the 1-year period before filing.
Debtors confronted with the new anti-cramdown provisions might consider redemption under 722 in a chapter 7 case as an alternative. However, the bill drafters sought to foreclose that option as well by amending 506(a). The bill requires that the amount of an allowed claim secured by personal property shall be based on the replacement value of the collateral, without deduction for costs of sale or marketing.45 In addition, another section of the bill prohibits redemption in installments.
Since the amendment to 506(a) requiring retail value also applies to determinations of allowed secured claims in chapter 13, the ability to cramdown car loans will be further restricted even if the car was purchased more than 2 years before filing (or 1 year before filing for other secured purchases).

Finally, in another provision that will certainly impact low-income debtors and the elderly, mobile home liens will not be subject to cramdown, whether or not the mobile home is attached to real property.47 These liens will have the same protection available to other residential mortgages under 1322(b)(2) of the Code. At the same time, the anti-modification provision in 1322(b)(2) is expanded to preclude stripdown of home mortgages when there is any additional property conveyed with the principal residence.

Ride-Through Provisions
The bill amends 521(a) of the Code to make clear that the fourth option in chapter 7 cases authorized in some circuits, which involves the retention of secured property without reaffirmation by continuing payments, will no longer be permitted. The amendment limits a debtor who wishes to retain personal property subject to a purchase money security interest to two options; the debtor must either enter into a reaffirmation agreement with the creditor or redeem the property under 722. Unlike current law, the bill also provides that the stay is automatically lifted without a hearing, and the secured property is no longer property of the estate, if the debtor does not carry out one of the two options within 45 days of the meeting of creditors.

This treatment of secured debts is expanded in another provision of the bill. Debtors will be required to file a statement of intention under 521(a)(2) in both chapter 7 and chapter 13 cases (and chapter 11 if the debtor is an individual) as to all personal property that is either security for a claim or that is subject to an unexpired lease. Moreover, the automatic stay is terminated without a hearing (and the property is no longer property of the estate) if the debtor does not surrender or redeem the property, reaffirm the debt, or assume the unexpired lease within 30 days from the date first set for the meeting of creditors. The stay will not be lifted if the statement specifies that the debtor will reaffirm the debt and the creditor refuses to enter into a reaffirmation on the original contract terms.
The combined effect of these provisions restricting cramdown, redemption and ride-through is certain; fewer debtors will be able to use chapter 13 to protect important assets and more debtors filing chapter 7 cases will be forced to enter into reaffirmation agreements. Both of these outcomes run completely counter to the stated goals of Congress in enacting the Bankruptcy Code in 1978. Sadly, debtors emerging from chapter 7 cases who are burdened with reaffirmation payments and new nondischargeable debts (as discussed in Part 1) are not likely to keep up with essential obligations such as child support and housing expenses.

[Note: This analysis of the current bankruptcy bill is not complete. It is simply too lengthy to complete here, but I think you get the idea by now.]

So Pleeeeeese. Close all your Citibank and Citigroup accounts, Including all affiliates through Primerica. Write your congressman to oppose HR 975. And stop borrowing money, live on cash, and keep your wealth in precious metals - away from the banking system. That is the only way to avoid confiscation of your wealth through inflation. (confiscation is a word used by Alan Greenspan in 1966 when explaining the problem with our monetary system, and recommends holding wealth in gold.)

I understand your rebuttal, and fully expected that kind of rebuttal. I thought like that my whole life, until I owned a highly successful business in the computer industry, that fell victim to the Internet crash. It was beyond my control to recover, yet I lost everything. Mostly because of trade credit, not banks, which is to say that I am not a foolish borrower.

This is because I believed that it was necessary to do business loans to create a business, and that I had to personally guarantee those loans - that is just the way it is done. I guaranteed more debt than I was good for, because that is what you do in business. Why did the bank require me to do that? It is foolish on our parts as small business owners to agree to that, and it is unreasonable for banks to require us to put more "skin in the game" as they call it.

(that is simply a code word for slavery, presented as a reasonable request to better secure a loan, by placing enough risk on the small business owner that they will work themselves to the grave to keep their home and family from being destroyed by the bank, when the business market goes bad.) In other words, if you lose the business, you lose everything, and the bank loses too because the personal guarantee rarely gets them more than the legal fees to collect the money.

Normally companies settle these kinds of debts. Citibank's response is to sue and only offer to settle for the maximum amount without getting admonished by the court system for being unreasonable. They don't care about the effect it has on the economy, or the lives it ruins.

It also doesn't help their bottom line, because of the amount of litigation costs it takes to sue, beyond the legal fees they get judgments for against their borrowers.

We are so strongly programmed to believe that no matter how or why we accumulated a debt, that it is wrong not to do whatever it takes to pay it back. It is logical and makes good ethical sense. However, what we are NOT taught about debt and money, is what is going to lead to our demise. If you see the ENTIRE picture, your system of ethics forces you to come to a different conclusion.

In Christian and Jewish scripture, Proverbs (the book of wisdom) it says that a "debtor is slave to the lender" and this is very true. It also says in Christian scripture that lenders should have mercy on borrowers. In fact, in Israel there is/was a thing called the Year of Jubilee, where all debts were forgiven, and everyone was given a fresh start.

It also keeps the lenders in check, by realizing the risk of lending, and being more prudent about making each loan. But our society revolves around debt. We don't buy a home or make any other major purchase without borrowing money to do it. We believe it is unthinkable that we would NOT borrow the money and wait until we had the money to make the purchase. Borrowing money has become a "right" in a sense. The Federal Reserve member banks have done the most effective marketing job in the history of the world in creating a need to borrow.

Meanwhile banks are slowly but surely taking away our freedom, by convincing us to choose to voluntarily waive it. Like boiling a frog (if you ever heard that story.) Put a frog in a pot of water and slowly raise the temperature, they will not realize they are being cooked, until it is too late.

Please, before you draw any quick conclusions, educate yourself. One great beginning is to read a book called "The Creature from Jekyll Island : A Second Look at the Federal Reserve
" By Edward Griffen ASIN: 0912986212. This is a book about the creation of the Federal Reserve, and reveals some very surprising facts about it that could very well change your mind. You will find that the Federal Reserve Bank is not Federal (it is a private corporation), there are no reserves (our money is actually promisory notes, and there are no gold reserves), and it isn't a bank. They have control of the monetary system, and have successfully put our government deep in debt to them.

Also, educate yourself on the monetary system we have. Read the publications put out by the Federal Reserve Bank on how money works. Study what historians say about the Federal Reserve Act, and what the U.S. President said after leaving office, about his part in the creation of the Federal Reserve. Research the topic on your own and find independent sources of information and put it in the mix with the official historians - and see what you find.

If you still believe Citibank is doing the right thing by being the largest litigant in American history, suing literally tens of thousands of Americans rather than doing workouts, after doing all that, you probably don't believe in the founding principles of this country. (not to mention Citibank's efforts to close the door on any possibility of getting a fresh start through bankruptcy.)

Please take notice. Don't be apathetic. You are a frog, and the temperature is slowly rising!

I have a car loan, a student loan, and a credit card all through Citibank. I have NEVER had any problems with them. In fact, we agreed to an interest rate for our car and they lowered it by over 2% to 5.25% after reveiwing our credit. We never even asked them to do this. They just lowered it.

I also have never had any problems with my credit card. One time I had a problem with my student loan because I filed paperwork late when I changed schools, and they fixed it VERY quickly. The customer service reps were more than willing to help me and they took the mark off of my credit, no problems.

I personally do not think Citibank is an evil corporation at all. They have ALWAYS worked with me and been very curteous. I can understand financial problems, but you owe them.

Wouldn't you be upset if someone owed you that much money? I sure would be. I hate it when people think that they do not owe a company just because they are the little guy. I hate that my interest rates and what I pay are affected by people who don't pay what THEY OWE.