Bankruptcies of the near future as determined by politics
It is too early into the current presidency to know for certain what changes are coming. Every new administration seeks to make its mark on history, however, so we can safely assume that there will be changes made to economic policy, and, thus, bankruptcy.
What Came Before
Personal bankruptcies grew from 1.3 million per year in 1999 to 1.6 million in 2003, leading then-President Bush to sign the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPACPA). While many thought that this piece of legislation heavily favored creditors over debtors (lenders instead of borrowers), it was pushed through Congress with the idea that it would force individuals to learn financial responsibility. By making it harder to file bankruptcy, they thought, people would be forced to be better with their money.
The economic crash of 2008 points to the idea that it didn’t work. And, in the interest of helping more Americans, the Obama administration created the Consumer Financial Protection Bureau (CFPB) in 2010 to give some power back to the people.
Proponents of the previous administration say that the CFPB provided borrowers with the ability to fight back against predatory lenders. The new protections also gave debtors the chance to catch their breath and get back on top of their debt, and this, in turn, created more responsible borrowers. 2016 saw individual Chapter 7 Bankruptcies drop by about 6 percent, and business declarations went down roughly 2 percent.
What’s Happening Now
Trump is no stranger to bankruptcy. Since 1990, six of his assorted companies have filed for Chapter 11, allowing him to restructure his debt while still staying in business. Long before the election, he caused concern by stating that should the economy crash, he’d just not bother paying off the nation’s debts. Apparently, he figured he could simply restructure the debt and pay less.
Filing for bankruptcy already looks to become more difficult, as the “America First: A Budget Blueprint to Make America Great Again” plan includes raising filing fees. Under this plan, he hopes to generate an additional $150 million annually by “ensur(ing) that those that use the bankruptcy court system pay for its oversight.”
Beyond direct action, the appointing of Jeff Sessions as Attorney General, and his voting record, is considered a cause for concern by many. With far-right leaning ideology, AG Sessions has shown a well-defined bias towards stricter bankruptcy laws, and opposition to consumer protections. The nomination of Neil Gorsuch to the Supreme Court does not bode well for those filing for bankruptcy. Jason Kilborn, creator of the blog Credit Slips, writes:
“…Gorsuch is not at all what one might call “debtor-friendly.” In fact, I don’t think one of the dozen-or-so opinions I found ruled in favor of the debtor(s).”
What to Expect in the Future
Fortunately, the CFPB is still hard at work as an advocate for borrowers, so there’s definitely hope that the system won’t tip too far in favor of lenders. In addition to federal agencies, there are also companies that are dedicated to serving the needs of you, the consumer, so don’t add to your stress by worrying too much about the presidency. As long as there are borrowers, lenders will need to rely upon them for their income, and they forget that fact at their own peril.