Thursday, September 03, 2009

The Flip Side of the New Bankruptcy Law

Congress passed and the president signed statute law earlier this twelvemonth that made filing for personal bankruptcy a much more than hard proposition. At the urging of the financial industry – particularly credit card suppliers and banks – the new statute law was drafted and approved setting the stage for stricter demands governing personal bankruptcy. There is a impudent side to the new law, one that is actually hurting creditors more than than they ever expected; delight chortle with me as you learn just what that other side is.

When President Shrub signed statute law making personal bankruptcy a more hard proposition, credit card suppliers and banks hailed it as a important move to reduce the number of defaulters skirting their financial duties by filing for personal bankruptcy. The mood, however, have quickly shifted for creditors as an ugly impudent side to the new bankruptcy law have reared its head: people are paying off their debt faster than ever before! Realizing that there is no second opportunity with the new law, consumers are reacting in fearfulness and paying off their debts. So, why is this ugly for creditors? For two reasons:

1. Consumers are not using their credit cards as much, therefore their debt degrees are now lower.

2. Consumers are paying off existing debt at faster rates than have got ever been seen before.

The result? Less income for the creditors as consumers have got wised up. MBNA and Capital One, two huge credit card providers, are seeing their net income sink. Other credit card suppliers are reporting similar results. Highly dependent on your desire to run up debt, these companies are now seeing their net income borders driblet sharply. In a nutshell: high consumer debt bes large profits; low consumer debt degrees bes low profits.

I am certain by now you are having the same chortles as I am. Keep on laughing by paying down your debt and by buying what you desire with cash. Oh, by the way, disregard the increased inundation in your letter box of credit card solicitations: you don't desire to change the temper of the financial community, make you?

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