If corporations are people, why do they get different bankruptcy rules?
Some South Dakotans who've gone broke recently have asked about the difference between their situation and that of companies such as Northern Beef Packers, an Aberdeen firm that is still in court over its bankruptcy filing.
According to Teresa Ghilarducci, chair of the economics department at the New School of Social Research, the laws governing corporate bankruptcy were written to be fundamentally different from consumer bankruptcy laws.
"Individuals responsible for the corporation are often protected from any of the costs, whereas an individual who gets into debt, they're presumed to pay most of the cost back," she said.
..."The bankruptcy laws presume that the individual was stupid or immoral," as she described the situation. "Corporations are presumed to get into bankruptcy situations through no fault of their own."
..."Corporations often use bankruptcy in their business model," she said. "People who didn't have any role in the corporation bankruptcies actually often have to pay the price" [Jerry Oster, "Northern Beef Packers Example of How Bankruptcy Laws Protect Corporations, Not People," Northern Plains News, 2013.11.11].
When individuals go bankrupt, the suffering falls mostly on their shoulders. They suffer major household upheaval and pain, while major creditors suffer minor inconvenience. When corporations go bankrupt, the suffering falls on the communities that lose jobs and tax revenue and residents to fill their apartments. Doesn't justice require that the consequences for bankruptcy be greater for those who cause more public harm?
More bankruptcy reform bills coming this next session from me. This will be year three of trying. Last year we moved the ball slightly down the field toward fairness. Not much support for anything more.
Steve: what about video loottery?
As you well know, the state is addicted to video lottery money and until we figure out a way to replace those dollars we are stuck with it. So, I encourage my colleagues in the legislature to resist every small and large expansion of video lottery in our state. People like Rep Hal Wick have interesting ideas about replacing video lottery income over the next ten years by establishing a fund that in ten years will provide the revenues.
My best thought is sell it - privatize it. The state has no business in this industry and we ought to sell it to the top bidder and regulate it. This does little to alleviate the social costs to the state from video crack additions but it at least gets the state weaned off it's addiction to lottery dollars. I'm convinced hard times are coming and donor states like SD will be catapulted into the stone age when we see a substantial reduction of Federal Funds. I'm a positive person but I know I sound miserably negative with these predictions. It is my view that though SD balances it's budget we are dependent on some really unhealthy revenue sources and video lottery is second on the list and our dependance of Fed funds is first.
Your proposal would still leave South Dakota video lottery players with all of the problems that go with it. I don't refuse to play video lottery because the state owns it, I think it is a poor use of my limited resources.
Your warnings about the Federal government running out of money ignore the real economics. Our Federal government can create the money it needs, we do need more people who understand that.
I don't see a good way to wean SD government from its gambling addiction. I don't favor creating another trust fund, taking hundreds of millions out of our state economy, giving it to Wall Street, and hoping for returns that exceed the inflation rate is the best is the way to go. That seems to me like just another form of gambling. I'd just as soon skip the middle man and keep the state's 50% share.
I do agree with Rep. Hickey that the federal gravy train can't go on forever like it has. We need to plan for the day we can't squeeze Uncle Sam for way more than we send him. It's already starting.
If South Dakota can't wean itself from gaming revenue, it should at least use those funds for what was intended and promised in the first place, EDUCATION.
Perhaps a state referendum is needed to ensure that gaming revenue is used for education and maybe healthcare.
Speaking of bankruptcy laws. How about a second look at being able to include student loans? It is virtually impossible currently to include student loans in a bankruptcy. Maybe by adding a little bit of risk in lending to students the price of tuition might go down as well.
I find corporate bankruptcy laws appalling. Just as Cory stated, corporations do get off very easy in bankruptcy. Corporations commonly use bankruptcy to bust unions.
I was forced into personal bankruptcy in 2009. My cause was the most common one: Catastrophic medical bills, plus the Great Recession. I recall two sources not eligible, educational loans and taxes.
I did the entire process myself because I had no money for an attorney. Mine was a simple bankruptcy. I had no pensions, life insurance, savings, etc. I used to, but I had cashed everything out trying to avoid bankruptcy.
Nope, I was not lazy, incompetent, uncaring, irresponsible. I had become very seriously and expensively ill in 2006. Then, before I could fully recover and work more than a poorly paying part time job, the Great Recession hit.
My story is most common. As I sat in the courtroom that day waiting for the judge to call my name, I listened to her interview others. She asked each one if they'd ever filed for bankruptcy before. Only one or two of the dozen had. We were all ordinary people who had endured harrowing experiences. There probably were a few who were not good managers of their finances.
My experience tells me the USA needs to adjust bankruptcy rules so that they are less damaging to our economy. One change that would be extremely helpful is tight regulation of payday lending businesses and the big banks which finance, and in some cases, own and operate them.
To simplify, all loan procedures need to be closely scrutinized and tightly regulated for the sake of the individual consumer. Financial institutions will make adequate profits without usurious interest rates.
Regulate loans closely, prohibit predatory lending: absolutely. Rep. Hickey, please carry on that fight.
Medical bankruptcy shouldn't exist: Rick Weiland's fight for Medicare as universal public option could help there.
Corporations: if they're people, let's treat them like people. What could we do to put corporations through the wringer in bankruptcy the way we do individuals?