Friday, December 21, 2007

Be Careful What You Wish For

Brendan writes in to remind us of this from a 6 or so weeks ago.

Nov. 8 (Bloomberg) -- Washington Mutual Inc. got what it wanted in 2005: A revised bankruptcy code that no longer lets people walk away from credit card bills.

The largest U.S. savings and loan didn't count on a housing recession. The new bankruptcy laws are helping drive foreclosures to a record as homeowners default on mortgages and struggle to pay credit card debts that might have been wiped out under the old code, said Jay Westbrook, a professor of business law at the University of Texas Law School in Austin and a former adviser to the International Monetary Fund and the World Bank.

``Be careful what you wish for,'' Westbrook said. ``They wanted to make sure that people kept paying their credit cards, and what they're getting is more foreclosures.''

As I wrote at the time I'm not quite sure that this article really proves the point that the Bankruptcy Bill is fully responsible for this, though the more I think about it the more it makes sense to me. If there was still a decent route to sensible bankrtupcy terms, people would prioritize the house over the credit cards. As it stands, it makes sense to walk away from the house and keep the credit cards.

The karma gods are laughing.