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The new bankruptcy reform legislation approved recently by the U.S. Senate is burdened with an unfortunate flaw. In the give and take of the political process of winning support for the measure, a regrettable loophole has been left that KSL feels unfairly favors the rich.
Wealthy families and corporations seeking bankruptcy protection will still be able to shelter certain valuable assets through the creation of special trusts. And assets kept in such protection trusts are shielded from seizure in bankruptcy proceedings.
If bankruptcy reform is based on fairness, as proponents claim, and intended to promote greater personal responsibility, shouldn’t such accountability apply to all? KSL believes it should. Therefore, we encourage the House to close the loophole as the measure proceeds through the legislative process.
That said, bankruptcy reform is long overdue! Since the last time Congress tackled the issue in 1978, bankruptcy claims have soared. While many deservedly benefit from the protection bankruptcy provides, far too many others end up there because of undisciplined spending fueled by the accessibility of easy credit.
In KSL’s view, the new legislation sends a powerful message to all consumers about the importance of being wise and responsible financial stewards. It is a message that would be significantly stronger if unfair loopholes in the legislation would be eliminated.
