Copyright 2000 The Houston Chronicle Publishing Company
The Houston Chronicle
October 13, 2000, Friday 3 STAR EDITION
SECTION: BUSINESS; Pg. 1
LENGTH: 797 words
HEADLINE:
House gives approval to bankruptcy reform
SOURCE: Staff
BYLINE: JOHN C. HENRY, Houston Chronicle Washington
Bureau
DATELINE: WASHINGTON
BODY:
WASHINGTON - Long-stalled legislation
overhauling the nation's bankruptcy laws cleared the House on Thursday, but the
measure faces a filibuster threat in the Senate and a promised veto at the White
House.
The bankruptcy overhaul, pushed by the nation's financial
industry and negotiated behind closed doors, would make it harder for people to
use bankruptcy court to help erase their credit card debts.
The final
version of the bill was hammered out by Republican House and Senate leaders on
Wednesday and, in an unusual move designed to make passage easier, was
substituted for an unrelated State Department funding bill.
"We cannot
permit people to use the bankruptcy system as a mechanism for financial
planning," said Rep. George Gekas, a Pennsylvania Republican and leading
advocate of the overhaul. Some House Democrats complained about the Republicans'
procedural tactic and the legislation's possible effect on families whose
finances are crippled by job loss or catastrophic medical expenses.
"This is a mean-spirited bill," said Michigan Rep. John Conyers, the
senior Democrat on the House Judiciary Committee.
The legislation,
approved by the House on a voice vote, creates a complex mathematical formula
for courts to use in deciding how much debt relief to allow and how much debtors
must repay their creditors.
Included in the bill is an amendment pushed
by Rep. Ken Bentsen, D-Houston, and Republican Sen. Kay Bailey Hutchison that
would help Texans keep their homesteads from becoming a part of the formula to
determine debt-paying ability.
The legislation specifies that $ 100,000
is the maximum value of a homestead that can be protected from creditors for the
first two years of ownership. After that, there would be no limit in Texas,
where the state constitution exempts homesteads from bankruptcy proceedings.
"I don't particularly like it," Bentsen said of the two-year residency
requirement, "but it's better than ending the Texas homestead exemption, which
was the alternative."
Rep. Kevin Brady, R-The Woodlands, acknowledged
the work of Democrats like Bentsen but credited Republican congressional leaders
for going "to the mat for Texas homeowners."
Stripped from the bill by
House and Senate negotiators was a provision to prohibit
abortion protesters from using bankruptcy as a
way to avoid paying court-ordered penalties for violating laws that protect
abortion providers.
Without that provision, Sen. Charles Schumer,
D-N.Y., said he would filibuster the bill when it comes up for debate, probably
next week. Another filibuster was threatened by Sen. Paul Wellstone, D-Minn.
To bypass at least five filibuster opportunities under Senate rules,
Republican leaders attached the bankruptcy bill to legislation that already had
passed both chambers setting aside funds for the State Department.
The
funding measure, which was approved by Congress earlier as part of another bill,
was gutted, leaving only the bankruptcy legislation. Since it carries the State
Department funding bill number, the bankruptcy legislation now only can be
filibustered once when it reaches the Senate.
Even before the measure
passed the House on a voice vote, White House Chief of Staff John Podesta
delivered a letter to congressional leaders saying President Clinton intends to
veto the bill.
Although Clinton supports the need to revise bankruptcy
law, Podesta wrote, the legislation passed by the House "gets the balance wrong"
between preventing abuses of the bankruptcy system and ensuring that truly needy
debtors can still get a fresh start.
Podesta also criticized lawmakers'
failure to include a limit on how much of a debtor's homestead value would be
protected from creditors after two years of ownership.
"This loophole
for the wealthy is fundamentally unfair and must be closed," Podesta wrote.
Even if the legislation is approved by the Senate with a veto-proof
majority - 67 votes in favor of passage - Clinton could wait until Congress
adjourns before formally rejecting the bill, thus avoiding the threat of an
override vote.
The president has 10 days from final passage to veto a
bill. Lawmakers, who had planned to adjourn by Oct. 1, are now aiming at Oct. 20
to quit and return home to campaign for re-election.
Supporters of the
bankruptcy legislation - banks, savings and loans, credit card companies and
other consumer finance businesses - assert that it is needed to respond to an
increase in personal bankruptcies. Filings reached a peak of 1.44 million in
1998, but declined to about 1.32 million in 1999.
"When borrowers can
easily walk away from their lawful debts, consumers are forced to make up the
losses by paying more for all kinds of goods and services," said House Majority
Leader Dick Armey, R-Irving.
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