Copyright 2002 The Washington Post
The Washington
Post
April 24, 2002, Wednesday, Final Edition
SECTION: FINANCIAL; Pg. E01
LENGTH: 551 words
HEADLINE:
Bankruptcy Reform Advances On Hill; Negotiators Agree On Home Equity
BYLINE: Kathleen Day, Washington Post Staff Writer
BODY:
After months of negotiating,
lawmakers yesterday cleared one of the last big hurdles blocking final passage
of legislation that would revamp the nation's bankruptcy laws by making it
harder for consumers to wipe out their debts.
Senate and House
negotiators resolved a disagreement over how much home equity an individual
filing for bankruptcy can keep in the five states that now set no limit.
In those states -- Texas, Florida, Kansas, South Dakota and Iowa -- the
home equity that can be shielded from creditors would be capped at $ 125,000 if
the individual filing had been a resident of the state for less than 2 1/2
years, owed debts arising from violations of securities law or financial fraud,
or in the last five years had recklessly caused a death or serious injury.
Consumer groups immediately criticized the agreement. They said it would allow
rich debtors to continue to hide wealth in their homes even as other provisions
in the legislation would deny bankruptcy relief to many people with low or
moderate incomes struggling because of medical bills, job loss or divorce.
The House and Senate passed differing versions of the bankruptcy
legislation last year. The proposed law is being pushed by the credit-card
industry, which says it is needed to close loopholes that make it too easy for
people who could repay some of their debts to wipe them out.
If passed,
the legislation would be the most significant change in the nation's bankruptcy
laws in nearly 25 years.
With yesterday's agreement, negotiators led by
Rep. James F. Sensenbrenner Jr. (R-Wis.) and Sen. Patrick J. Leahy (D-Vt.) face
only one final hurdle, but it is the most contentious issue of all.
The
two sides disagree over a provision in the Senate version opposed by abortion
foes. The Senate bill would bar anyone convicted of blocking an entrance to an
abortion clinic from filing for bankruptcy to
avoid paying court-imposed fines.
But many Senate Democrats, led by Sen.
Charles E. Schumer of New York, are fighting to keep it. Lawmakers have
struggled for months to try to make the provision acceptable to House
Republicans by broadening its application beyond abortion clinics to include
violence at churches or during labor strikes.
The group of lawmakers
from the House and Senate who crafted the home-equity protection agreement
yesterday may reconvene as early as today to try to resolve the abortion clinic
issue. If they do, the bill could be sent within days to the floors of the House
and Senate for a final vote, and then to President Bush's desk to be signed into
law.
The legislation is intended to make it harder for individuals to
erase debts under Chapter 7 of the U.S. Bankruptcy Code and to force more people
to file under Chapter 13, which would require them to repay a portion of the
debt over five years.
Under current law, individuals can file under
Chapter 7 to wipe out their debts if they agree to give up most of their assets,
excluding in most cases their houses and other essentials. They do not have to
prove insolvency, but a court can deny them bankruptcy status if a judge thinks
the system is being abused.
The bill would also use a stricter measure
to determine how much money a debtor could keep each month for living expenses.
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