Copyright 2000 The Washington Post
The Washington
Post
December 8, 2000, Friday, Final Edition
SECTION: FINANCIAL; Pg. E01
LENGTH: 747 words
HEADLINE:
Senate Votes to Tighten Debt Law; Bankruptcy Bill Gains Veto-Resistant Margin
BYLINE: Kathleen Day , Washington Post Staff Writer
BODY:
The Senate voted 70 to 28
yesterday to pass a bill that would make it harder for consumers to wipe out
debt through bankruptcy. Although that margin would be enough to override a
veto, the legislation's future remains in doubt.
After the vote,
President Clinton renewed his threat to veto the legislation, which is backed by
the credit-card industry and was passed by the House in a voice vote in October.
Whether it becomes law or dies, however, depends on whether Congress remains in
session long enough to attempt a veto override, and, if it does, whether
Democrats who backed the bill yesterday would decline to join Republicans in
such an attempt. The 70 "yes" votes, which included 53 Republicans and 17
Democrats, were three more than the 67 needed to override a veto.
The
bill would create a complex formula for determining how much debt financially
troubled consumers would be required to repay under a court-supervised
bankruptcy plan and how much of their incomes they could retain each month. It
would be harder to wipe out debts completely.
Consumer groups decried
the Senate action, saying the bill remains too harsh on consumers who fall into
financial difficulty because of illness, job loss or divorce.
"It's
going to allow wealthy debtors to retain expensive homes while filing for
bankruptcy," said Travis Plunkett, legislative director for Consumer Federation
of America, a nonprofit advocacy and educational group. "It's going to
compromise high-priority debts like child support after bankruptcy, and overall
it's going to make it harder for modest-income consumers to get financial relief
when they have suffered genuine financial misfortune."
Credit industry
officials--who have made $ 6 million in political donations in the first six
months of the year--hailed the vote as bringing the country a step closer to
what they say is a much-needed overhaul of the nation's bankruptcy laws.
"It's designed to go after people who can afford to pay something and
are now abusing the system," said Edward Yingling, chief lobbyist for the
American Bankers Association, an industry trade group.
Backers of the
legislation point out that personal bankruptcies have reached 1.4 million a
year, a dramatic rise from the 348,000 filed in 1984. But opponents counter that
the number of bankruptcies has remained flat for two years, a sign that the
problem is leveling off.
The overwhelming majority of debtors file under
Chapter 7, which effectively wipes away their debts. Only about one-third file
under Chapter 13, which requires some repayment. According to a study funded by
the American Bankruptcy Institute, about 3 percent of the people who file under
Chapter 7 could repay a portion of their debt under Chapter 13. The credit
industry has estimated the number to be 10 percent to 15 percent.
Critics of the credit-card industry say it bears a large responsibility
for getting Americans over their heads in debt, because of its aggressive
marketing techniques that offer overly easy credit.
They also say the
industry has fought efforts to give consumers more information that would help
them understand their debt, such as how long it would take to erase debt by
paying only the minimum payment each month.
"Many small businesses and
retailers work with slim profit margins and an even smaller margin for error and
cannot absorb the loss from abuses of the bankruptcy system," said Thomas
Donohue, head of the U.S. Chamber of Commerce, which has been a primary backer
of the legislation.
Clinton opposes the bill because, aides say, it
would allow violent demonstrators at abortion clinics to use
bankruptcy law to evade fines. And it would enable once-wealthy
filers to retain expensive homes, even as it imposes inflexible, overly strict
burdens on moderate income filers, the aides say.
"The president
continues to want to sign a balanced bankrutpcy reform bill," said Gene
Sperling, Clinton's national economic adviser. "He has made clear that this bill
misses the mark and he will veto it."
Sen. Charles E. Grassley (R-Iowa),
a key backer of the legislation, urged Clinton to reconsider signing the bill
or, if he does veto it, to do so as soon as possible so that Congress has a
chance to override it. Clinton should remember, Grassley warned, that this
version of the bill at least has a few consumer protections.
"President
Bush might sign a tougher bill without the consumer protections in it," Grassley
said.
LOAD-DATE: December 08, 2000
