GOP REVOLT, ABORTION POLITICS DOOM BANRUPTCY REFORM - FOR NOW
by Philip E. Daoust
American Reporter Correspondent
San Francisco, Calif.
WASHINGTON, Aug. 2, 2002 -- Congress adjourned for its August recess Thursday without a final vote on a controversial bill that would make it more difficult for millions of Americans to seek bankruptcy protection from creditors.
A hotly-contested provision that would prohibit anti-abortion protestors from declaring bankruptcy to avoid paying court fines became the central obstacle in getting a final vote on the bill before the Congressional recess.
U.S. Sen. Charles Schumer (D-N.Y.), one of the bill's authors, refused to strike the provision from inclusion in the final legislation.
But House Judiciary Chairman James Sensenbrenner (R-Wis.) and veteran lawmaker Rep. Henry Hyde (R-Ill.) were concerned the law could be used to unfairly penalize non-violent abortion protestors. House Republicans mustered up enough turmoil last week to bring Sen. Schumer and other Democrats back to the bargaining table.
Following intense negotiations, Sen. Schumer and Rep. Hyde agreed to strike from the bill the term "reproductive health services," replacing it with a more friendly pro-life wording, which Democrats reluctantly agreed to in the interests of getting a vote on the bill before recess.
But pro-life Republicans were still unhappy with the anti-abortion protestor provision, and before a final vote could be scheduled, they staged an eleventh-hour rebellion.
The right-wing revolt was spearheaded by Rep. Christopher Smith (R-N.J.), who flustered enough GOP members to launch a challenge in the last hours of the Congressional session on July 25. Repeated calls to the senator's office for a comment went unanswered.
The revolt spurred Democrats' concerns that support for the measure was quickly eroding in the Republican-controlled House. In an effort to save the bill altogether, Democrats agreed to withdraw it, leaving the measure suspended in legislative limbo until Congress reconvenes after Labor Day.
Some Democrats felt too much of the bill's original intent was sacrificed to the demands of the right-wing Republican minority.
Unconfirmed reports from the Congressional Daily suggest the bill may never have had a chance for a vote anyways, because many Democrats were displeased with the "last-minute" changes to the final version.
However, David Carle, a spokesperson for U.S. Sen. Patrick Leahy (D-Vt.), a main author of the bill, indicated Thursday that the senator was satisfied with the final version of the bill.
"The senator believes it is a much better and more balanced bill," Carle said. He would not comment on the Republicans move to delay a vote on the legislation.
In September, when House members return to Capitol Hill, it is likely they will vote on the measure, especially if the bill's proponents persuade the pro-life contingency to concur with the Hyde-Schumer agreement and solidify wavering support among some Democrats.
One Congressional aide, who asked not to be identified, said the bankruptcy reform bill will "most likely" be passed in the fall session of Congress, even with the latest changes. President George Bush said last Monday that he would sign the bill.
U.S. Sen. Paul Wellstone (D-Minn.), one of the legislation's leading opponents, may attempt to block a vote in the fall session. Sen. Wellstone claims that the bill is unfair to hundreds of thousands of people have lost their jobs and retirement savings since the corporate accounting scandals became public.
Consumer advocacy groups are also opposing the legislation, claiming it unfairly impacts legitimate personal bankruptcy filings.
"The bill throws up very high barriers to bankruptcy for moderate income and working people, while still allowing affluent debtors to exploit existing bankruptcy loopholes," said Travis Plunkett of the Consumer Federation of America.
Plunkett and other consumer advocates are worried that the bill contains no provisions for holding credit card companies and others debtors responsible for the lending practices that often lead many people to bankruptcy.
Consumer groups are not the only ones calling foul. Some columnists also contend that the bankruptcy reform bill is actually legislation beneficial to the rich, and devastating for those who face traumatic and unexpected losses and need protection from creditors.
"No belt-tightening has been applied to Chapter 11, the portion of the bankruptcy law that large corporations employ, " wrote progressive columnist Robert Scheer. "The end result is that a company like Enron gets to protect the wealth of its top people, while its fired workers and money-losing investors find it hard to obtain relief."
But banking and business groups disagree, claiming the legislation will affect only about 10 percent of personal bankruptcy filings.
"The bankruptcy system is still going to continue to be there for most Americans. Nothing is going to change," American Bankers Association spokeswoman Catherine Pulley told the Associated Press.
As it stands now the new bankruptcy bill would establish a system in which personal bankruptcy filers automatically undergo an income evaluation. If the debtor is found to have sufficient income to repay at least 25 percent of the debt over the ensuing five years, or they earn the median income in the state of residence, a judge will be required by default to order a Chapter 13 repayment schedule.
Filings under Chapter 13 force people to repay debts over a period of time in accordance with a court-approved plan. Chapter 7 of the U.S. Bankruptcy Code allows people to dispose of most of their unsecured debt, like credit cards.
The new legislation comes at a time when more Americans are filing for bankruptcy than ever before. In fact, between April 1, 2001 and March 31, 2002, a record 1.5 million Americans filed for protection from creditors. A whopping 97 percent were personal bankruptcies
Currently, a bankruptcy judge or a private attorney appointed by the Justice Department usually decides whether someone qualifies for dissolution of debts or should be forced to repay under a reorganization plan.
Some changes have been made to the bankruptcy laws in recent years, but most measures for bankruptcy reform have been deadlocked in Congress for years. President Bill Clinton vehemently refused to sign legislation that would make it more difficult for moderate to low-income people to declare bankruptcy without any provision to make lenders more accountable.
The absence of any measures in the bankruptcy legislation to make lenders more responsible doesn't surprise consumer advocates.
"[The bill] does absolutely nothing to crack down on lenders who extend credit recklessly," Plunkett said. He added that 90 percent of all personal bankruptcies are triggered by the loss of a job, overwhelming health bills or divorce.
Credit card companies and financial institutions, while all in favor of the new personal bankruptcy provisions, have fiercely opposed any efforts to make lenders more accountable.
Over the past five years, large bank chains, like MBNA America Bank, have deployed scores of lobbyists to Capitol Hill for bankruptcy reform and donated tens of millions of dollars to Congressional and presidential campaigns.
A review of contributors to the 2000 Bush campaign for the White House reveals that MBNA America Bank was the single biggest donor, giving a total of $240,675. Records show that so far this year, banks and financial institutions have contributed more than $10 million to the 2002 Congressional elections.
During the past year, banking lobbyists have stepped up their pressure on individuals members of both chambers of Congress to get the bill passed, while aggressively resisting any moves to add provisions that would make lenders more responsible. Even some Congress members who were all for the bankruptcy reform, opposed the absence of lender responsibility clauses in the legislation.
In March of 2001, while the Senate was locked in a heated battle over the bankruptcy bill, the bill's author, U.S. Sen. Charles Grassley (R-Iowa) acknowledged to CNN, "we have a lot of protection in there for creditors. But we also have a lot of education information on interest in there for debtors."
On the day of the vote, March 15, 2001, Sen. Wellstone and Sen. Grassley openly debated the bill on the Senate floor. Wellstone agreed with Grassley that bankruptcy fraud is a problem, but he charged the legislation went "too far" in penalizing the majority of people who file bankruptcy out of absolute need. Sen. Wellstone said studies showed only three percent of people who file for Chapter 7 abuse the law.
"Bankruptcy has been a safety net not just for low-income people, but for middle-income people as well," Wellstone told the Senate. "It is being shredded. I think all I can say is, we'll just have to see how history judges us."
One study by the American Bankruptcy Institute, according to Plunkett, found that "only three to four percent of those who declared Chapter 7 bankruptcy could afford to pay off even a portion of their debts.
"Yet, this bill radically alerts the current bankruptcy system and will make it more difficult for debtors who have suffered real financial misfortune to get a fresh start in both Chapter 7 and Chapter 13," he said.