IE 11 is not supported. For an optimal experience visit our site on another browser.

Senate nears approval of bankruptcy bill

/ Source: The Associated Press

Majority Republicans methodically knocked down Democratic attempts to ease the effects of a pending bankruptcy bill as senators neared final passage of legislation making it harder for people to dump debts.

With House approval likely to seal work on Capitol Hill next month, the bill would give President Bush the second of his pro-business legislative priorities since the GOP increased its majorities in both chambers last November.

The march to Senate passage was slowed by partisan wrangling over a Democratic proposal eyeing recent corporate scandals such as Enron and WorldCom, which appeared to be gathering support among some Republicans but was defeated Thursday on a 55-44 vote.

That amendment would have prohibited investment banks that advised or financed securities offerings by companies that later filed for bankruptcy from also representing the company or defrauded creditors in the bankruptcy proceeding.

Five Republicans broke ranks to vote for the amendment while five Democrats split off to oppose it.

The proposal was meant to prevent conflicts of interest, said sponsor Sen. Patrick Leahy, D-Vt. The bankruptcy bill as written would overturn current law to allow investment bankers to play both roles — a move that Securities and Exchange Commission Chairman William Donaldson recently said would be a mistake “at a time when investor confidence is fragile.”

Senate Democrats complained that Republican leaders refused to allow a vote on the amendment in Wednesday’s session, delaying the tally for a day. Republican Sen. John Warner of Virginia, who had been one of the sponsors, was compelled by the GOP leaders to withdraw his name, Senate aides said, speaking on condition of anonymity.

Many of the 1.5 million people who seek bankruptcy protection yearly could soon be barred from dissolving medical bills, credit card charges and other debts under the legislation.

The House is expected to follow next month with approval of the legislation, which orders the most thorough overhaul of U.S. bankruptcy laws in a quarter-century. It long has been sought by credit card companies and banks yet stalled for eight years by congressional gridlock.

Bush is eager to sign the measure, delivering to the business community on a campaign promise.

In the earlier pro-business legislative victory for Bush, Congress sent him a law last month placing most large multistate class action lawsuits under federal court jurisdiction, making it more difficult for plaintiffs to join together and win multimillion-dollar judgments in state courts.

As the Senate quickstepped Wednesday toward passage of the legislation, Democratic opponents made last-ditch attempts to restrict practices of the credit industry that they said were especially hurting the poor. Not a dent was made in the bill, which was armor-plated by the Senate’s Republican majority against amendments.

The legislation would establish a new income-based test for measuring a debtor’s ability to repay debts, require people in bankruptcy to pay for credit counseling and stiffen some legal requirements for debtors in the bankruptcy process.

It would ease some requirements for creditors and enable credit card issuers, retailers and other lenders to recover more of what is owed them.

Opponents say it would fall hard on low-income workers, single mothers, minorities and the elderly and would remove a safety net for those who have lost their jobs or face big medical bills.

“The bankruptcy courts are filled with cases of hardworking single mothers who were pushed over the financial brink because they failed to get the child support they deserve,” said Sen. Edward M. Kennedy, D-Mass., author of an amendment addressing single parents. “Yet this bill would only tighten the screws, looking to squeeze out a few more dollars for the credit card companies.”

Backers of the legislation argue that bankruptcy frequently is the last refuge of gamblers, impulsive shoppers, divorced or separated fathers avoiding child support, and multimillionaires — often celebrities — who buy mansions in states with liberal homestead exemptions to shelter assets from creditors.

“The short answer is fairness,” insisted Sen. Orrin Hatch, a Utah Republican. “Those who can pay their bills should pay their bills. That’s the American way.”

Banks, credit card issuers and retailers have lobbied vigorously for bankruptcy revisions that would force more people to repay at least part of their debt. Such a bill nearly passed in 2002. But it failed when the Senate accepted, but House Republicans rejected, a Democratic amendment barring anti-abortion protesters from using bankruptcy to avoid paying court fines for blocking abortion clinics.