Legislation to Curb Bankruptcy Filings Moving Again in Congress

From Tampa Bay Online:

Legislation to Curb Bankruptcy Filings Moving Again in Congress

By Marcy Gordon, The Associated Press

Published: Mar 4, 2003

WASHINGTON (AP) - Legislation to make it tougher for people to dissolve their debts in bankruptcy court, which barely failed last year, is moving again in Congress.

Banks, credit card companies and retailers have pushed for the legislation since 1997. The record pace of new personal bankruptcies in 2002 is expected to continue this year in a weak economy.

Lawmakers of both parties - and President Bush - support an overhaul of the federal bankruptcy laws. Consumer and civil rights groups and unions oppose it, contending it is unfair to low-income working people and would remove a financial safety net for those who have lost their jobs or pile up onerous medical bills.

Continued.

House and Senate leaders, including Orrin Hatch, chairman of the Senate Judiciary Committee, have promised to put the legislation on a fast track. Now that Republicans control both chambers as a result of November's elections, the process is expected to be speedy.

Rep. James Sensenbrenner, R-Wis., the House Judiciary chairman, has put forward the almost-enacted 2002 measure, after removing a provision that would have barred anti-abortion protesters from declaring bankruptcy to avoid paying court-imposed fines. Last year, that provision led conservative anti-abortion Republicans to join to block the bill with House Democrats opposed to overhauling bankruptcy laws. That bill was a House-Senate compromise that came the closest to passage of any of the six previous years' versions.

A House Judiciary subcommittee held a hearing on the legislation Tuesday, a step toward drafting and voting on a bill.

More than 225 groups, including the AFL-CIO, Consumer Federation of America, church groups, the NAACP, the National Organization for Women and the Public Interest Research Group, signed a letter to House leaders asking them to reject the bill as written.

"At a time when many Americans have been harmed by a very shaky economy and a massive wave of corporate scandals, moving forward mechanically with ... (the bill) would be a mistake," the groups said. "Rising bankruptcies are driven by economic difficulties. The timing of this bill could not be worse."

The legislation could especially hurt women, minorities, the unemployed and older Americans, the groups said.

Proponents of the legislation insist it is needed to stop abuse of the bankruptcy system by people who can afford to repay their debts. The abuse, they say, creates a hidden tax of about $400 a year on every American family through higher interest rates passed on by consumer credit businesses and other charges.

The goal is "to prevent people who have been abusing the system from continuing to do so," said Tom Lehner, executive vice president of the American Financial Services Association, a group representing retail credit businesses.

Bankruptcy filings reached a record high last year, gaining 5.7 percent over 2001, according to data released last month. The data compiled by the Administrative Office of the U.S. Courts show that new bankruptcy filings in 2002 totaled 1,577,651, compared with 1,492,129 in 2001 as the economy slid into recession.

Under current law, Chapter 7 of the U.S. Bankruptcy Code allows people to erase credit-card and other debts, usually in exchange for giving up some personal assets. Filings under Chapter 13 force people to repay debts over time in accordance with a court-approved plan.

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.

The legislation would apply a new standard under which, if a debtor had sufficient income to repay at least 25 percent of the debt over five years or earned at least the median income for his state, he or she would be forced into a Chapter 13 repayment plan.

On the Net: American Bankruptcy Institute: http://www.abiworld.org

Administrative Office of the U.S. Courts: http://www.uscourts.gov

AP-ES-03-04-03 1430EST

http://ap.tbo.com/ap/breaking/MGAUM5F9WCD.html

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