Bill to Alter Bankruptcy Seems to Stall
By RIVA D. ATLAS
A bill that would have made it more difficult for consumers to dismiss their debts by filing for bankruptcy has effectively been pushed aside in Congress, unlikely to re-emerge this year, lawyers and analysts say.
The Senate and House passed versions of the legislation in March, and a conference was scheduled for this fall to reconcile the differences. But with consumer confidence considerably weaker since the terrorist attacks on Sept.11, lawmakers' enthusiasm for the legislation may have dimmed.
"This bankruptcy legislation is more protective of the lenders than the consumer," said Meredith Whitney, an analyst at Wachovia (news/quote) Securities who follows credit card companies. "Given that so much of the economy hinges on the consumer, no one in Washington wants to be perceived as anticonsumer."
Bankruptcy filings have been on the rise this year as consumers and corporations have found it hard to pay their bills. The number of consumers filing for bankruptcy has also risen in anticipation of passage of the bankruptcy bill, which would make it more difficult for individuals to file under Chapter 7 of the United States Bankruptcy Code.
Chapter 7 permits consumers and businesses to shed most of their unsecured debts. Under the bill, more individuals would be forced to file under Chapter 13, which requires debtors to come up with a plan to pay off at least a portion of their debts, usually over three to five years.
With little talk about reviving the legislation, Visa International told its network of bank credit card issuers earlier this week that it was lowering its projections for bankruptcy filings by individuals this year to an increase of 21.1 percent from a previous estimate of a 23 percent increase, Ms. Whitney said. A spokeswoman for Visa declined to confirm the projections, saying the numbers were confidential. Ms. Whitney said she had access to the data because Wachovia is a credit card issuer.
Congressional staff members said the legislation had not officially been tabled, but there were no signs it was a priority, either. A conference to reconcile the two versions of the bill was scheduled for the day after the terrorist attacks, but it was canceled, said Jeff Lungren, a spokesman for the House Judiciary Committee.
Bankruptcy lawyers said the weakness in the economy meant that more consumers would remain in dire straits in the near future.
"The economy was bad before Sept. 11, but things have really deteriorated since," said Max Gardner III, a bankruptcy lawyer in Shelby, N.C. "I have never before seen the sense of personal desperation and fear that I've seen. Filing for bankruptcy provides some certainty in a sea of uncertainty."