US Congress clears bankruptcy overhaul
Thu Apr 14, 2005 03:53 PM ET
(Recasts with passage of bill)
By Susan Cornwell
WASHINGTON, April 14 (Reuters) - Bankruptcy legislation making it tougher for heavily indebted Americans to wipe out their obligations and start over won final congressional approval on Thursday.
Sought for years by banks and credit card companies who say people are abusing bankruptcy to escape repayment, the measure cleared the House of Representatives on a 302-126 vote. It passed the Senate last month on a 74-25 vote.
The bill now goes to President George W. Bush, who has said he is eager to sign it into law as part of his legal reform agenda.
Opponents say the bill is too harsh on poor and middle-class Americans, arguing many of those filing for bankruptcy were driven into debt by unemployment, a medical crisis or divorce.
The measure contains an income test to determine if people should enter compulsory repayment plans, rather than have their assets liquidated to repay creditors.
"This bill will help stop fraudulent, abusive, and opportunistic bankruptcy claims by closing various loopholes and incentives that have produced steadily cascading bankruptcy claims," said Wisconsin Republican Rep. James Sensenbrenner.
Personal bankruptcy filings have risen in recent years, but last year they were down 3.8 percent to 1.6 million.
Critics also charge the bill ignores loan-shark style practices that entice people to borrow, and then sock them with high interest and fees. They say it adds insult to injury by forcing those filing for bankruptcy to have credit counseling.
"This is the most special interest-invested bill that I have ever dealt with in my career in Congress," said Rep. John Conyers, a Michigan Democrat first elected in 1964. "It massively tilts the playing field in favor of banks and credit card companies and against working people and their families."
Some parts of the bill affect corporate bankruptcies. It lets creditors close out their derivatives contracts with companies that have filed for bankruptcy, a provision aimed at reducing the risk of systemic financial crises.
Another provision tightens the rules for companies that are filing for bankruptcy and want to pay retention bonuses to executives to stop them leaving.