Senate passes bankruptcy overhaul bill
Friday, March 16th 2001, 12:00 am
By: News On 6
WASHINGTON (AP) _ The Senate has voted to make it more difficult for people to erase their debts in bankruptcy courts and closed a loophole in present law that allows wealthy debtors to shield their assets in luxury homes.
Thursday's 83-15 vote in favor of the most sweeping overhaul of bankruptcy laws in 20 years occurred just two weeks after the House passed a similar bill, but one that left wealthy homeowners in some states protected.
The measure garnered the votes of 47 Republicans and 36 Democrats in the evenly divided Senate, while 13 Democrats and two Republicans opposed it. Sen. Peter Fitzgerald, R-Ill., voted present to avoid a conflict of interest because his family owns a bank.
To speed a final package to a receptive President Bush, the bill's supporters now want the House to either approve the Senate version or make changes in it and send it back to avoid having to negotiate the differences between the two versions.
Personal bankruptcy filings have declined in the past two years, but the legislation comes against the backdrop of a sagging economy and shaken stock market.
It was the second business-friendly measure to pass both houses of the new Congress. Last week, Congress voted to repeal last-minute Clinton administration workplace rules aimed at curbing repetitive motion injuries.
Bush has signaled he would sign the bankruptcy legislation, which passed the House on March 1. But he is opposed to national caps on homestead exemptions, such as the $125,000 limit the Senate adopted by voice vote Thursday.
``We're very encouraged by the direction of the bankruptcy legislation,'' White House spokesman Ari Fleischer said. ``However, we continue to work with leaders on the Hill. The president is looking forward to the presentation of the bill that he can sign.''
Sen. Paul Wellstone, D-Minn., a leading opponent of the bill, predicted the Senate homestead cap ``will be a problem for the White House.''
The bill would limit to $125,000 the amount of home equity that debtors can keep out of the reach of creditors in bankruptcy court.
Sen. Herb Kohl, D-Wis., who sponsored the homestead amendment, cited the case of actor Burt Reynolds, who wrote off millions in debt in bankruptcy court but kept his $2.5 million Florida estate.
The Senate debated the bill for two weeks, but few of the issues were new to it. The banking, credit card and retail credit industries have spent millions of dollars in campaign contributions and lobbying activities on behalf of it over the past three years.
Consumer groups and unions have been aggressive in opposing it, contending that the changes in bankruptcy law will take away an important means of relief for families hit by job losses. Former President Clinton vetoed last year's version, saying it would hurt ordinary people and working families.
The legislation applies a new standard for determining whether people filing for bankruptcy should be forced to repay their debts under a court-approved reorganization plan rather than having them dissolved. If a debtor is found to have sufficient income to repay at least 25 percent of the debt over five years, a reorganization plan generally would be required.
Some proponents of the legislation have insisted that the real issue is not money but fundamental values such as fairness and taking responsibility for one's actions.
``I think that it is a moral question,'' said Sen. Jeff Sessions, R-Ala. It is an ``unhealthy value'' to encourage people who can repay their debts to walk away from them, he said.
Personal bankruptcies in the United States reached a record 1.4 million in 1998, up more than 300 percent since 1980. The total declined to about 1.3 million in 1999 and 1.2 million last year.
In recent days, Senate Democrats have proposed a series of amendments aimed at tempering the legislation but have been rebuffed almost every time.
Shortly before approving the bill, senators voted 79-18 to knock out a provision that could have blocked insurer Lloyd's of London from collecting debts from about 300 U.S. investors. It would have prevented foreign courts from collecting judgments against any American investors if the investors could demonstrate that they were victims of misrepresentations or omissions from 1975 through 1993.
Secretary of State Colin Powell said in congressional testimony Wednesday that the Bush administration strongly opposed the provision.