Senate blocks U.S. bankruptcy bill, prospects dim
Senate Democrats Wednesday blocked a vote on final legislation to overhaul the U.S. bankruptcy system, further dimming the prospects of efforts to make it harder for individuals to wipe out their debts.
With a number of senators absent, Republicans were unable to muster the 60 votes needed to limit further debate and move to a final vote on the bill — which the White House has already said President Clinton would veto.
And with Congress apparently poised to defer its unfinished budget battles until after next week’s elections — in what many lawmakers believe will be a very short “lame duck” session — opponents of the bill were claiming a “tremendous victory.”
“I think the dynamic changes in a lame duck session and I think we will only be in a stronger position,” said Minnesota Democratic Sen. Paul Wellstone.
Added Massachusetts Democratic Sen. Edward Kennedy: “I think this thing is gone.”
But supporters insisted they would continue to press for Senate passage of the bill, which was approved by the House last month.
“We will persist in our effort to pass this important legislation,” said Senate Majority Leader Trent Lott of Mississippi. “We will have another vote before the year is out, whenever that may be.”
The effort is strongly backed by banks, credit card companies and retailers, who argue the current law encourages “bankruptcies of convenience” by people who could afford to pay back some of their debts.
BILL CALLED ONE-SIDED
Opponents, including academics, labor unions and consumer groups, counter that those companies are reaping the results of their own aggressive marketing of credit and call the bill a huge special-interest giveaway.
The legislation would establish a “means test” formula that would be applied to determine how much relief debtors could receive in bankruptcy and how much they could be made to repay.
Those judged able to repay some of what they owed could be disqualified from Chapter 7 — which allows most unsecured debts, such as credit card bills, to be wiped out — and put into Chapter 13, which requires repayment of those debts.
Supporters argue that is needed to respond to a sharp rise in personal bankruptcies in the United States in the last decade, with filings reaching a record 1.44 million in 1998.
“The fact is, the bankruptcy reform bill … will do a lot of good for the American people and the American economy,” said the bill’s chief Senate sponsor, Iowa Republican Charles Grassley.
Opponents argue the “bankruptcy crisis” has already been defused by lenders tightening credit standards in response to earlier losses, citing a more than 8 percent drop in filings in 1999 — the largest one-year decrease on record — and a continued decline so far this year.
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