Democrats fail to soften strict House bankruptcy bill Measure to benefit banks, credit card companies


WASHINGTON -- With the number of personal bankruptcies soaring, the House Judiciary Committee considered a controversial bill yesterday promoted by the banking and credit card industries to make it more difficult for people to declare themselves legally broke.

By defeating several changes proposed by Democrats, the Republicans in control of the committee signaled that they would pass the bill, probably today.

The Senate Judiciary Committee is expected to consider a somewhat less strict version as early as today, and both houses could vote next week.

The bill, which the Clinton administration has threatened to veto, would require an income test of those filing for bankruptcy and would constitute the first major change to bankruptcy law in two decades.

Banks and credit card companies argue that the measure is needed to allow them to recoup money from people who use the bankruptcy system to walk away from payments they are able to make.

They estimate that of the 1.37 million people who filed for bankruptcy last year, 15 percent had the means to pay their debts. They said this amounted to about $4 billion in forgiven debt, which is passed on to consumers in higher prices and higher interest rates.

Critics of the bill -- most Democrats and various advocacy groups for consumers, victims, women and children -- complained that it gives credit card companies equal legal footing with single parents who are trying to recover alimony and child-support payments from someone who has filed for bankruptcy.

They contended that the collection agencies hired by banks, department stores and other creditors would be far more aggressive in recouping money than would, say, a single mother and that battling the credit industry in court for priority would leave the parent even more destitute.

Since 1903, Congress has required that anyone in bankruptcy still provide child-support and alimony payments, regardless of other debts. It has since expanded that requirement to include taxes and student loans.

The committee rejected a sheaf of Democratic proposals yesterday to state in iron-clad language that the bill would not put women and children at a disadvantage.

Republicans said the final language offered such protection; Democrats insisted it was open to interpretation, but they could not muster enough support.

Pub Date: 5/14/98

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