Senate opens debate on bill to limit bankruptcies

WASHINGTON – After nearly eight years of trying, proponents of legislation to make it harder to erase consumer debts believe it finally will pass Congress. The Senate began debate Monday on the measure, a priority for Republican leaders.

Many Senate Democrats also support a bankruptcy overhaul, but oppose the current bill. They have prepared amendments that would, for example, protect employees of bankrupt companies and exempt military personnel from new restrictions on filing for bankruptcy.

The Democrats also are considering trying to add to the bill an increase in the minimum wage, aides said.

As debate opened, the White House said it supported the bankruptcy legislation.

“These common-sense reforms to the nation’s bankruptcy laws will help curb abuses of bankruptcy protections,” the White House said in a statement.

In the House, the chairman of the Judiciary Committee, Rep. James Sensenbrenner, R-Wis., has proposed identical legislation.

Supporters hope for congressional passage before lawmakers adjourn for the spring recess next month. They say they are heartened by the swift passage two weeks ago of a bill aimed at discouraging class-action lawsuits.

Making the case for the bankruptcy legislation, Majority Leader Bill Frist, R-Tenn., said in the Senate chamber Monday that “wealthy debtors are walking away from debts they can repay.”

Banks, credit card companies and retailers have pushed since 1997 for a bill overhauling the bankruptcy laws.

Consumer and civil rights groups and unions, as well as Democratic opponents, say the legislation is unfair to low-income working people, single mothers, minorities and the elderly, and would remove a safety net for those who have lost their jobs or face mounting medical bills.

Sen. Edward M. Kennedy, speaking after a discussion in Boston on veterans who are returning from Iraq and Afghanistan, said he is concerned about soldiers in the National Guard and Reserves whose businesses fail after they are called up to serve.

The legislation before the Senate “will come out more on the side of the creditors in terms of harassing these extraordinary individuals rather than recognizing that these are hard working people,” said Kennedy, D-Mass. “I’m going to do everything I can to make sure that (it) is not passed in the United States Senate the way that it is.”

Democrats also want the bill to prohibit protesters from using bankruptcy to avoid paying court fines for blocking abortion clinics, if the demonstrators knowingly violated the law.

Bankruptcy legislation nearly passed Congress in 2002 but failed over that proposal. Bush has supported bankruptcy bills that do not include the clinic provision.

The Senate Judiciary Committee approved the bill, 12-5, on Feb. 17. Three of the committee’s eight Democrats – Sens. Joseph Biden of Delaware, Dianne Feinstein of California and Herb Kohl of Wisconsin – voted with the Republican majority.

Personal bankruptcies appear to have broken the upward trend of recent years, slipping 0.8 percent in the 12 months ending June 30, according to the most recent figures.

Some experts say the decline means that while the level of bankruptcies is still high compared with four years ago, some consumers finally have been able to benefit from an improving economy and low interest rates.