Congress passes measure making bankruptcy harder

WASHINGTON — Bankruptcy lawyers expect thousands of debt-burdened people to rush to courthouses to beat a new law making it harder to wipe the slate clean of credit card bills and other obligations.

The biggest changes in U.S. bankruptcy laws in a quarter-century will occur 180 days after President Bush signs a bill that Congress sent him Thursday. The 30,000 to 210,000 people that the American Bankruptcy Institute estimates will be affected by the new law can escape its impact if they file for bankruptcy before then.

"We will be up working late trying to get those petitions filed before the deadline," said Eric Roland Spencer, a bankruptcy attorney practicing in Roanoke, Va.

In recent weeks as Congress has debated the legislation, Spencer said, he's seeing seven to eight clients a day, up from four a day beforehand.

The bill passed by the House Thursday on a 302-126 vote marks the second major change in law to benefit business since Republicans increased their House and Senate majorities in last fall's elections. The Senate passed the bill last month, 74-25.

The measure requires people with incomes above a certain level to pay credit-card charges, medical bills and other obligations under a court-ordered bankruptcy plan.

Opponents say the change would fall especially hard on 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 crushing medical bills.

The legislation "protects the credit industry at the expense of the consumer," Rep. Alcee Hastings, D-Fla., declared in House debate. "It will drive more Americans deeper into financial crisis and weaken the nation's economy and social structure."

But backers in Congress and the financial services industry argue that bankruptcy frequently is the last refuge of gamblers, impulsive shoppers, divorced or separated fathers avoiding child support, and multimillionaires — often celebrities — who buy mansions in states with liberal homestead exemptions to shelter assets from creditors.

"Those who abuse the system make getting credit more expensive for everyone," House Speaker Dennis Hastert, R-Ill., said after the vote as he and Senate Majority Leader Bill Frist, R-Tenn., signed the bill to speed it to the president. "Bankruptcy is for those who need help, not those who want to shift costs to other hardworking Americans."

During debate, Rep. David Dreier, R-Calif., pegged those costs, in the form of higher interest rates, at an average $400 a year per family.