Bankruptcy bill drawing fire

Women and children will likely be the real losers under proposed federal bankruptcy reforms, according to critics of a recently passed bankruptcy bill.

Earlier this month, the U.S. House approved legislation that would make it harder for consumers to discharge their debts. Part of that legislation included child support provisions that would do little to help women secure money owed to them by men who file for bankruptcy protection, said Joan Entmacher, vice president of the National Women's Law Center, a nonprofit organization for women's rights based in Washington, D.C.

Even though the provisions give first priority status to child support claims under Chapter 7 filings, allowing debts to be liquidated, Entmacher said the conditions are meaningless because other parts of the bill elevate claims owed to credit card companies and used car dealerships.

"Women and children will lose out to commercial creditors who are the real winners under the bankruptcy bill," she said. "The important thing to realize is that even today, less than 4 percent of Chapter 7 debtors have any assets to distribute. . . . The bill gives women and children the right to stand first in line to get nothing."

Entmacher, part of a panel of bankruptcy experts who debated the issue Friday in a teleconference sponsored by the Virginia-based American Bankruptcy Institute, said current law requires child support debts to be paid in full before a bankruptcy plan is approved and discharged. However, under the new legislation, more unsecured debts will have to be paid, leaving less money for child support arrears.

"More debts will have to paid under a Chapter 13 plan under this bill in addition to support to families. And the reality is that even now two-thirds of Chapter 13 plans fail."

Chapter 13 allows debts to be repaid over a three- to five-year period.

Yet Philip Strauss, an attorney with the National Child Support Enforcement Association, said the new provisions will provide an enormous service for women and children, who require support during bankruptcy proceedings. He said child support payments through income withholding can be blocked at the time of a bankruptcy filing.

"Currently a Chapter 13 debtor can obtain all of the benefits of bankruptcy and ironically not pay one cent of court-ordered ongoing child support," Strauss said. "The current status of the law puts the debtor's children and very frequently the mother of the children at enormous economic risks when the debtor seeks bankruptcy protection. And the problem, of course, is magnified when these women cannot afford representation."