After an angry partisan exchange, the Senate Judiciary Committee on Thursday overwhelmingly approved a bill to rewrite the nation's personal bankruptcy laws.
Sen. Edward Kennedy, D-Mass., called the bipartisan measure "Robin Hood in reverse - robbing women and children to increase profits for banks and credit card companies."As legislation making the most sweeping overhaul of the bankruptcy laws in 20 years advances through the House and Senate, rancor over the issue has intensified. The measures are supported by the credit card industry and opposed by consumer groups.
Lawmakers are alarmed by the rising number of debtors in a strong economy. The number of Americans filing personal bankruptcies last year jumped to 1.2 million - up more than 300 percent since 1980.
In Utah alone, 12,127 bankruptcy cases were filed in 1997, almost doubling the figure of 6,514 filings in 1994. Through April of this year, another 4,839 cases were filed.
The Clinton administration, which supports some changes in the bankruptcy laws, has said it cannot support the legislation in its current form. The administration prefers the more temperate Senate measure but also would like to see changes in it.
Led by President and Mrs. Clinton, Democrats have called attention to provisions in both bills that they say would defuse the Democrats' criticism. Senate Republicans adopted an amendment to give child support and alimony payments top priority in bankruptcy cases - putting them ahead of federal taxes, bankruptcy attorneys' fees and other obligations.
"Deadbeat dads should be given no chance to manipulate the bankruptcy laws in order to avoid making child support and alimony payments," said Judiciary Committee Chairman Sen. Orrin Hatch, R-Utah, who proposed the amendment with GOP Sens. Charles Grass-ley of Iowa and Jon Kyl of Arizona.
The change wasn't sufficient for Kennedy, who angrily told Kyl that it was only "a very modest step" that should have been taken when the bill was originally drafted.
Grassley, entering the fray as Kennedy and Kyl traded barbs, said, "I don't think Republicans can be made to look bad on this issue now."
Sen. Richard Durbin, D-Ill., who co-sponsored the Senate bill with Grassley, suggested that even if child support payments get top priority, single mothers still would have to compete with credit-card companies in bankruptcy court.
"The question is how many other people will be in the pool?" he said.
The panel voted, 16-2, to approve the bill and send it to the full Senate, where debate is likely to be contentious because decisions on several amendments were deferred Thursday. Opposing the meas-ure were Kennedy and Sen. Russell Feingold, D-Wis.
Last week, the House Judiciary Committee cleared, by an 18-10 vote, a GOP-backed bill that is more stringent toward debtors. The House measure would, among other things, establish a "needs" test to determine how much debt relief people filing for bankruptcy protection should receive and how much they are able to repay.
People would be forced to file under Chapter 13 of the bankruptcy code, subject to a court-ordered repayment plan, if they earned at least 100 percent of the U.S. median income (now some $51,000) and had the ability to repay at least 20 percent of their debt over five years. Their child-rearing expenses, including support payments, would be subtracted before calculating the ability to repay 20 percent of their debt.
Under that scenario, people would not be allowed to file under the more lenient Chapter 7, in which some debts can be erased. Credit-card companies have complained that too many people have taken shelter under Chapter 7 who actually can afford to reorganize their debts under Chapter 13.
With one filing for every 53.6 households, Utah's bankruptcy rate is among the nation's highest.
Rank State Filings Filing Rate*
1 Tennessee 52,459 38.9
2 Georgia 61,572 44.2
3 Nevada 13,125 47.2
4 Alabama 32,785 49.5
5 Mississippi 18,459 53.0
6 UTAH 12,127 53.6
7 California 202,642 54.8
8 Oklahoma 21,962 57.6
9 Maryland 30,921 60.5
10 Indiana 36,495 60.5
41 Massachusetts 20,680 112.3
42 Delaware 2,427 112.5
43 Iowa 9,545 115.6
44 South Dakota 2,321 117.6
45 Maine 4,097 117.9
46 South Carolina 11,024 124.8
47 Pennsylvania 36,799 124.9
48 Vermont 1,841 125.1
49 North Dakota 1,928 128.1
50 Alaska 1,593 134.3
NATIONWIDE 1,335,053 74.0
* Calculated by dividing number of households by number of filings.
Source: Visa U.S.A.