Posted on: Friday, March 11, 2005
Senate passes bankruptcy-law overhaul
By Kathleen Day
Washington Post
WASHINGTON — The Senate yesterday approved a measure backed by the credit-card industry that would make it harder for individuals to wipe out debt through bankruptcy, setting a path for quick passage of the bill by the House as early as next week.
Bankruptcy filings for 2004:
• Total bankruptcies: 1,597,462. • Business bankruptcies: 34,317.
• Personal bankruptcies: 1,563,145.I Chapter 13: Debtors are put on a stringent repayment schedule, their wages are garnished for years, in an effort to repay as many creditors as possible. Hawai'i's Democratic senators split their votes with Daniel Akaka voting against the bill and Dan Inouye voting for it.
House Republican leaders have promised to take up the bill within weeks — and to deliver the votes to pass it. That commitment was based on the Senate keeping the bill free of major new amendments that would have undone scores of compromises carefully crafted over several years in an effort to secure passage of the measure.
President Bush has said he would sign the bill. It would be the second major win for big business in Bush's second term, following passage last month of legislation intended to curb class-action lawsuits against corporations.
Under the legislation, people who earn less than the median income of their state can file under Chapter 7. Hawaii's median household income is $50,110, according to the state Department of Business, Economic Development and Tourism.
The bill would require many consumers filing for bankruptcy court protection to repay a portion of their debt under Chapter 13 of the bankruptcy code rather than allowing them to erase it almost entirely. It is estimated that the proposed legislation would force an estimated 30,000 to 100,000 additional filers a year into Chapter 13.
Consumer groups and many Democrats say the bill is too harsh on individuals who fall on hard times from sickness, divorce or job loss and have criticized it for retaining a loophole that allows wealthy individuals who file for bankruptcy to protect expensive homes.
The bank, credit-card and retail industries argue that changes to current law are needed to end abuse of the system by consumers who shirk their debts when they could repay a portion.
Gannett News Service contributed to this story.
The 74-25 vote in favor of the bill, which makes the most sweeping changes in bankruptcy law in more than 25 years, was propelled by a 55-member Republican majority who voted in unison, joined by 18 Democrats and one independent.
Bankruptcy in America
• • •
| Personal bankruptcy
Average age: 38. 53 percent have at least some college education. 44 percent are couples. 46 percent cited a family medical crisis as the main reason for bankruptcy. 6.9 percent of bankruptcy filers are age 25 or younger. Two out of three have lost a job. Median income in the year prior to filing for bankruptcy: $25,000. States with the highest bankruptcy rates: Tennessee, Utah, Georgia, Nevada, Indiana. Defining bankruptcy • Chapter 7: Designed for people who fall so deeply into debt that they have no hope of repaying what they owe. Debtors turn over a portion of their assets and in return, their debt is wiped away. The bankruptcy bill would tighten the standards for this category and sweep an estimated 30,000 to 100,000 people a year into Chapter 13 bankruptcy instead. • Chapter 13: Debtors are put on a stringent repayment schedule, their wages are garnished for years, in an effort to repay as many creditors as possible. |
