GOP Resolute on Bankruptcy Bill

Republican senators continued their steady drive toward passing more stringent bankruptcy legislation Wednesday, knocking down a series of Democrat-sponsored amendments to exempt seniors and those facing medical hardship from some of its provisions.

The bill, expected to pass the Senate next week, would impose new hurdles on those seeking to erase their debts through bankruptcy in an effort to force more Americans to pay back more of what they owe.

The measure has been a longtime priority for banks and credit card companies. They argue that the costs of the country’s increased number of personal bankruptcies gets passed on to credit-worthy consumers in the form of fees and higher interest rates.

During Senate debate this week, Democrats have proposed a series of amendments they say are necessary to protect lower-income consumers, especially the sick and elderly and those who fall victim to fraud or aggressive marketing by credit companies.

But in largely party-line votes, Republicans have defeated the proposed changes, arguing that the bill’s main provisions are not punitive. Also, House GOP leaders have said their chamber would not pass a bill containing the Democratic amendments.

On Wednesday, five of the amendments were voted down.

“The only way we are going to change bankruptcy is by passing this bill. And the only way to pass this bill is to pass it without any amendments,” said Sen. Orrin G. Hatch (R-Utah).

The bill’s central provision would require debtors to pass a “means test” to determine whether they had adequate assets to pay back at least some of their debts. Those with incomes below the median level in their state would be allowed to apply for debt forgiveness, but those making above the median would have to develop a repayment plan. The median annual household income in California is about $50,000.

“It is simply too easy for some mostly high-income debtors to simply wipe away their debts by filing for bankruptcy,” Hatch said during the Senate debate.

Two amendments proposed by Sen. Edward M. Kennedy (D-Mass.) sought to protect Americans facing medical hardship. The first would have exempted from the means test those who faced bankruptcy from medical bills. The second would have protected $150,000 of the value of patients’ homes from being seized to pay creditors.

Referring to laws in some states that allow those filing for bankruptcy to keep their houses, Kennedy said, “Fat cats who go into bankruptcy don’t lose their mansions. They can build palaces in Florida and Texas, and the bankruptcy courts can’t touch them. So my amendment says -- if you get sick, you should at least get some protection for your home too.”

Republicans argued that the means test would protect those most vulnerable to financial problems stemming from medical hardship, and that the issue of how much of a home’s value should be protected from seizure during bankruptcy should be decided state by state.

“If you’ve got enough money to pay some of your debts, let me ask you -- should you pay your doctor? Should you pay your hospital?” asked Sen. Jeff Sessions (R-Ala.). “Are those evil entities that if other people are getting paid money, ought they not to be paid? Because that’s what’s in some sense being argued here.”

Republicans also defeated an amendment that would have permitted seniors entering bankruptcy to protect $75,000 of the value of their homes, as well as one that would have exempted from the means test family members forced into bankruptcy by the need to care for a sick relative.

And the GOP rebuffed an effort by Sen. Daniel K. Akaka (D-Hawaii) to force credit card companies to disclose to their clients how long it would take to pay off their balances if they made only the minimum payments.

California’s Democratic senators -- Dianne Feinstein and Barbara Boxer -- voted with the majority of their party on all the votes.

The bankruptcy bill has been in the works for more than eight years and previously has come close to becoming law.

Democrats complained that Republicans were routinely defeating their proposals, regardless of their merits, in an eagerness to push the bill into law this year.

“I think if the majority decides that in every circumstance every amendment that’s going to be offered here in the Senate on these issues is going to be turned away, perhaps they will not have the robust vote on bankruptcy reform [on final passage] they expect,” said Sen. Byron L. Dorgan (D-N.D.).