Senate Approves Measure to Toughen Bankruptcy Laws

Defying the threat of a presidential veto, the Senate on Thursday easily approved a measure to toughen bankruptcy laws, making it harder for consumers to wipe out their debts.

The bill passed on a 70-to-28 vote, more than the two-thirds margin needed to override a veto by President Clinton. The House passed the bill in October on a voice vote.

The measure’s future now becomes a test between its backers and the White House, which strongly opposes the bill and wants to avoid an embarrassment for Clinton during his administration’s waning days.

Clinton has 10 days to sign or veto the measure. That means the lame-duck Congress now in session may adjourn before the 10 days is up. Also, the bill’s foes believe that some Democrats who supported it in Congress would be less inclined to do so if it meant overriding a veto.

Still, the bill’s passage is a show of strength for the banking, retail and credit card industries, which worked hard for the legislation. The number of individuals filing personal bankruptcy doubled in the last decade, reaching 1.4 million in 1998, and business interests want to curb that increase by imposing stricter rules on those seeking debt relief.

“This bill strikes the balance needed to strengthen the safety net for people who need a fresh start after a hardship while closing the loopholes exploited by big spenders to walk away from debts they could repay,” said a leading sponsor, Sen. Charles E. Grassley (R-Iowa).

Opponents attacked the bill as an unfair effort by credit card companies and banks to recover billions of dollars a year in debt. “The bill targets the most vulnerable people,” said Sen. Paul Wellstone (D-Minn.). “It’s too harsh, it’s without balance,” he said.

The bill would create a formula for calculating whether filers could afford to repay part of their debts rather than have them canceled through bankruptcy.

Backing the bill were 53 Republicans and 17 Democrats. All those voting against it were Democrats, including California’s Dianne Feinstein and Barbara Boxer.

Grassley said he hoped that the margin by which the measure passed would cause Clinton to drop his veto threat. Looking toward the prospect of a George W. Bush administration, Grassley said: “There would be a lot of pressure on me next year to make it a much stronger bill. A lot of people in the Senate think we gave too much to consumer groups.”

Although Bush has not committed himself on the bill Congress passed, he has expressed support for reforming bankruptcy laws.

The administration opposes the bill in part because it would not close the so-called homestead exemption, which allows people to move to certain states, notably Florida and Texas, and use their assets to buy expensive homes that are shielded in a bankruptcy proceeding.