House Passes Bankruptcy Bill; Clinton Threatens to Veto It

A bill making it harder for people to sweep away their credit card debts in bankruptcy court passed the House on Thursday. The White House immediately said President Clinton would veto it and, with Congress racing to adjourn next week, it was doubtful lawmakers would have an opportunity to override his action.

After a fairly brief debate, the House approved the bipartisan measure by a voice vote.

The legislation next moves to the Senate, where staunch opponent Paul Wellstone (D-Minn.) has threatened to block the measure. However, his power to obstruct legislation is limited, and Senate Democratic leaders, including Minority Leader Tom Daschle (D-S.D.) have expressed support for putting it to a vote soon.

Proponents of the measure, who have been pushing such legislation for three years, have received millions in campaign money from banks and credit card companies this election year.

Supporters pointed to the rapid rise in bankruptcy filings in recent years--they reached a peak of 1.4 million in 1998--as evidence of rampant abuse of the bankruptcy court system. They maintained that the abuses create a “hidden tax” of $400 a year on each American family in the form of higher interest rates passed on by consumer credit businesses and other charges.

“Clearly, this nation’s bankruptcy system is broken when it enables individuals to avoid paying their debts,” Rep. Jim Moran (D-Va.) said before the vote. “Bankruptcy reform is not a Republican or a Democratic issue. It’s a consumer issue.”

The bill would establish a complex mathematical formula for determining whether debtors are able to repay part of their debts under a court-supervised plan and therefore would not be allowed to have them dissolved.

But opponents said the legislation would hurt families hit by job loss, catastrophic medical expenses and other hardships.