Bankruptcy Bill Clears Impasse Over Abortion

Ending a yearlong legislative logjam, key House and Senate negotiators reached agreement on a bill Thursday night that would make it harder for people to unload debts by filing for bankruptcy.

The breakthrough came as House and Senate negotiators resolved a stubborn impasse over a Democratic-backed provision to prevent abortion-clinic protesters from evading criminal fines by filing for bankruptcy.

“This is a victory for women,” said Sen. Charles E. Schumer (D-N.Y.), leading proponent of the abortion-related provision. “The agreement we reached today ensures those who use violence to close clinics can’t use bankruptcy as a shield.”

The compromise is also a victory for credit card companies, who since the mid-1990s have lobbied hard for a bill to help stem millions of dollars of losses the industry sustains every year from bankrupt customers.

The core of the bill, which was agreed upon months ago but stalled by the abortion dispute, would force more people to file under Chapter 13 of the bankruptcy code. That requires debtors to work out repayment plans for at least part of their debts. Credit card companies and other financial institutions have been arguing that the current law allows too many people to file for bankruptcy under Chapter 7, which wipes out debts entirely. To crack down on that, the bill would establish a “means test” to determine who qualifies for a Chapter 7 filing.

Consumer advocates fought against the measure, calling it a gift to big donors. According to the Center for Responsive Politics, since 1990 the financial services industry has contributed about $27 million to the campaigns of members of Congress in both parties.

The opponents argue that the bill would do little to stem the proliferation of credit cards, which they say entice some consumers to assume more debt than they should. The foes also say the bill would hurt economically struggling families by making it harder to get legitimate relief from bankruptcy.

“This so-called bankruptcy reform is terrible for consumers and working families trying to rebuild their lives, especially in these bad economic times,” said Allison Dobson, spokeswoman for Sen. Paul Wellstone (D-Minn.).

But barring last-minute glitches, the bill is expected to be approved by the House today and the Senate next week. President Bush has indicated he will sign it.

The agreement on the bankruptcy measure came on the same day as congressional enactment of corporate reform legislation sparked by recent business scandals. The actions are part of a cascade of legislative activity as Congress prepares for its summer recess and this fall’s midterm campaign.

Along with House and Senate passage Thursday of the corporate reform legislation, both chambers were expected to pass legislation to create a new homeland security department within the next week. Negotiations over trade legislation quickened, and a long-stalled bill to finance anti-terrorism initiatives finally cleared Congress earlier this week.

Passage of the bankruptcy bill will mark the culmination of a legislative journey that has taken unusual twists and turns, even by the standards of Capital Hill’s often-convoluted process.

“We have worked hard for a year to make this a better and more balanced bill, and we have succeeded,” said Sen. Patrick J. Leahy (D-Vt.), chairman of the Senate Judiciary Committee.

The House and Senate have voted on similar bills many times since the late 1990s. A similar measure cleared both chambers in 2000 but was vetoed by President Clinton.

The legislation was spurred by a surge in personal bankruptcy filings over the last decade. According to the American Financial Services Assn., a record 1.43 million bankruptcies were filed in 2001--up 14% over 2000. In 1985, the filings totaled only 298,000.

Analysts attribute the increase in part to the proliferation of credit cards and a reduction in the social stigma attached to bankruptcy. But the bill’s proponents say another factor is growing abuse of the bankruptcy code by people who have the means to make partial repayment.

To crack down on that, the compromise bill would require any debtor who has enough resources to pay 25% of his or debt over five years--or who earns the median income for his or her state--to try to repay at least some of the debt.

Although the abortion dispute was the last issue to be settled, another hurdle was surmounted earlier this year after the financial collapse late last year of Enron Corp.

That corporate controversy spotlighted a controversial loophole in current law that allows bankruptcy filers in several states--including Texas, where Enron is based--to keep expensive homes.

Negotiators on the bankruptcy bill in April agreed to a compromise that would limit this so-called homestead exemption for felons and others convicted of financial misdeeds.

The abortion dispute stemmed from a Schumer amendment to the Senate bill--not included in the House version--aimed at preventing abortion opponents from declaring bankruptcy to avoid paying fines imposed as a result of violent protests at abortion clinics. That tactic has been used by some abortion protesters in recent years, including Randall Terry of Operation Rescue.

Fighting the Schumer amendment was Rep. Henry J. Hyde (R-Ill.), who opposed the idea of singling out abortion protesters for special stipulations.

The compromise uses more general terms, barring the use of bankruptcy to avoid fines incurred for blocking access to any lawful facility or activity.

Hyde was not available to comment on the agreement.