Abortion Rule Snags Bankruptcy Bill

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Back when Congress first began talking about tightening federal bankruptcy rules, Bill Clinton was in his first presidential term, Newt Gingrich was just a troublemaker in a Democratic-controlled Congress and the stock market had yet to break 10,000.

Now, after a tortuous legislative journey, a bill to overhaul the bankruptcy code is on the brink of becoming law. Yet it still may stall, despite bipartisan agreement on its key provisions and backing from a powerful armada of lobbyists.

The measure would make it harder for people to unload debts by filing for bankruptcy if they could afford partial repayment. But it has hit an eleventh-hour snag over an issue far removed from its core: the use of bankruptcy law by abortion clinic protesters.


Lobbyists for the banks and credit card companies that stand to gain financially from the bankruptcy overhaul are fuming. After spending years lobbying for the bill--and funneling millions of dollars in contributions to the politicians considering it--they are seeing their legislative priority ensnared by one of the nation’s most emotional, divisive social issues.

“Trying to forge an agreement on abortion is like trying to solve the problems in the Middle East: It’s timeless,” said Thomas Lehner, vice president for government affairs at the American Financial Services Assn.

The bankruptcy bill’s saga is a rich case study in how Congress works--and doesn’t work. Its progress, despite repeated setbacks over the years, is a testament to the clout wielded by a well-connected, moneyed lobby. But the last-minute impasse underscores how hot-button issues can derail broad consensus and contribute to legislative gridlock.

“We’ve been down on the 1-yard line before, and now we’re on the 1-inch line,” said Ed Yingling, chief lobbyist for the American Bankers Assn. “We’re not going to get worked up until it’s called a touchdown.”

The abortion-related dispute stems from different versions of the bill passed by the House and Senate. The Senate added a provision sponsored by Sen. Charles E. Schumer (D-N.Y.) 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 several abortion protesters in recent years, including Randall Terry of Operation Rescue.

Fighting the Schumer amendment is Rep. Henry J. Hyde (R-Ill.), a leading abortion foe. The conflict could come to a head Wednesday, at a meeting of the conference committee trying to reconcile the bill’s two versions.


Schumer has warned that if a compromise on the abortion issue is not reached by then, he might try to sidetrack the entire bill.

Almost forgotten in the jockeying has been the primary thrust of the bill, which is an effort to stem a steep rise in individual bankruptcy filings over the last decade. According to the financial services association, 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 bill would force more people to file under Chapter 13 of the bankruptcy code, which requires debtors to work out repayment plans for at least part of their debts, rather than under Chapter 7, which wipes out debts entirely. The bill would establish a “means test” to determine who qualifies to file under Chapter 7.

The measure’s critics, including consumer advocates, say it would impose unfair burdens on legitimate bankruptcy filers. They also complain it does not address an important cause of the spike in bankruptcies: the aggressive marketing of credit cards to people ill equipped to take on debt, such as college students.


According to the Consumer Federation of America, which opposes the bill, credit card companies sent out a record 5 billion solicitations in 2001.

Such objections did not deter the House-Senate conference committee from reaching agreement on the final wording for the bill’s main elements. That, in turn, has increased pressure on Hyde and Schumer to strike a deal on their dispute.

The financial services association has stepped up its lobbying, sending New York bankers to urge Schumer to back down. The association also recently ran newspaper advertisements targeted to Capitol Hill that called for an end to the deadlock.

The ad said, “306 congressmen and 83 senators can’t be wrong,” referring to the number of lawmakers who voted for the bankruptcy bill in the House and Senate last year.

The bill’s roots can be traced to 1994, the last time Congress enacted any change in the bankruptcy code. That measure was designed mostly to speed up, not deter, bankruptcy cases. And it included a time-honored tool for resolving the thorniest legislative disputes: It set up a blue-ribbon commission to recommend additional changes in bankruptcy law.

That commission issued recommendations in 1997, but the nation’s banks and credit card companies opposed them, saying they were tilted against creditors. The industries formed a lobbying coalition that pressed the case to make it harder for people to discharge their debts in bankruptcy.


The lobbyists showered Congress with letters, visits and telephone calls. They enjoyed access to lawmakers in part because they represented business interests that are among the nation’s top campaign contributors. Since 1990, the Center for Responsive Politics reports, the financial services industry contributed about $27 million to the campaigns of members of Congress in both parties.

What’s more, according to the center, the biggest single source of donations to George W. Bush’s 2000 presidential campaign was MBNA America Bank, a credit card company. Its executives and their families gave more than $240,000 to Bush. Over the years, the bankruptcy bill advanced in fits and starts.

In 1998, differing measures were passed by the House and Senate--each with strong support. But lawmakers failed to agree on a compromise version.

In 2000, a bill cleared Congress. But President Clinton, siding with consumer advocates, refused to sign it.

In early 2001, it looked like smooth sailing for the measure, with Bush in the White House and Republicans controlling the House and Senate. By mid-March, each chamber had passed its version of the bill.

But in early June, Democrats seized control of the Senate and sent the bill into limbo. It was not a priority for the Senate’s Democratic leaders. And it took them weeks to reconfigure the chamber’s operations, including the makeup of House-Senate conference committees.


When that detail was worked out, the bankruptcy panel finally set a date for its first meeting: Sept. 12. That was canceled after the Sept. 11 terrorist attacks, and the bill was again shunted aside.

Behind-the-scenes talks resumed early this year, and quiet progress was made. One of the last major hurdles was cleared this spring, in part because of the collapse of Enron Corp.

That scandal spotlighted a controversial loophole in current law that allows bankruptcy filers in several states--including Texas, where Enron is based--to keep expensive homes. The bill’s prospects abruptly improved in April when negotiators agreed to a compromise that would limit this so-called homestead exemption for felons and others convicted of financial misdeeds.

Schumer views his abortion-related amendment as an effort to give teeth to a 1994 law he wrote making it a crime to bar access to abortion clinics.

Before the Senate approved his provision, he made one change to answer criticism that it singled out a particular type of protester for special punishment. He reworded it to apply more broadly to anyone who is fined for obstructing access to any lawful services, not just abortion clinics.

Hyde’s objections, though, focus on the amendment’s potential effect on abortion protesters. His main concern is that the provision could penalize nonviolent demonstrators.


Negotiators for the lawmakers have spent weeks trading proposals--and mutual accusations that each side would rather kill the whole bill than be seen as compromising on abortion.

Schumer said he is growing increasingly pessimistic that an agreement can be reached by Wednesday’s conference committee meeting. “If we don’t resolve it then, I don’t see how it will be resolved.”

Others who have been following the bill’s path over the years find the prospect of it collapsing over the abortion dispute hard to imagine.

Terry Holt, spokesman for House Majority Leader Dick Armey (R-Texas), said: “Too many lobbyists have too much on the line.”