Hopes of Bankruptcy Overhaul Die in Senate

A planned overhaul of the nation’s bankruptcy laws was pronounced dead Friday in the Senate, less than a day after House members voted first to kill the bill, then to revive it in altered form.

Majority Leader Tom Daschle (D-S.D.) said the Senate would not take up the measure in the final days of the lame-duck session because the House had reneged on a delicately crafted compromise involving abortion protesters.

“The House Republicans killed bankruptcy for this year,” Daschle said. “It’s as simple as that.”

The measure’s demise demonstrated the ongoing political potency of the abortion issue and its ability to add controversy to unrelated issues. In this case, it drove a wedge into the ranks of Republicans who favored virtually everything else in the bankruptcy bill.

“Shame,” said Senate Minority Leader Trent Lott (R-Miss.), lamenting that the bill had been derailed “over a two-paragraph provision” that was tangential to its core.

Banks and credit card companies have been pushing for years for revisions in federal law to make it more difficult for consumers to wipe away their financial obligations by filing for bankruptcy. A record 1.4 million bankruptcy cases were filed last year, compared with 298,000 in 1985, according to the American Financial Services Assn.

The bill would have made it more difficult for Americans to eliminate their debts entirely in bankruptcy court. A new “means test” would have required filers with the ability to repay at least a portion of their debts to do so.

The measure also would have cracked down on a legal loophole that allows bankruptcy filers in several states to keep expensive homes.

Consumer groups have vigorously opposed the measure, saying it would enrich big lenders at the expense of cash-strapped borrowers. They also faulted the bill for doing little to stem the proliferation of credit cards, which they argued entice some consumers to assume more debt than they should.

A previous version of the legislation almost became law in 2000, but President Clinton declined to sign it. This year’s bill appeared likely to make it over the top, until it became mired in the politics of abortion.

Senate Democrats, led by Sen. Charles E. Schumer of New York, had insisted on amending the bill to restrict protesters from using bankruptcy filings to avoid paying court fines for blockades or other illegal acts at abortion clinics. The provision was opposed by antiabortion lawmakers, particularly House Republicans, who said it would water down 1st Amendment rights for one group of protesters but not others.

After months of negotiations, congressional conferees agreed on compromise language that would prohibit any protester blocking legitimate businesses from using the bankruptcy law to avoid fines.

The compromise was backed by GOP leaders. But a handful of rank-and-file Republican House members still opposed it, arguing it was clearly aimed at antiabortion activists who in the past have used the bankruptcy law to avoid paying fines.

In the narrowly divided House, the dispute was enough to shoot down the bill when it reached the House floor Thursday afternoon. As it became clear the measure lacked majority support, more than 80 Republicans broke ranks with their leaders on it. They joined with Democrats, who opposed the measure as bad for consumers, to block consideration of the bill, 243 to 172.

The rebuff stunned representatives of the big banks and other financial institutions who had lobbied hard -- and contributed generously -- to get the bankruptcy bill enacted.

As the House session extended into the early hours of Friday, chastened GOP leaders tried to repair the rift with the financial community by seeking House approval of a new version of the bill with the abortion-related provision removed. The stripped-down legislation was approved, 244 to 116, in a roll call that ended about 2 a.m. (EST).

Some Democrats, saying the bill would be dead on arrival in the Senate without the abortion-related provision, derided the GOP strategy as a “midnight stunt” designed to mend fences with angry business supporters.

And on Friday, Daschle said the amended bill would not see the light of day in his chamber.

“We had a compromise that was the product of virtually years of work,” Daschle said. “You had Republicans and Democrats who recognized the fragile nature of this compromise, and yet the Republicans defeated it.”

Daschle said he did not plan to bring up the bill for a floor vote before the lame-duck session ends next week. Even if he did, “it would never pass,” Daschle said. “It would be subject to a filibuster” by supporters of abortion-rights.

Sen. Thomas Carper (D-Del.) said that after talking with some of his Democratic colleagues Friday, it was clear that bankruptcy reform stood no chance of passage this year.

Carper suggested that Senate Democrats engage in high-stakes political poker with House Republicans by restoring the provision and sending the bill back for another vote. But he said his Democratic colleagues thought that impractical, with most House members having left town, probably for the year.

The sequence of events was hailed by antiabortion advocates, but left bankruptcy reform advocates downcast.

“This vote proves that politics makes strange bedfellows,” said Roberta Combs, president of the Christian Coalition of America. She noted that Democrats, including many abortion-rights advocates, had joined with GOP abortion foes “in providing the pro-life movement with one of its most stunning congressional victories.”

American Financial Services Assn. spokesman Tom Lehner lamented the bill’s failure. “It just sets a terrible precedent that conference reports agreed upon by House and Senate negotiators can be derailed by those who don’t support what’s in them,” he said.