House, Senate Reach Accord On Dormant Bankruptcy Bill
July 26, 2002
By DAVID ROGERS
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- Ending years of debate, House and Senate negotiators reached
agreement on landmark legislation to tighten federal bankruptcy rules and tip the balance
more in favor of creditors seeking repayment.
The House could act on the final compromise measure as early as Friday, and senators
said they hope to send a bill to President Bush for his signature before going home next
week for the month of August.
"Perseverance pays off," said Sen. Charles Grassley (R., Iowa). "At long last, we'll be
able to close loopholes exploited by big spenders who have the ability to repay their
debts, and better protect consumers who have been left to pay higher prices for goods
and services as a result."
Close to five years in the making, the bill represents a long-sought victory for a coalition of
banks, financial-services and credit-card companies that have complained that well-off
individuals often have been able to game the current federal system, which has seen the number of bankruptcies soar during
the past decade. In response, the bill now would apply a combination of means tests and time limits to determine if and
when a debtor must repay debts, rather than have the debts dissolved through a bankruptcy-court filing.
Critics complain that many of the changes will complicate the legal system and unfairly wring money from consumers, while
doing little to curb aggressive marketing techniques by big lenders that encourage some people to run up debts. But with the
collapse of Enron Corp. and the prospect of wealthy executives shielding their assets through bankruptcy proceedings from
shareholder lawsuits, supporters won new traction. The recent impasse had less to do with the core bill than a contentious
side issue related to the responsibility for fines and other debts arising from attacks against abortion clinics.
With time running out for the session, a compromise finally was struck Thursday night on the provision promoted by Sen.
Charles Schumer (D., N.Y.) but resisted by Rep. Henry Hyde (R., Ill.), the former chairman of the House Judiciary
Committee and a powerful voice in the antiabortion movement. A House Republican aide said the compromise Thursday
night tightens the initial Senate language to apply more narrowly to cases of intentional violence, and the wording was
altered to apply more generally beyond just abortion clinics.
Mr. Schumer, who participated in Thursday night's talks, was satisfied with the outcome. "This is a victory for women," he
said. "The agreement we've reached ensures that those who use violence to close clinics can't use bankruptcy as a shield to
escape liability."
Since 1996, the financial-services industry has contributed nearly $700 million to the two political parties, according to
figures compiled by the Center for Responsive Politics, a nonpartisan watchdog group. That political muscle has been a
huge factor in building support for the bill, but Enron's collapse spurred a populist touch.
In April, soon after the collapse, negotiators resolved old divisions and agreed to sharply restrict the amount of home equity
that can be shielded by bankrupt individuals who owe debts arising from a violation of federal fraud or securities laws,
among other things. Lawmakers clearly were reacting to the prospect that top executives could protect multimillion-dollar
homes from creditors, even while workers at the Houston energy concern lost millions of dollars of retirement savings. And
negotiators said the final $125,000 homestead limit was specifically written to address concerns about a Houston
penthouse apartment owned by former Enron Chief Executive Kenneth Lay. |
