The Rich Get Richer, the Poor Get Shafted

Senators Portray Bankruptcy Bill as Unfair
By Marcy Gordon
The Associated Press

Thursday 03 March 2005

Washington - Stung by two days of defeat for their bids to revise a bill overhauling the bankruptcy laws, Senate Democrats are portraying the measure as making it harder for low-income, elderly and sick people to dissolve their debts while allowing the wealthy to shelter assets.

Through a day of debate Wednesday, the Democrats maintained a rhetorical accent on what they see as the inequity of the bankruptcy legislation. The Republicans, who hold the majority, maintained tight discipline. Sen. Orrin Hatch, R-Utah, warned against "killer amendments" that could jeopardize the bill's acceptance by the House.

Sen. Edward M. Kennedy, D-Mass., a leading opponent of the legislation as written, will try to get an increase in the minimum wage - a top priority of the Democrats - attached to it, aides said. Kennedy's proposal would lift the hourly minimum from $5.15 to $7.25 over two years.

Mostly along party lines, the Senate voted 59-40 Wednesday to reject a Democratic amendment that would have allowed older people to get special homestead exemptions to keep their homes when they file for bankruptcy. Currently, such exemptions are determined by the states.

Also rebuffed, 58-39, were two proposals focused on people whose significant medical expenses for illness force them to file for bankruptcy.

The first would have allowed people to keep at least $150,000 of the equity in their primary residence. If, in addition, medical bills exceed 25 percent of the person's income, the second proposal would have exempted them from a new test in the legislation measuring income and assets of bankruptcy applicants to determine if debts can be discharged.

Under unlimited homestead exemptions in a half-dozen states, "fat cats who go into bankruptcy don't lose their mansions," said Kennedy, author of the twin amendments. "Where is fairness in this bill?"

By another 59-40 tally, the Senate defeated a Democratic proposal to require that credit card statements show how long it would take the consumer to pay off his or her debt by making only the minimum monthly payment, and what the total interest charges would be.

The bankruptcy overhaul bill would raise the threshold for dissolving credit card and other consumer debts in bankruptcy court. Supporters are predicting a swift victory after nearly eight years of congressional gridlock and feverish lobbying by banks and other credit-card issuers.

The new "means" test in the legislation is intended to determine whether those seeking bankruptcy protection must repay their debts or are allowed to have them canceled. Under the current system, bankruptcy judges have the discretion to decide that.

Supporters of the bill hope for passage before lawmakers adjourn in mid-March for the spring recess.

Banks, credit card companies and retailers have pushed since 1997 for a bill overhauling the bankruptcy laws. Consumer and civil rights groups and unions say the legislation would shred a safety net for those who have lost their jobs or face mounting medical bills.



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