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Congress Passes Bankruptcy Bill

Measure Rewards Financial Industry at Consumers' Expense

By Martin H. Bosworth
ConsumerAffairs.com

April 14, 2005

Putting aside their supposed differences for a few moments, Republicans and Democrats from the reddest and bluest states alike lined up to support S.256, the "Bankruptcy Abuse Prevention and Consumer Protection Act," approved by the House of Representatives today on a 302-126 vote. It passed the Senate last month by 74-25.

The bill now goes to President George W. Bush, who wants to sign it into law as part of his legal reform agenda.

• Consumer Bankruptcy Filings At Highest Level In Nearly Four Years • Bankruptcy "Reform" Fails to Deliver • Bankruptcy Filings Top 100,000 in October • Personal Bankruptcies On the Rise • New Bankruptcy Law Hurts Consumers and Lenders, Report Finds • Obama Calls for Bankruptcy Law Reform • Bankruptcy Recovery Time Longer than Many Expect • Bankruptcy Rates Rise Among Older Americans • Consumer Bankruptcies Up 47% from Last Year • Bankruptcy Filings Soared in February • Senate To Debate Bankruptcy Law Changes • Dodd Announces Bankruptcy Reform Legislation • Bankruptcy's Early Warning Signs • Credit Counseling Not Helpful in Bankruptcy Cases, Study Finds • New Bankruptcy Law, One Year Later • Bankruptcy Filings Set Record in 2005 • Consumer Borrowing Plunges In October • Lawsuit Challenges New Bankruptcy Law • New Bankruptcy Law Tightens Rules, Adds Paperwork • Bankruptcy Filings Surge Ahead Of New Law • IRS Plans to Yank Tax-Exempt Status of 20 Credit Counselors • Credit Cards Ensnare, Victimize Working Families, Report Finds • Congress May Modify Bankruptcy "Reform" that Penalizes Katrina Victims --- Related Stories • Red & Blue United • A Test of Means or A Mean Test? • Cui Bono? (Who Profits?) • Long View, Long Road • "Laws Can Be Written Again" • What You Can Do • Senate Passes MBNA's Bankruptcy Bill • Congress Ready to Tighten Bankruptcy Law • Medical Bills Leading Cause of Bankruptcy, Harvard Study Finds

Pundit Arianna Huffington describes the measure as reading "like a credit industry wish list [that] does nothing to prevent bankruptcy abuse or protect consumers."

The stated purpose of this legislation is to enact tougher restrictions on declaring bankruptcy, preventing criminals and deadbeats from escaping their obligations by filing for Chapter 7 or 13, and starting over again.

As the bill's sponsor, Senator Chuck Grassley (D-Iowa) put it in a press release, "This bill boils down to one point: If you can pay your bills - you should…The sooner the House passes this bill, the sooner our bankruptcy system will be focused as it should be - on helping those with real need and less vulnerable to abuse by consumers who have the ability to repay their debts."

Yet, S.256 actually leaves vulnerable groups -- the poor, the elderly, military personnel and their families -- more vulnerable to credit card companies looking to make money off late fees and less capable of seeking protection in bankruptcy court when things go bad. In the words of Elizabeth Warren, Harvard Law professor and an expert on bankruptcy law and its effects, "This bill was designed to point a thousand daggers squarely at consumers in trouble ... it's like narrowing the doors to a hospital and expecting everyone to squeeze their way in."

What's in this bill? Who benefits and who suffers from its passage? And what about it has compelled noted Independent Jim Jeffords (I-Vermont) to partner with his former Republican allies across the aisle, while groups as disparate as Consumers' Union and the Federalist Society have openly declared the bill to be a cure that is worse than the disease?

Next: A Test of Means .. Or a Mean Test?

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