The Senate Judiciary Committee -- propelled by a unified Republican majority and with little public debate -- voted 12 to 5 yesterday to approve legislation backed by the credit card industry and opposed by consumer groups that would make it harder for consumers to wipe out debt through bankruptcy.
The bill, which would be the most significant change in bankruptcy law in more than a quarter of a century if adopted, now goes to the full Senate. Senate Majority Leader Bill Frist (R-Tenn.) has said debate could begin within 10 days. Republicans and many Democrats believe the bill eventually will pass -- its chief sponsor, Sen. Charles E. Grassley (R-Iowa), yesterday predicted a final vote of 80 to 20 in its favor -- but only after a drawn-out and heated discussion on the Senate floor.
Senate Democrats who oppose the bill plan to propose dozens of amendments to change or at least stall it, including a controversial provision sponsored by Sen. Charles E. Schumer (D-N.Y.) that would bar individuals from using bankruptcy to avoid paying court-imposed fines for unlawful protests against abortion.
Bankruptcy legislation has been a top priority for the credit card industry for more than seven years, and twice in that time bankruptcy bills have passed both the House and Senate but never made it into law.
In one case, President Bill Clinton refused to sign the legislation, saying it was unfair to consumers. In 2002, House Republicans at first approved the bill, only to then vote it down after the Schumer amendment was attached. In the past two years, the House passed bankruptcy legislation, but the Senate never voted because Republicans, who had a narrow majority, feared they lacked sufficient power to block Schumer's amendment.
Now the legislation's backers think the Senate Republicans' 55 to 45 majority provides the necessary margin to scuttle Schumer's attempts to attach the amendment once again. Schumer has said he will do whatever is needed to save the amendment, which could include a filibuster. As a result, both sides are counting to see whether the Republicans would have the 60 votes needed to cut off debate. Republican House leaders have said they will take up the legislation as soon as the Senate acts. President Bush has said he will sign it.
Three of eight Democrats on the committee joined Republicans yesterday in approving the legislation after four hours and with only a handful of amendments offered. Sen. Orrin G. Hatch (R-Utah), who led the committee meeting because Chairman Arlen Specter (R-Pa.) is sick, repeatedly urged committee Democrats, including Sens. Edward M. Kennedy (Mass.) and Russell Feingold (Wis.), to refrain from offering more than 50 amendments, saying the provisions were sure to be defeated and, in any case, would be introduced again before the full Senate.
A dozen amendments were offered, however. Most were defeated, largely along party lines, including a Feingold proposal to provide higher protection of elderly peoples' home equity and another by Sen. Richard J. Durbin (D-Ill.) that would have given military personnel added bankruptcy protections. But the committee did adopt few provisions, including a Kennedy provision to give bankruptcy courts more authority to limit the amount of money executives and other corporate insiders can take in bonuses and severance pay from companies filing for bankruptcy.
The perceived ability to beat back Schumer's "abortion amendment," as it is called among congressional staffers, plus the Republican leadership's decision to begin deliberation now, early in the legislative cycle, has industry officials and lawmakers hoping a bill will become law within weeks.
Lobbyists for the credit card industry say the legislation is needed to close loopholes that make it too easy for people to wipe out their debts when they could repay some of them.
Consumer advocates say it would allow some rich debtors to continue to hide wealth through homeownership while bankruptcy relief would be denied to many people with low or moderate incomes who have fallen on hard times because of illness, job loss or divorce. They say credit card companies must share the blame for increased bankruptcies because they aggressively market products and inadequately disclose how interest rates and penalty fees mount up when consumers pay only minimum balances each month.