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Bankruptcy Bill Passes; Bush Expected to Sign

The credit card industry defeated a provision that would have required credit card issuers to tell customers how much more interest they would be charged if they chose to pay only the required minimum each month. But the bill would require companies, upon request, to tell customers how long it will take to pay off a debt by remitting minimum amounts. And the bill retains a provision business groups had tried to kill that would 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 protection.

Both sides have waged a polarized war of words for years, with neither side conceding that the bill might not prove as beneficial as proponents say or as onerous as critics contend. Privately, however, some lobbyists for the bill say it has been so watered down from what industry initially proposed years ago that its passage is not a complete triumph for business. The lobbyists spoke only on the condition that they not be named because of concerns about damaging relations with their clients.

House Speaker J. Dennis Hastert (R-Ill.), with Sens. Ted Stevens (R-Alaska), left, and Bill Frist (R-Tenn.), right, answers a question after signing the bankruptcy bill. (Dennis Cook -- AP)

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Some of these lobbyists say it is possible that the bill may make it easier for individuals to cheat the system: Imposing eligibility tests for bankruptcy that are less flexible than those under current law would provide individuals who want to manipulate the system a road map of what they need to do. They say it would tell manipulators what, when and under what terms they can buy and keep items during bankruptcy -- whether it is new cars or fancy stereos.

Lobbyists and others who tracked the bill say the biggest winner under the new law would not be the credit card industry but rather automobile manufacturers, which often provide financing for the cars they sell. The new legislation would put car companies ahead of most other creditors in line for payment.

But others focused on the broader changes that the bill would create. "The essential philosophical and political divide over the bankruptcy bill boils down to whether you see filing for bankruptcy as a right or a privilege," said John D. McMickle, a lawyer who was formerly the bankruptcy lawyer for the Senate Judiciary Committee. "The new law makes bankruptcy a privilege reserved only for people who can prove they can't repay their debts."

The bill has been passed several times by both the Senate and House in the past three sessions of Congress but never made it into law. In one case, President Bill Clinton vetoed it as unfair to consumers. Despite setbacks, the industry continued to lobby hard for the bill. The banking, credit card and retail industries gave more than $56 million to political parties and candidates in the 2004 elections, most of it going to Republicans, according to the Center for Responsive Politics, a nonpartisan, nonprofit research group that tracks political contributions.

Yesterday, lawmakers, including Grassley, said they thought the long fight was worth it. "This demonstrates that when you're right, you'll win out," he said.

Senate Majority Leader Bill Frist (R-Tenn.) said the "style, tone" and speed with which the Republican-controlled Congress passed the bankruptcy legislation will be a hallmark of legislation in the months ahead.

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