Bankruptcy legislation that supporters in the credit card industry thought would sail through the Republican-controlled Congress this week could hit a serious snag because of a planned amendment from a Republican, Sen. John Cornyn of Texas, congressional sources said yesterday.
Republican leaders, including the bankruptcy bill's main sponsor, Sen. Charles E. Grassley (R-Iowa), have asked Cornyn not to offer the amendment, which would require a company to file for bankruptcy protection in the state where its primary business operations are located. Now companies can file either where they operate or where they are incorporated. A substantial number of companies are incorporated in Delaware and New York -- states that many executives think favor company interests over those of creditors.
 
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Ending such "venue shopping" would close a loophole in bankruptcy law, Cornyn has argued, and would "protect employees by preventing bankruptcy cases from moving thousands of miles away from the communities and their workers who have the most at stake." The amendment is supported, for example, by a group of employees from Enron Corp., the Houston energy firm whose mismanagement led to a bankruptcy filing in 2001, costing employees and other stockholders billions of dollars.
Most Republicans have no problem with the content of the Cornyn's amendment, sources said, pointing out that ending "venue shopping" was part of recently passed legislation to restrict where consumers can file class-action suits. That's why they are pressuring Cornyn not to offer the amendment: They want to avoid putting themselves in the difficult position of supporting a provision with which they agree in principle but that could imperil the legislation.
The amendment could shift the balance in what could be a very close vote. The Senate has 55 Republicans, 44 Democrats and one independent. Republicans need 60 votes to end a filibuster. So far, Republicans have counted on at least two Democratic senators -- Joseph R. Biden Jr. and Thomas R. Carper of Delaware -- to vote with them for the bill. But if the legislation would prevent companies from filing in Delaware, which gets revenue from such filings, Biden and Carper are expected to vote against it.
A spokesman for Biden, who is a member of the Judiciary Committee, which approved the bill now before the full Senate, did not return telephone calls yesterday.
Another topic of discussion yesterday was an effort by some companies to weaken a provision proposed by the Judiciary Committee last month that would require bankruptcy judges to impose more limitations on severance bonuses and other compensation of executives at companies that have filed for bankruptcy protection.
The companies, most notably from the financially troubled asbestos industry, want the limitations to apply only where fraud contributed to a bankruptcy, not just unethical or incompetent behavior. Some Republican congressional aides said they thought the lobbyists on the issue, including Manus Cooney, who was chief counsel of the Judiciary Committee under Sen. Orrin G. Hatch (R-Utah), would have an uphill battle.
Yesterday, Republicans also were caught somewhat by surprise at the support in their ranks for a proposal by Sen. Richard J. Durbin (D-Ill.) to give military personnel added bankruptcy protection. In response, Republicans offered their version of such an amendment, which would provide narrower protections. It passed 63 to 32.
Some Republican and Democratic aides said both sides are still counting votes on the legislation, which would be the most significant change in bankruptcy law in more than 25 years. The credit card industry says the changes are needed to prevent abuses of the system, by making more people repay a portion of their debt.
Consumer advocates and many Democrats say the bill would be too harsh on consumers and that it would allow some rich debtors to retain multimillion-dollar houses while denying bankruptcy relief for individuals who have fallen on hard times because of medical bills, divorce or unemployment.
Debate on the bill, which is supported by President Bush, could last through Friday and, possibly, into next week, congressional aides said yesterday.
