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Bankruptcy Bill Passes U.S. House

Bankruptcy Bill Passes U.S. House

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WASHINGTON (AP) -- Consumers would have a harder time erasing their debts in bankruptcy court under legislation that won overwhelming House approval Wednesday.

The vote was 315-113 for the measure, which has sped through the Republican-dominated House while splitting Democrats, some of whom assailed it as unfair to people who have been knocked off their financial feet by tough economic times.

The bill faces less favorable prospects in the closely divided Senate.

A similar measure came close to passage by Congress last year but failed because of a dispute over a provision affecting anti-abortion protesters who file for bankruptcy.

"These commonsense reforms will help curb abuses of bankruptcy protections," the White House budget office said before the vote.

Passage of the legislation, sought by credit card companies and retailers, followed House approval last week of another pro-business measure, a bill designed to limit jury awards in medical malpractice cases by capping at $250,000 non-economic damages -- such as compensation for loss of a limb or sight.

In the Senate, Judiciary Committee Chairman Orrin Hatch, R-Utah, has promised to move quickly on the bankruptcy legislation. But it isn't clear whether proponents in the closely divided body would be able to muster the 60 votes needed to proceed to a vote on the bill.

Lawmakers of both parties support an overhaul of the federal bankruptcy laws, saying it is needed to stop abuse of the bankruptcy system by people who can afford to repay their debts. The abuse, they contend, creates a hidden tax of about $400 a year on every American family through higher interest rates passed on by consumer credit businesses and other charges.

The record pace of new personal bankruptcies in 2002 is expected to continue this year.

Rep. James Sensenbrenner, R-Wis., chairman of the House Judiciary Committee, said passage of the legislation was "a victory for those who work hard and pay their bills but are forced to shoulder the debts of those who abuse our personal bankruptcy system."

Consumer and civil rights groups and unions oppose the legislation, saying it is unfair to low-income working people, single mothers, minorities and the elderly and would remove a safety net for those who have lost their jobs or face mounting medical bills.

Banks, credit card companies and retailers have pushed since 1997 for the legislation -- and Democrats said Wednesday those industries have gotten their lobbying money's worth.

"We've fallen victim to the special interests," lamented Rep. Sheila Jackson-Lee, D-Texas, during floor debate.

Democrats blamed the credit card industry for much of the rise in personal bankruptcies.

Citing some 5 billion solicitations made to consumers yearly by credit card issuers, Rep. William Delahunt, D-Mass., said the industry "has created a culture of debt that is overwhelming millions of Americans."

Many Democrats, who support an overhaul in principle, oppose the legislation as written because it no longer includes a provision barring anti-abortion protesters from using bankruptcy laws to skirt court fines.

That provision in last year's legislation had led conservative anti-abortion Republicans to join with House Democrats who oppose overhauling bankruptcy laws.

Under current law, Chapter 7 of the U.S. Bankruptcy Code allows people to erase their credit card and other debts, usually in exchange for giving up some personal assets. Filings under Chapter 13 force people to repay debts over time in accordance with a court-approved plan.

A bankruptcy judge or a private attorney appointed by the Justice Department usually decides whether someone qualifies for dissolution of debts or should be forced to repay under a reorganization plan.

The legislation would apply a new standard in which, if a debtor had sufficient income to repay at least 25 percent of the debt over five years or earned at least the median income for his state, he or she would be forced into a Chapter 13 repayment plan.

(Copyright 2003 by The Associated Press. All Rights Reserved.)

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