Senate Passes Bankruptcy Bill

December 8, 2000

By Marcy Gordon
AP Business Writer

WASHINGTON ?? Defying President Clinton's veto promise, the lame-duck Senate has sent him a bankruptcy overhaul bill that would make it harder for people to erase credit card and other debts in court. (Click Here for Text H.R. 2415)

Senators, by a 70-28 veto-proof vote, on Thursday approved the most sweeping bankruptcy law changes in 20 years. Supporters, including the banking and credit card industries, have pushed for the changes over the past three years.

Clinton favors overhaul of the bankruptcy laws in principle but thinks the current bill is unfair to ordinary debtors and working families that fall on hard times.

"President Clinton is disappointed that the Senate failed to pass balanced bankruptcy reform that addresses real abuses without tilting the playing field against those who turn to bankruptcy as a last resort," White House spokesman Patrick Dorton said after the lopsided vote.

Voting for the bill were 53 Republicans and 17 Democrats; all the opponents were Democrats, including Connecticut's Joseph Lieberman, the vice presidential candidate.

Sen. Peter Fitzgerald, R-Ill., voted present to avoid a potential conflict of interest because his family owns a bank. Sen. Mary Landrieu, D-La., was absent.

The House and Senate passed competing versions of the legislation, both by veto-proof margins. The current compromise measure cleared the House by voice vote on Oct. 12.

For much of the year, lawmakers have sought to reach a deal on the legislation, which has divided Democrats. Supporters in both parties have received millions of dollars in political contributions from banks and credit card companies this election year.

In the final hours of Senate debate on Thursday, one longtime opponent, Sen. Paul Wellstone, said the bill was "harsh" and he accused the banking and credit card industries of "blatant hypocrisy" for aggressively soliciting new business.

Wellstone, D-Minn., cited an academic study published in the spring that found medical bills accounted for about 40 percent of personal bankruptcy filings in 1999.

The legislation would establish a complex mathematical formula for determining whether debtors can repay part of their debts under a court-supervised plan rather than be allowed to have them dissolved.

Consumer groups, unions and other opponents contend the legislation would hurt families hit by job losses, catastrophic medical expenses or other unforeseeable hardships that push them over the edge financially. They also point to single mothers and their children who need alimony and support payments from bankrupt fathers.

The banking and retail credit industries, meanwhile, were jubilant. The American Financial Services Association said the legislation "still allows any American to seek bankruptcy protection." The U.S. Chamber of Commerce urged Clinton to abandon his veto pledge.

Proponents cite a rapid rise in personal bankruptcy filings in recent years, reaching 1.4 million in 1998, as evidence of rampant abuse of the bankruptcy court system.

"This bill strikes the balance needed to strengthen the safety net for people who need a fresh start after a hardship, while closing the loopholes exploited by big spenders to walk away from debts they could repay," said a leading sponsor, Sen. Charles Grassley.

Grassley, R-Iowa, said bankruptcy abuse creates a hidden tax of at least $400 a year on each American family in the form of higher interest rates passed on by consumer credit businesses and other charges.

Clinton could choose to wait until the lame-duck congressional session adjourns before effectively vetoing the legislation by not signing it, thereby depriving lawmakers of the chance to override the veto in a new vote.

By law, he has 10 days from passage of the legislation to use his veto or refuse to sign it if Congress is out of session.

Copyright 2000 The Associated Press

Contact ALTA at 202-296-3671 or

North American Title Insurance Company (NATIC) is a seasoned title insurance underwriter, helping title agents to achieve their individual business goals for more than 50 years. Today, the company conducts real estate settlement services in 39 states and the District of Columbia through a network of experienced, independent agents.