WASINGTON – The Senate on Wednesday rebuffed a Democratic attempt to provide senior homeowners special federal protection from a proposed law making it harder for people to erase their debts in bankruptcy.
Mostly along party lines, it voted 59-40 to reject a proposed amendment that would have allowed older people to get special homestead exemptions (search) allowing them to keep their homes when they file for bankruptcy. Currently, such exemptions are determined by the states.
"Seniors are the people who need the exemption most," Sen. Russ Feingold, D-Wis., said during debate before the vote.
But Sen. Orrin Hatch, R-Utah, argued that the bankruptcy overhaul bill (search) as written already provides protections for elderly people and that, when it comes to homestead exemptions, "The choice belongs to the states."
Hatch warned that adopting Feingold's plan could stymie passage of the bill, which proponents have been pushing for nearly eight years. House Republicans, who hold a majority, would have been unlikely to accept such an amendment to the bankruptcy legislation.
With the identical vote tally, the Republican-controlled Senate also defeated a proposal by Sen. Daniel Akaka, D-Hawaii, to require that credit card statements (search) show how long it would take the consumer to pay off his or her debt by making only the minimum monthly payment.
It was the third time in two days that the Senate beat back a proposed Democratic amendment to the sweeping bill to overhaul the bankruptcy code. On Tuesday, the Senate did accept a more limited GOP provision that would give a break to active-duty military personnel and some veterans who file for bankruptcy.
Democrats expressed concern Tuesday about hardships for veterans returning from Iraq and Afghanistan, citing cases of people in the National Guard and Reserves who have seen their businesses fail after they were called up to serve.
About 16,000 active-duty members of the military file for bankruptcy each year, according to congressional investigators.
The bankruptcy overhaul bill would raise the threshold for erasing credit card and other consumer debts in bankruptcy court. Supporters predicted an imminent victory after nearly eight years of congressional gridlock and feverish lobbying for the bill by banks and other credit-card issuers.
The new "means" test in the legislation is intended to determine whether those seeking bankruptcy protection must repay their debts or are allowed to have them canceled. Under the current system, bankruptcy judges have the discretion to decide that.
Besides exempting service members from the test, Durbin's proposal also would have allowed them more generous property exemptions when applying for bankruptcy so that they could keep their homes and vehicles.
Supporters hope for passage before lawmakers adjourn in mid-March for the spring recess. They say they are heartened by the swift passage two weeks ago of a bill aimed at discouraging class-action lawsuits.
Banks, credit card companies and retailers have pushed since 1997 for a bill overhauling the bankruptcy laws. Consumer and civil rights groups and unions say the legislation would shred a safety net for those who have lost their jobs or face mounting medical bills.
Personal bankruptcies appear to have broken the upward trend of recent years, as new filings fell 3.8 percent last year, according to official figures released Tuesday. They showed 1,563,145 personal bankruptcy filings in 2004, down from 1,625,208 in 2003.
Some experts say the decline means that while the level of bankruptcies is still high compared with four years ago, some consumers finally have been able to benefit from an improving economy and low interest rates.