Senate Continues Bankruptcy Debate

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Senate Democrats pressed Tuesday to protect U.S. military personnel from provisions in a pending bankruptcy (search) bill that would make it much more difficult for people to use the law to shed their debts.

The measure, whose supporters are predicting victory after nearly eight years of congressional gridlock, would significantly increase the burden of those trying to erase credit card and other debts in bankruptcy court.

The Democrats said they were concerned about financial hardships faced by veterans returning from Iraq and Afghanistan and their families. Some soldiers in the National Guard and Reserves have seen their businesses fail after they were called up to serve, they said.

"Many men and women in the military are making extraordinary sacrifices," said Sen. Dick Durbin, D-Ill., principal author of the proposed amendment to the bankruptcy overhaul legislation. "It's unfair that they should come home to face this new harsh bankruptcy law."

The amendment would exempt members of the military from a new test in the bankruptcy legislation to measure people's income and assets to determine whether they must repay their debts or have them canceled in bankruptcy. Under the current system, bankruptcy judges have the discretion to decide that.

Durbin's proposal also would allow service members more generous property exemptions when applying for bankruptcy so that they could keep their homes and vehicles.

President Bush on Monday called the proposed revisions of the nation's bankruptcy laws "commonsense reforms" that will curb abuses. In the House, the chairman of the Judiciary Committee, Rep. James Sensenbrenner, R-Wis., has proposed identical legislation.

The Senate Democrats, many of whom support a bankruptcy overhaul but oppose the bill as written, have prepared scores of amendments that would, for example, also protect employees of bankrupt companies.

The Democrats also are considering trying to attach to the legislation an increase in the minimum wage, one of their highest priorities.

Supporters of the bankruptcy overhaul bill hope for passage before lawmakers adjourn for the spring recess. They say they are heartened by the swift passage two weeks of a bill aimed at discouraging class-action lawsuits by having most large ones with plaintiffs from multiple states heard in a federal court rather than a state court.

Making the case for the bankruptcy legislation, Majority Leader Bill Frist, R-Tenn., declared in the Senate chamber Monday that "wealthy debtors are walking away from debts they can repay."

Banks, credit card companies and retailers have pushed since 1997 for a bill overhauling the bankruptcy laws.

Consumer and civil rights groups and unions, as well as Democratic opponents, say the legislation 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.

Sen. Edward M. Kennedy, speaking after a discussion in Boston on veterans who are

Democrats also want the bill to prohibit protesters from using bankruptcy to avoid paying court fines for blocking abortion (search) clinics, if the demonstrators knowingly violated the law. Bankruptcy legislation nearly passed Congress in 2002 but failed over that proposal. Bush has supported bankruptcy bills that do not include the clinic provision.

The Senate Judiciary Committee approved the bill, 12-5, on Feb. 17. Three of the committee's eight Democrats — Sens. Joseph Biden of Delaware, Dianne Feinstein of California and Herb Kohl of Wisconsin — voted with the Republican majority.

Personal bankruptcies appear to have broken the upward trend of recent years, slipping 0.8 percent in the 12 months ending June 30, the most recent figures.

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.

New personal bankruptcy filings declined to 1,599,986 from 1,613,097 in the year ending last June 30, according to the data from the Administrative Office of the U.S. Courts (search).