Bankruptcy overhaul law in president’s hands

Associated Press

WASHINGTON — The lame-duck Senate on Thursday sent President Clinton a bankruptcy overhaul bill he has promised to veto because he believes it would hurt working families that fall on hard times.

Senators, by a 70-28 veto-proof vote for the bipartisan legislation, approved the most sweeping bankruptcy law changes in 20 years, making it harder for people to erase credit card and other debts in court. Supporters have pushed for the changes over the past three years.

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.

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 favors overhaul of the bankruptcy laws in principle but believes the current bill is unfair to debtors.

He 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 not sign it if Congress is out of session.