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Aborting
the Bankruptcy Bill
August 17, 2002
By Laurin Suiter (ZombyWoof)
 Veteran
analysts of pork-barrel legislation should not be surprised
how the perpetually divisive issue of abortion managed to
find its way into the pending Bankruptcy Reform Act. It could
do some good to be alert, though. Assessing the merit of legislation
often means observing the time-honored practice of ‘following
the money’. When one considers the primary sponsors of the
bankruptcy bill, now pending for nearly five years, it is
easy to get a sense of who is lobbying for it and why. The
bill assuredly protects only the interests of creditors, financial
institutions, and collection agencies. It does virtually little
or nothing for the debtors, largely made up of the working
poor. The bill enjoys the enthusiastic support of the Republicans
in Congress, as well as George W. Bush, whose election campaign
for the White House was largely funded by the financial giants
of the credit industry. The money trail is as simple as it
gets in this case.
Still, despite massive lobbying and financial support from
the credit sector, a Republican majority in the House of Representatives
for the past five years, as well as a GOP majority in the
Senate until last year - the bill has never quite made it
to the Oval Office, in which now sits a sympathetic would-be
signer. The most recent defeat of the latest version of the
bill at the hands of Senate Democrats was a small but noteworthy
victory for all opposing the legislation. No matter how many
deals are attempted to keep it alive, and no matter how many
amendments are added to keep it afloat, nothing changes the
fact that the Bankruptcy Reform Act is punitive legislation
that does little more than make debt reduction more difficult
for poor and working people, ensure greater profits for creditors,
and involve the most unlikely sort of deal-making maneuvers
in order to secure its passage once and for all.
There are two ways in which private citizens can obtain debt
relief: Chapter 7 Bankruptcy, which absolves all debts in
the most extreme circumstances, and Chapter 13, which allows
for a full or partial repayment of debts over a specified
time period. The bill pending for the past five years is seeking
to make Chapter 7 nearly impossible to declare, by setting
even higher financial limits. For Chapter 13 reform, it seeks
to require those who can pay at least 25% of their debts back
over five years to do so in lieu of Chapter 7. These proposals
sound all well and good, but it would only affect a range
of somewhere between 55,000 to 130,000 debtors, 4% to 10%
of annual bankruptcy petitioners, hardly a majority of those
in severe financial straits. For the creditors lobbying the
bill, such as MBNA (Bush’s single largest campaign contributor)
and Citibank, who rake in billions of dollars in profits alone,
it seems they are working awfully hard to recover such a small
difference. The bill is simply about increasing already-bloated
profit margins, and little more.
To be sure, there are many debtors out there who have far
too often taken advantage of the current bankruptcy code.
The number of people declaring bankruptcy since 1980 has increased
300%. It is likely that a few recessions, multiple layoffs,
more divorces, and rising medical expenses over these past
two decades are a factor in that increase, but it is also
safe to surmise that concurrent abuses increased too. It is
not wrong to attempt legislation to curtail abuses. The current
bill does close a few loopholes for potential abusers, but
the measures called for are the equivalent of solving dandruff
by decapitation. The remedies are too extreme in favor of
the creditors.
The majority of those seeking debt relief under current bankruptcy
law are single mothers, divorcing spouses, displaced workers,
the poor, and people with insurmountable medical expenses.
The bill does nothing to differentiate their circumstances
from those who are able to meet at least some of their debts,
and yet proceed to file bankruptcy and avoid any repayments
altogether. The most glaring flaw in the bill, however, lies
in what it omits - creditor reform.
There are very few clauses in the bill, as it now stands,
that address what creditors can do to lessen their risks when
lending. Creditors must assume some risk with the aggressive
marketing tactics they use to lure new customers. College
students, entry-level employees, low-income families, and
just about anyone in between on the economic ladder, are targeted
relentlessly through television, print, the Internet, and
even their mailboxes, with seductive offers of easy credit
and accompanying gimmicks: shopping rebates, vacations, cruises,
and other consumerist bribery. These goodies are yours if
you apply now! In an era which “corporate responsibility”
is the new buzzword, this bill is horribly lacking even a
pretense of any. If creditors want the public to assume more
responsibility for their spending and borrowing habits, fair
enough. But lenders must set a good example.
Some of these token pro-consumer measures to address creditor
responsibility are still in the pending version. One measure
is to require creditors to disclose the risks of making only
minimum monthly payments, and to protect the customer from
being dropped from their accounts if they can make the payments
in full. Nothing about marketing strategies is addressed,
which in unsurprising in a climate still averse to more regulation.
These few promising steps to bring balance to the bill fall
short in comparison to some more substantive amendment proposals
that have come and gone during its lifespan. The most recent
of these proposed deal-makers blew up in the face of House
Republicans last week, which now portends yet another contentious
debate when the bill is re-introduced in September, after
the recess. The Senate Democrats added a provision that would
prohibit anti-abortion protesters from declaring bankruptcy
in order to avoid paying court costs. Naturally, the zealous
anti-choice members of the House fell apart over this one,
as Representatives Henry Hyde (R-IL) and James Sensenbrenner
(R-WI), the chief bankruptcy negotiators in the House, worked
all night to persuade them to accept this provision, but the
effort was in vain. The unyielding fanaticism of the hardcore
anti-choice bloc ironically worked against their greater goal
of getting the bill passed. But perhaps this unexpected obstruction
is not ironic at all, since it is lawmaking in action.
The failed deal is also hypocrisy in action, GOP-style. The
double-standard of seeking to remove the abortion-protester
provision is glaring. In the flawed logic of the dissenting
Republicans, the working consumer must suffer from the tighter
controls of bankruptcy law, in order to promote “personal
responsibility”; it is perfectly okay, then, for the tireless
advocates of violence and intimidation against women who are
pursuing their legal rights of reproductive freedom, to reap
the benefits of exclusion from the law. Score one for the
Senate Democrats.
In 1998, when economic times were good, the Bankruptcy Reform
Act took off, boosted in part by the peaking numbers of bankruptcy
filings. Paradoxical as that seems, it is unlikely, as the
nation meanders through the current economic doldrums, that
the number of filings will now magically decrease. The timing
could not be worse for this bill’s passage. Surely, legitimate
bankruptcy filings will increase as the tough times continue.
When the bill is introduced yet again in September, will it
pass at last? It will be a month consumed by the first annual
commemoration of September 11, more saber rattling concerning
Iraq, and pre-election grandstanding. If Bush affixes his
signature to whatever version of the bill that makes its way
to his desk, it will be one more favor delivered to his benefactors,
and one more mark against the rest of us, trying to make our
way through troubled times. If the bill is to be aborted once
more, let this be the end of it, at last.
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