Democratic Underground  

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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