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Bankruptcy Overhaul Legislation Passes House
By Marcy Gordon   Associated Press
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WASHINGTON — Buoyed by anticipated approval from President Bush, legislation that would make it harder for people to erase credit card and other debts in bankruptcy court passed the House on Thursday.

The vote was 306-108, with the majority Republicans solidly supporting the bipartisan bill and Democrats split. Momentum for passage of the measure came despite new government data showing that personal bankruptcies in this country have declined in recent years.

The legislation, which has been pushed by the banking and retail credit industries and opposed by consumer groups and unions, is expected to be signed by Bush if it gets through Congress. It was passed overwhelmingly last year, then was vetoed in December by then-President Clinton on grounds it hurt ordinary people and working families who fall on hard times.

Supporters of the legislation, which would bring the most sweeping overhaul of the bankruptcy laws in 20 years, contend it is needed to stem a tide of bankruptcy filings and abuse of the court system. They say bankruptcy abuse creates a hidden tax of about $400 a year on each American family in the form of higher interest rates passed on by consumer credit businesses and other charges.

The legislation "strikes the proper balance" between debtors and creditors, Rep. Dave Weldon, R-Fla., said in House debate Thursday before the vote. "It is a good bill and it protects consumers."

But Stephen Brobeck, executive director of the Consumer Federation of America, complained this week that the measure would force many people "into a virtual debtors' prison."

Brobeck cited new data by the Administrative Office of the U.S. Courts showing that personal bankruptcy filings fell from a peak of about 1.4 million in 1998 to 1.3 million in 1999 and to 1.2 million last year.

Opponents of the legislation maintain it would hurt families hit by job losses, catastrophic medical expenses or other unforeseeable hardships that push them over the edge financially, especially amid the economic slowdown that has made layoffs frequent.

"The American people should know that a debtor can live in a mansion in Florida worth millions ... and not worry," said Rep. William Delahunt, D-Mass. But, he added, "If you are barely making it ... woe is you: Those credit card companies will be able to chase you forever."

"Every fair-minded American should find this offensive and unconscionable," Delahunt declared.

Foes also criticize what they say are aggressive credit card solicitations through the mail, which reached 2.51 billion by the end of last year's third quarter, according to industry figures. Total credit extended on card accounts jumped 13 percent to $2.9 trillion in the third quarter of 2000 from a year earlier.

The Senate Judiciary Committee voted Wednesday, 10-8, to approve parallel legislation and send it to the full Senate, which may vote next week. Senate Democrats previously had blocked a Republican effort to rush it through that chamber, where the two parties have a 50-50 split.

In a related move Wednesday, the House overwhelmingly passed a bill that would allow farmers filing for bankruptcy to continue to receive special protection so they would not have to sell their equipment.

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