The US House of Representatives overwhelmingly approved a major overhaul of the nation's bankruptcy laws on Thursday, completing congressional action on the measure and sending it to President George W. Bush for his signature.
The 302-126 vote adopted the first significant revision of the bankruptcy laws in 27 years and is the culmination of years of intensive lobbying by the nation's largest banks, credit card companies and retailers, who have complained about what they say is a rising tide of abusive bankruptcy filings.
It is a major victory for Bush, who supported the measure, and a sharp setback for civil rights organizations and labor and consumer groups. They say the new law will be a huge giveaway to special interests at the expense of many middle- and lower-income families.
Those groups say that abuses of the bankruptcy system are episodic, not systemic, and that the increase in filings over the last 30 years is a symptom of other societal problems, such as the growing number of uninsured families facing high medical bills. They also link the increase to the sharp rise in promotion by credit card companies, banks and retailers of easy credit often accompanied by hidden and high fees.
Supporters of the legislation beat back a variety of attempts to force lenders to cut fees, expand disclosure and curtail what critics have called the abusive marketing tactics of banks and credit card companies. The supporters also beat back a series of amendments that would have curtailed what the critics said were the abusive bankruptcy practices of corporations like Enron and WorldCom.
Bush hailed the House vote.
"These common-sense reforms will make the system stronger and better so that more Americans -- especially lower-income Americans -- have greater access to credit," he said in a statement.
The Senate passed the same bill last month by a vote of 74-25.
When it takes effect six months after it is signed by the president, the new law will disqualify many families from taking advantage of the more generous provisions of the current bankruptcy code, which since 1898 had permitted bankruptcy filers to extinguish their debt for a "fresh start."
In its place, the bill would impose a means test that would prompt many people to file for bankruptcy protection under Chapter 13, which requires a repayment plan. The means test would not be applied to debtors who earn less than the median income in their state. Those who earn more than that, and can pay at least US$6,000 over five years, would have to seek protection under Chapter 13, rather than Chapter 7.
The median income for a family of four in 2003 was US$65,093, ranging from US$45,867 in New Mexico to US$82,561 in Massachusetts, according to the US Census Bureau.
The bill would also impose significant new costs on those seeking bankruptcy protection and give lenders and businesses new legal tools for recovering debts. It also imposes new barriers to filing a series of successive bankruptcy filings over the years.
Opponents of the legislation said that the move by Congress was a harsh attack on the poor and most needy..
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