Bankruptcy law makes last resort more expensive
Christian Danielsen ; The California Aggie (UC-Davis)
Issue date: 4/27/05 Section: News
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DAVIS, Calif. - Students carrying massive credit-card or student-loan debt may face greater difficulties in declaring bankruptcy.
Congress passed a bill Thursday that makes it more difficult for consumers to seek relief from overwhelming debt through bankruptcy.
The U.S. Senate's version of the bill, titled "The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005," passed easily with a vote of 74-25 on Mar. 10. Thursday's vote in the House of Representatives' version of the bill was 302-106. President George W. Bush has indicated he is ready to sign the bill into law.
The banking and credit industries applauded Thursday's vote, saying the 500-page bill was an overdue overhaul of the nation's bankruptcy system that will cut down on fraud and abuse.
"The bill is written to target those who declare bankruptcy with significant income.... It's asking those people to pay a portion of their debt," said Laura Fisher, spokesperson for the American Banking Association, a financial-industry lobbying group. "I think most Americans would agree that it's reasonable to ask people to repay the debts that they can afford to repay."
Consumer advocacy groups, however, blasted the bill as a gift to some of Bush's most generous contributors. They say the law will punish people who have fallen on financial hardship while ignoring the "predatory" lending practices of credit-card companies and other creditors -- namely high interest rates and myriad fees that make it hard to pay down debt.
One of the bill's biggest proponents was credit card giant MBNA, which contributed over $1 million between 1999 and 2004 to senators who voted for the bill, compared to $85,000 for those who did not, according to an analysis by the Center for Responsive Politics.
Despite repeated attempts by The California Aggie, MBNA did not return calls requesting comment.
Harvard law professor and bankruptcy expert Elizabeth Warren, who launched a bogging campaign against the law, said it was only a matter of time before the financial industry's contributions brought results.