Abortion Spat Delays Bankruptcy Bill

A coalition of anti-abortion Republicans forced what could be a fatal delay of a landmark House-Senate bankruptcy agreement that would have made it tougher for Americans to dissolve debt.

The House was expected to pass the compromise bankruptcy legislation Friday night before leaving for the summer, but it hit a snag after an argument rose among Republicans over an abortion provision in the bill.

The bill will now have to wait until after Congress returns from its summer recess, congressional aides said.

The sticking point was a provision that would prohibit people who attack or block access to abortion clinics from declaring bankruptcy to avoid paying court-ordered fines.

Rep. Henry Hyde of Illinois, one of the leading anti-abortion Republicans in the House, had fought to curb or kill that provision, and went along with the bankruptcy deal only after Senate Democrats agreed to limit the measure to people who intentionally or knowingly violate the law.

But a group of anti-abortion Republicans, led by GOP Rep. Chris Smith of New Jersey, objected to Hyde's deal with Senate Democrats, delaying the floor movement until September.

The bill's backers decided they needed more time to try to assure its passage, congressional staffers said.

House Republicans, who control the chamber by only seven votes, need every GOP vote to get the legislation through the chamber, with several Democrats lined up against the bankruptcy legislation.

The bankruptcy bill has been in the mix for five years, coming close several times but never able to cross the final hump. If the House had passed the bill, the Senate would have taken it up next, and President Bush already has indicated that he would sign it.

But the month-long delay will give consumer groups, as well as some House and Senate Democrats, time to marshal their forces against it, making it harder to get a final agreement.

Consumer groups said the legislation was so unfriendly to financially strapped Americans they might start flooding into bankruptcy court now to avoid the new rules.

"To Joe Blow, I'd say be very careful about unsecured debt, about credit cards, and tell your family that if they're in financial trouble, they should think about declaring bankruptcy sooner rather than later," said Travis Plunkett of the Consumer Federation of America.

But banking and business groups insisted that most Americans should never even have to think about the legislation, which took almost five years to reach the point where the GOP-controlled House, the Democrat-controlled Senate and the White House are all ready to sign on.

"The bankruptcy system is still going to continue to be there for most Americans. Nothing is going to change," American Bankers Association spokeswoman Catherine Pulley said. "This bill is only going to affect Americans who can afford to pay their bills back, but choose not to."

Personal bankruptcy filings rose 15 percent last year, federal official reported in April. There were 1.5 million bankruptcy filings in the U.S. Bankruptcy Courts in the 12 months that ended March 31, the most recent data available.

Personal bankruptcy accounts for about 97 percent of that, officials said.

Seven out of every ten consumer bankruptcy filings come under Chapter 7 of the U.S. Bankruptcy Code, which allows people to escape paying any of their credit-card and other debts. Filings under Chapter 13 force people to repay debts over time in accordance with a court-approved plan.

The legislation applies a new standard if a debtor is found to have sufficient income to repay at least 25 percent of the debt over five years or has at least the median income for his or her state. Then, the debtor would automatically be forced into a Chapter 13 repayment plan.

Right now, a bankruptcy judge or a private attorney appointed by the Justice Department usually decides whether someone qualifies for dissolution of debts or should be forced to repay under a reorganization plan.

Credit card companies and banks have complained for years about the rise in Chapter 7 filings, which forces them to eat billions of dollars in losses a year from bankrupt consumers, Pulley said.

The American Banking Association estimated only about 10 percent of bankruptcy filings will be affected by the legislation, Pulley said.

But consumer advocates say the legislation couldn't have come at a worse time. Tens of thousands of people have lost their retirement savings and jobs since the Enron Corp. and WorldCom Inc. accounting scandals became public.

"So you have a WorldCom employee who loses her job, loses her health insurance, gets a paltry severance, and is left with a retirement plan that may be worth nothing," said Frank Torres, spokesman for Consumers Union. "That person may find it impossible to file for bankruptcy, but her employer WorldCom is free to file for bankruptcy after it cooked the books and cheated investors."