March 8, 2005
The bankruptcy bill Republicans are bulldozing through the Senate this week will make it harder for middle-income people to escape crushing debt while providing a convenient escape hatch for the wealthy. The legislation has long been sought by banks and credit card companies and Republicans have the votes to push it through Congress. But it's a bad bill that shouldn't become law.
In the name of ending bankruptcy abuse, the bill would impose a means test to determine who could have their debts wiped out and who could only have them adjusted with a repayment schedule. It would do nothing to rein in companies that flood consumers with credit, high interest rates and long, costly repayment schedules. And in their zeal to pass a bill the House will accept without changes, Senate Republicans rejected Democratic amendments intended to take the focus off income and to take aim instead at willful deadbeats.
Killed were amendments, for instance, to cut people some slack if they were wiped out by catastrophic medical expenses or as a result of identity theft. Others would have provided special protections for the military and allowed the elderly to shield some of the equity in their homes.
What Republicans should reject, but haven't so far, is a loophole allowing the wealthy to use asset protection trusts, available in five states, to stash unlimited amounts of money beyond the reach of creditors. Setting up the trusts can cost hundreds of thousands of dollars, so only the rich need apply. Sponsors say they're looking to close that loophole.
But unable to sand off the bill's rough edges, Sen. Charles Schumer (D-N.Y.) plans to offer an amendment barring anti-abortion protesters from using bankruptcy to shield themselves from judgments for illegally blocking access to clinic entrances. The amendment is a poison pill. If approved it would kill Republican support and the bill. Republicans aren't likely to let that happen, but death is the fate the bill deserves.