Published on Sunday, March 13, 2005 by The Progressive
Democratic Senators Cave on Bankruptcy Bill
by Matthew Rothschild
On March 11, the U.S. Senate passed the bankruptcy bill that will fill the coffers of the credit card companies while bleeding consumers dry.
The bill passed by a whopping 74 to 25 margin, with eighteen Democratic Senators going over to the dark side.
Here are the spineless 18:
Max Baucus, Montana.
Evan Bayh, Indiana.
Joe Biden, Delaware.
Jeff Bingaman, New Mexico.
Robert Byrd, West Virginia.
Thomas Carper, Delaware.
Kent Conrad, North Dakota.
Daniel Inouye, Hawaii.
Tim Johnson, South Dakota.
Herb Kohl, Wisconsin.
Mary Landrieu, Louisiana.
Blanche Lincoln, Arkansas
Bill Nelson, Florida.
Ben Nelson, Nebraska.
Mark Pryor, Arkansas.
Harry Reid, Nevada, Senate Minority Leader!
Ken Salazar, Colorado.
Debbie Stabenow, Michigan.
"This is not where we as Democrats ought to be, for crying out loud," as Senator Tom Harkin noted. "We are making a terrible mistake by thinking that we can have it both ways. We have to remember where our base is."
The bill is a fantasy come true for credit card companies, which have been pushing it for years. But it's not as though they're suffering. They made $30 billion in profits last year.
The bill severely limits the ability of consumers to wipe away some of their debts and get a fresh start.
Half the people who file for bankruptcy do so because of sky-high medical bills, and another 40 percent due so because of disability, job loss, family death, or divorce, according to the National Consumer Law Center. If you make more than the median income in your state, no matter how high your bills are, you can't wipe the debts clean.
As a result, debtors will be at much greater risk of losing their cars or their homes.
And even if your debts are the consequence of identity theft, of someone stealing your credit card and running up charges, you still are on the hook for them, as the Senate amazingly voted down an amendment to shelter victims of identity theft.
Yet at the same time, the bill assigns guilt to consumers who are doing perfectly understandable and legal things. "The bill presumes that a struggling family that spends more than $42 a week on credit card purchases before declaring bankruptcy is guilty of fraud," according to the Consumer Federation of America.
The bill also requires anyone filing for bankruptcy to get credit counseling beforehand. But as Senator Russ Feingold pointed out, there are some people who need to file for bankruptcy who can't get that counseling. He mentioned a person with Alzheimer's, for instance. "Do we think anything is to be gained by requiring a debtor who is ill with a terrible, incurable disease, not even competent to sign legal papers anymore, to take a credit education course?"
He also mentioned U.S. soldiers fighting in Iraq or Afghanistan. Some of them are going broke because their military pay is much less than they were earning at home. On the Senate floor, Feingold again asked: "Do we want to require a soldier to sit down at a computer and take a credit counseling or credit education course while they are in Iraq in order to protect his or her family back home from financial ruin?"
Meanwhile, the new bill won't do anything to force the credit card companies to stop their predatory lending, nor will it even make them come clean on how much interest or penalties they are charging to consumers who pay only the minimum balance or who pay late.
Middle class debtors are the ones who are going to suffer the most under this bill.
The poor will still be able to get Chapter 7 protection, which releases them from most of their debts. And the indebted rich can still shelter their property if they get a good lawyer to draw up an asset protection trust in states where that's allowed. And many affluent debtors could still declare bankruptcy and still keep their mansions. On top of that, corporations like Enron could still file bankruptcy to avoid paying their employees.
But if you're struggling to keep your head above water, this bill has one piece of advice for you: drown.
And eighteen Democratic Senators refused to throw you a rope.
© 2005 The Progressive