Fierce Democratic opposition derailed efforts Thursday to whisk bankruptcy reform legislation through the Senate Judiciary Committee.
The dissent forced Sen. Orrin Hatch of Utah, the committee chairman, to schedule a hearing April 22 to begin voting on 26 pending amendments.
"This legislation doesn't measure up," Sen. Edward M. Kennedy said. "It basically stinks. If you talk about special-interest legislation, you got it right here."
The Massachusetts Democrat led an insurrection that foiled Sen. Hatch's plan to clear the bill quickly for consideration by the full Senate. No votes were taken Thursday.
Sen. Kennedy's involvement seriously jeopardizes prospects for bankruptcy reform. He successfully blocked a similar bill last year in the waning days of Congress.
"Last year it was a bad bill," he said. "This year it is an equally bad bill. This legislation does not deserve to pass."
The bill would require bankruptcy trustees to determine whether a consumer should eliminate unsecured debt in Chapter 7 or repay it in Chapter 13. Debtors would have to use Chapter 13 if they could afford, after living expenses, to repay $15,000 or 25% of unsecured credit over five years. Creditors also could ask judges to force a consumer into Chapter 13.
The proposal also includes a host of bankruptcy provisions addressing nonconsumer topics ranging from farming to derivatives, small businesses to audits.
It does not incorporate many of the consumer protections Democrats successfully added to last year's reform bill, which passed the Senate 97 to 1 before being altered by the House and eventually blocked by Senate Democrats.
"Today's bill is missing the key ingredient from last year's balanced reforms in the Senate-consumer credit information and protections," said Sen. Patrick Leahy, D-Vt.
Further clouding the bill's prospects was a promised amendment from Sen. Charles E. Schumer that would make it tougher for perpetrators of violence against abortion clinics to use bankruptcy to protect their assets when courts order payments of damages.
"I don't view this as pro-choice or anti-pro-life," the New York Democrat said. "It is about rights."
But other senators called the amendment a "poison pill" that would kill the bill. "If the object is to not have a bankruptcy bill, then move forward with your abortion amendment," said Sen. Joseph R. Biden, D-Del.
Democrats also questioned whether the committee has held enough hearings on the bill. Though it held nearly a dozen hearings last year, Senate Judiciary did not have one this year.
"I don't understand the rush to report this bill without hearings," said Sen. Russ Feingold, D-Wis. "I'm afraid what we are doing here is irresponsible."
Sen. Kennedy also charged that the bill would hurt the poor and middle class who most need help. "It is easy to see who loses," he said. "It is the basic hard-working Americans who have run into hard times."
Sen. Charles E. Grassley, R-Iowa, defended the bill he authored, calling it a "fair and balanced" approach that enjoys overwhelming public support. "The polls are clear," he said. "The American people want bankruptcy reform."
He said consumer credit card protections are not in the bill because Senate Banking Committee Chairman Phil Gramm would have claimed jurisdiction. That would slow the bill and open it up to more changes.
Sen. Biden said it was hypocritical for members of his party to complain that poor people and minorities were being saddled with credit card debt when just a few years ago they demanded banks extend credit to these groups.
Supporters of the bill received a boost from the Clinton administration, which said the Grassley bill includes "some encouraging improvements" over earlier drafts. Still, Acting Assistant Attorney General Dennis K. Burke said in a 34-page letter that further changes are needed.
Among the administration's demands is automatically allowing poor people to file Chapter 7 regardless of repayment ability, and switching to an index different from the one the Internal Revenue Service uses to calculate living expenses.
Industry lobbyists remained optimistic. "There is plenty of time to work these issues out," said Philip S. Corwin, a principal at Federal Legislative Associates who lobbies for the American Bankers Association.
But consumer advocates said the bill is dead unless creditors and their supporters in the Senate drop their opposition to enhanced consumer protections.
"The potential for a compromise bill is there," said Gary Klein, a lawyer at the National Consumer Law Center. "It is simply a matter of whether the powerful forces in the credit industry are willing to accept balanced legislation."
