Starting the bankruptcy reform debate on a bipartisan basis, the House Judiciary Committee on Tuesday adopted amendments protecting poor people from unsecured creditors.
The bipartisanship during the first of three days of debate on consumer bankruptcy reform stands in sharp contrast to the fierce opposition voiced in the past two months by Democrats on the Senate Judiciary Committee and on the House panel's administrative law subcommittee.
The reform bill embraces needs-based bankruptcy, which means people would be required to repay some unsecured debt if they have sufficient income remaining after living expenses. The mechanics of carrying out such a system, however, have prompted fierce partisan battles and sunk an effort to enact similar legislation last year.
The judiciary panel appeared to make some progress in bridging the differences. On a voice vote, it adopted an amendment that would automatically let bankrupts earning less than the regional median income eliminate debts in Chapter 7 regardless of ability to repay.
The original bill used national median income, which several Democrats said was unfair to people living in areas with high costs of living, such as California.
The committee also voted 18 to 11 to drop a provision requiring that debtors be forced into Chapter 13 if they could afford, after living expenses, to repay at least 25% of unsecured debt. The committee instead said Chapter 13 would be required if people could afford to pay $100 a month after living expenses and attorney's fees.
The amendment was sponsored by Chairman Henry Hyde, R-Ill.; all the Democrats present voted for it; but most Republicans voted against.
The committee, on a 13-to-11 vote, dropped a provision requiring judges to use Internal Revenue Service estimates when calculating living expenses. Instead, judges would consider "reasonably necessary" living expenses when determining how much unsecured debt a borrower could afford to repay. A Justice Department division would define the term.
Cooperation between Democrats and Republicans seemed to ebb as lawmakers prepared to tackle some of the more controversial provisions, including those that would make it harder to eliminate credit card debt.
Republicans defeated a Democratic alternative that would have required debtors to use Chapter 13 only if they earned more than $60,000 annually and could afford to repay 100% of unsecured credit within three years. Republicans also rejected an amendment banning reaffirmations.
