Lawmakers and observers could be excused if they had a feeling of d?j? vu last week during the Senate Judiciary Committee's first hearing on the bankruptcy reform bill. It came almost four years to the day to the committee's last hearing on the credit union-backed bill.
And leading off last week's hearing, as he did four years ago, was Shoreline Credit Union President Kenneth Beine, telling the senators that bankruptcy filings have cascaded at his $65-million, Two Rivers, Wis. credit union since then.
Losses due to bankruptcy were just $24,000 at the last juncture, stated, Beine, and were $115,000 in 2003, although they fell to $70,000 last year.
In a broader perspective, bankruptcy filings among credit union members climbed to a record 275,000 during 2004, costing credit unions an estimated $900 million in losses, 40% of all charge-offs, according to Beine.
Beine, testifying for CUNA, urged senators to finally pass the bankruptcy bill after four unsuccessful tries. The bill would make it harder for individuals with adequate financial means to erase all of their debts by filing a Chapter 7, relegating those debtors instead to a Chapter 13 reorganization.
'I'll Keep Coming Back'
Beine said he and other credit union executives have not given up on the need for bankruptcy reform despite the continued failures. "I'll keep coming back here until we get this done," he said.
The main aim, he told members of the Senate committee, is not to cut down on bankruptcy-related charge offs, but to deter debtors from abusing the system by using bankruptcy as a financial planning tool. He described the case of one SCU member who recently fired for bankruptcy a third time in order to shirk his debts.
But there were clear signals at last week's hearing that the bill will get stuck again, as it has at the last two Congresses, on a provision that would bar abortion clinic protesters who are convicted of crimes at the clinics from shielding assets under bankruptcy. New York Sen. Charles Schumer, chief proponent of that provision, said he will not shy away from it and urged his colleagues not to, either.
"The bankruptcy code should not be used for a safe haven by anybody who commits violence or intimidation on abortion clinics," said Schumer. "Bankruptcy is no escape from accountability. I hope now, as we reconsider this bill, that my colleagues will not do an about-face and reconsider this measure."
Schumer's position was echoed by his democratic colleague in the committee, Patrick Leahy of Vermont.
Last week's hearing came a day after the House introduced its own version of the reform bill, with a broad bipartisan group of 65 co-sponsors.
CUNA lobbyist Gary Kohn said the start of the process so early in the 109th Congress, just a week after the commencement of hearings, was a significant show of support by congressional leaders. "This shows there is a new seriousness in getting this passed early in this Congress," said Kohn.
The bill introduced in both the House and the Senate includes the credit unions' three main priorities: a means-test to determine the eligibility to file Chapter 7; mandatory financial education for all bankruptcy filers, and the continued ability of credit unions and members to enter into reaffirmation, or voluntary repayment, agreements on selected debts.
It would also close a major loophole in the bankruptcy law by establishing a uniform homestead exemption of $125,000 for the value of a home. Currently seven states have unlimited homestead exemptions, allowing some debtors to buy homes in Florida, Texas and elsewhere, to shield debts.
