Bankruptcy reform continued its crawl through Congress on Tuesday, as the Senate Judiciary Committee voted 14 to 4 to send the legislation to the full Senate.
House Judiciary postponed its vote on similar legislation until today. As a result, the full House will not vote on the bill Thursday as expected. It is unclear when either the House or Senate will vote.
Both versions would require consumers with high disposable incomes to repay some unsecured debt in Chapter 13 rather than eliminating it all in Chapter 7.
The House bill would require a judge to force consumers into Chapter 13 if they could afford, after living expenses, to repay unsecured creditors $6,000 over five years.
The judge would determine living expenses by using Internal Revenue Service guidelines modified to include extra funds for food, clothing, and education. The judge could permit consumers with high disposable incomes to use Chapter 7 in "extraordinary" circumstances. Anyone making less than the regional median income would be exempted.
The Senate bill would require debtors 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.
Sen. Charles E. Schumer, D-N.Y., withdrew an amendment that would force credit card companies to tell consumers the cost of paying their balances over time. The amendment also would force companies to let customers know what happens when low, introductory interest rates expire.
"Disclosure makes an imminent amount of sense, and for the love of me I can't see why-whatever one's political philosophy-why one would be against it," Sen. Schumer said.
Delaying the amendment was merely a tactical move, because if Senate Judiciary included it the Senate Banking Committee could assert jurisdiction and slow down the legislation.
"Those of you who are adding amendments to protect consumers, you ain't gonna get something out of the Banking Committee that's going to protect consumers," warned Sen. Joseph R. Biden Jr., D-Del. "Vote against it (Sen. Schumer's amendment), then vote for it on the floor; that's the place to vote for it."
President Clinton has threatened a veto if bankruptcy reform does not include such disclosures.
Democrats spent much of House Judiciary's fourth day of debate on the bill unsuccessfully trying to make it more consumer friendly.
The panel defeated, 19 to 4, an amendment by Rep. Jerrold Nadler, D- N.Y., that would have attacked "reckless lending practices." Credit card lenders extending debt to consumers with debt-to-income ratios of 40% or higher would be barred from collecting it in bankruptcy.
Rep. Mel Watt, D-N.C., lost in voting on two amendments that would have required credit card lenders to disclose how long it would take a consumer to repay his balance if only the minimum was paid each month.
"This is the kind of information consumers need to know," said Rep. Watt, who added that it could take up to 31 years to pay off a $3,000 balance.
"How would it hurt to have a little more disclosure," asked Rep. Maxine Waters, D-Calif. "What is wrong with that?"
One amendment would have changed the Truth-in-Lending Act to create the disclosure requirement, an action House Republicans charged would have delayed Thursday's vote by the full House because it would have required the bill to be referred to the Banking Committee.
To get around that problem, Rep. Watt offered a modified amendment that would make it easier for consumers who did not receive the disclosures to eliminate credit card debt in bankruptcy, even if they had high disposable incomes.