House passage of bankruptcy legislation this week is a given, but lenders need a huge margin of victory to get what they want from the three- year reform effort.
Without a two-thirds majority-the votes needed to override a threatened presidential veto-House leaders may be forced to accept pro-debtor provisions when they hammer out a final version with Senate counterparts this summer.
"If this does not get 290 votes, it is in trouble," one industry official said.
The House Rules Committee is scheduled to consider the bill Tuesday. The committee is expected to permit Republicans and Democrats to propose five or six amendments each when the bill hits the House floor on Wednesday. The Senate is expected to vote on bankruptcy reform in June.
The House bill would require judges to force consumers to use Chapter 13 if they could afford, after living expenses, to repay at least $6,000 in unsecured debt over five years. It would automatically permit consumers making less than the regional median income to use Chapter 7, regardless of their ability to repay debt.
To get 290 votes in the House, roughly 75 Democrats must vote yes. Grabbing one-third of the party's House members could be tough, considering the bill garnered just two votes from Democrats when the House Judiciary Committee voted last week.
Industry lobbyists said they expect Democratic support to widen.
"The committee is very polarized," said Philip S. Corwin, a principal at Federal Legislative Associates who lobbies for the American Bankers Association. "Last year only a few (committee) Democrats supported it, but the bill got 80 Democratic votes on the House floor." The bill's chief sponsor, Rep. George Gekas, R-Pa., will have his hands full in fighting proposed amendments. Several observers said there will be battles on the floor over the test used to determine who may file for Chapter 7 and over consumer protection issues, such as credit card disclosures.
For instance, House Judiciary Committee Chairman Henry J. Hyde said he will introduce an amendment to give judges discretion to determine "reasonable" living expenses when calculating whether a consumer has enough disposable income to repay some unsecured debt. The bill currently relies on Internal Revenue Service estimates of living expenses, modified to include extra funds for food, clothing, and education. Democrats are expected to push an amendment requiring credit card lenders to disclose how long it would take a consumer to retire his balance by making only the minimum monthly payment. They also plan to try to kill language limiting class actions against creditors that illegally persuade consumers to reaffirm debts that they are entitled to eliminate in Chapter 7.
"These are salient issues," a Democratic staff member said. "Members who are not on the Judiciary Committee are going to want to raise them."
The Senate bill is expected to contain many of these provisions by the time it is approved next month. It already permits debtors to use Chapter 7 unless they could afford to repay $15,000 in unsecured debt over five years, which is $9,000 more than the House version.
Last year the Senate refused to act on a bankruptcy bill, with many members accusing Senate conference managers of accepting too many pro- creditor provisions from the House bill. That killed the industry's quest for reform, which actually began two years earlier when lenders began lobbying a federal commission that proposed an overhaul of the consumer bankruptcy laws.
Still, an industry lobbyist cautioned against predicting gloom and doom if the bill does not pass overwhelmingly in the House.
"Any proponent of a bill wants to see a wide margin because it does help," he said, "but this is only one step in the process. At this stage of the game, what is most important is we just cross the goal line."