Bankruptcy “Reform” Act: Deforming the System

Many of you are aware of the bankruptcy “reform” bill now barreling through the Senate. This credit industry wish-list does nothing to address the causes of spiraling bankruptcy rates in America, like predatory lending practices, stagnant wages and a lack of health care. Instead, it cynically caricatures bankrupt families as “deadbeats” who must be punished by higher costs and less protection from creditors — never mind the fact that about 96% of all bankruptcies are caused by medical emergencies, job loss, divorce or a death in the family.

The bill itself is bad enough. (More on specific provisions here, here and here.) But for my money, the most depressing aspect of this whole affair is how clearly it illustrates Senators’ slavish and cynical devotion to big donors. The credit and banking industries are among the nation’s largest campaign contributors — and it’s paying off.

In the last few days, the Senate has beat back common sense proposals to exempt military service members and veterans from a harsh means test; give relief to people forced into bankruptcy by medical bills; discourage predatory lending practices by credit companies; and allow elderly people to protect their homes from seizure. Even a bi-partisan proposal to curb bankruptcy abuses by big corporations is being blocked because Senate leadership fear such a “controversial” notion might stall the bill.

If the bill passes, Democrats and Republicans will share the blame. In fact, the credit industry, effectively headquartered in Delaware, is counting on Senators Biden (D-DE) and Carper (D-DE) to help deliver this bill. (I’m sure they’ll continue to benefit handsomely for their loyalty.)

There is hope yet. The credit industry has been pushing this bill since the late 90s, but Senator Schumer (D-NY) has repeatedly inserted an amendment prohibiting violent abortion protesters from escaping court-ordered fines by declaring bankruptcy. The provision made the bill untouchable for socially conservatives, and gave others cover for voting against a bill they knew was deeply flawed. Schumer is again proposing his amendment, which will most likely be voted on within a week. That vote may well determine the fate of the bill. Let’s hope Schumer is successful again, not only for the sake of a woman’s right to choose, but also for the sake of the whole American middle class.

— Ryan Spear