WASHINGTON (AP) -- With personal bankruptcies soaring, the House passed major legislation Wednesday that was sought by credit card companies to make Americans shoulder more responsibility for their debts.
A key feature of the bill, adopted on a 306-118 vote that sliced across party lines, would make it more difficult to simply file court papers and sweep bills away.
The legislation is the most far-reaching overhaul of the nation's bankruptcy laws in 20 years. Prospects for a milder measure pending in the Senate are unclear.
Opponents charge that lawmakers are bending to the profitable banking industry and credit card lobbies at the expense of honest working people hit by job losses, medical crises and ensuing financial disaster. The banking and retail credit industries have spent millions of lobbying dollars in campaigning to pass the legislation.
"Once again, the Republican majority is pushing legislation that puts the interests of wealthy corporations ahead of the interests of families who are struggling to make ends meet," said Rep. Maurice Hinchey, D-Saugerties, N.Y. "This legislation would force mothers trying to collect child support to compete in court against powerful financial institutions. …This is an outrage."
The Clinton administration supports some changes in bankruptcy laws, but has said it cannot support the House bill in its current form. The administration prefers a more temperate Senate measure but also wants changes in it.
The House legislation would establish for the first time a "needs" test for people filing for bankruptcy court protection from creditors.
It would require people who earn at least the median U.S. income, about $51,000, to file for financial reorganization under Chapter 13, subject to a court-ordered repayment plan, if they can pay back 20 percent of their debt within five years.
Credit card companies complain that too many people take shelter under the more lenient Chapter 7, which erases some debts, when they could afford to reorganize their debts under Chapter 13.
"We need to put personal responsibility back into the system again," said Rep. Bill McCollum, R-Fla., a chief sponsor.
With $44 billion in unpaid credit card debt piling up, McCollum contended, companies are being forced to charge higher interest rates that hurt responsible consumers.
The House is acting in response to a staggering trend. Despite the strong economy, the number of Americans filing personal bankruptcies last year jumped to 1.3 million – up more than 300 percent since 1980.
The rising tide of bankruptcies spills across demographic, ethnic and social lines. Factors cited include a rising divorce rate, expansion of legalized gambling, changes in health insurance and uninsured medical expenses, aggressive soliciting by credit card companies and widespread advertising by bankruptcy lawyers.
Consumer groups and other opponents of the legislation blame banks and the consumer credit industry, which continues to send out billions of credit card solicitations each year.
A political flashpoint in recent weeks has been complaints by consumer groups and Democrats, including Hillary Rodham Clinton, that provisions in the House and Senate bills would make thousands of single mothers and children who are owed support by an absent male take a back seat to credit card companies in debt collection.