Washington — The Senate voted Thursday to make it harder for people to erase their debts in bankruptcy courts and close a loophole in present law that allows wealthy debtors to shield their assets in luxury homes.
The 83-15 vote in favor of the most sweeping overhaul of bankruptcy laws in 20 years occurred just two weeks after the House passed a similar bill, but one that left wealthy homeowners in some states protected.
Washington In a victory for banking and credit card firms that have long lobbied for such a move, the Senate voted Thursday to make it harder for Americans to wipe out their debt and get a fresh financial start by filing for bankruptcy.
Consumer interests called the measure too harsh on low-income borrowers.
At the heart of the bankruptcy bill is a provision requiring Americans who file for bankruptcy to meet a means test to determine whether they will be allowed to eliminate all of their debt or be forced to enter into a repayment plan under court order.
Only those who prove they cannot pay at least 25 percent of their debt over five years would be permitted to file under the law's Chapter 7 provisions allowing debt wipeout and a fresh start.
Others would have to file under Chapter 13 and agree to a court-approved repayment schedule.
The measure garnered the votes of 47 Republicans and 36 Democrats in the evenly divided Senate, while 13 Democrats and two Republicans opposed it. Sen. Peter Fitzgerald, R-Ill., voted present to avoid a conflict of interest because his family owns a bank.
Personal bankruptcy filings have declined in the last two years, but the legislation comes against the backdrop of a sagging economy and shaken stock market.
It was the second business-friendly measure to pass both houses of the new Congress. Last week, Congress voted to repeal workplace rules aimed at curbing repetitive motion injuries.
President Bush has signaled he would sign the bankruptcy legislation, which passed the House on March 1. But Bush is opposed to national caps on homestead exemptions, such as the $125,000 limit adopted by voice vote Thursday.
"We're very encouraged by the direction of the bankruptcy legislation," White House spokesman Ari Fleischer said. "However, we continue to work with leaders on the Hill. The president is looking forward to the presentation of the bill that he can sign."
To speed a final package to the White House, the bill's supporters now want the House to either approve the Senate version or make changes in it and send it back to avoid having to negotiate the differences between the two versions.
The Senate debated the bill for two weeks, but few of the issues were new to it.
The banking, credit card and retail credit industries have spent millions of dollars in campaign contributions and lobbying activities on behalf of it over the past three years.
Consumer groups and unions have been aggressive in opposing it, contending that the changes in bankruptcy law will take away an important means of relief for families hit by job losses.
Former President Clinton vetoed last year's version, saying it would hurt ordinary people and working families.
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