BANKRUPTCY: Amending Economic Justice

A bipartisan coalition in the Senate is determined to help the credit card industry, which took in $30 billion in profits last year. That's why many senators are supporting a bill (S. 256) that would make it harder for average people to recover from financial misfortune by declaring bankruptcy. And they refuse to let anyone – not victims of identity theft, not those suffering from debilitating illness, not the military – get in their way.  Last week the Senate rejected a series of amendments to the bankruptcy bill that would have, among other things, closed loopholes for the wealthy, cracked down on predatory lending practices and protected the homes of those who were facing bankruptcy from medical bills. (For more on the bill, check out this memo by American Progress CEO John Podesta).There is no more time to waste – a final vote on this bill is scheduled for tomorrow. Write your senators now and demand that they oppose the bankruptcy bill.

REJECTED – CLOSING LOOPHOLES FOR MILLIONAIRES: Under the bill, the very wealthy would be able to shield millions in assets after declaring bankruptcy by setting up "asset protection trusts." Sen. Chuck Schumer (D-NY) introduced an amendment that "would have limited the use of the trusts to shield assets only up to $125,000." The amendment failed 39-56. Schumer lamented, "now we have a bill that says a family won't be protected if it has $50,000, but it will if it has $5 million."

REJECTED – PROTECTIONS FOR THE ELDERLY: The bill will be especially hard on elderly Americans, who are bankrupted by medical bills with increasing frequency. Sen. Russ Feingold (D-WI) introduced an amendment that would have shielded their homes (up to a modest $75,000) from seizure after declaring bankruptcy. The amendment failed 40-59.

REJECTED – PROTECTIONS FOR THE SICK: More than half of all bankruptcies result from families who are unable to pay medical bills. Sen. Ted Kennedy (D-MA) introduced an amendment to exempt those who became bankrupt because of illness from the new restrictions. The amendment failed 39-58.

REJECTED – COMPREHENSIVE PROTECTIONS FOR VETERANS: Many veterans returning from Iraq and Afghanistan, away from their jobs for months or years, face financial hardship. Sen. Dick Durbin (D-IL) introduced an amendment that would have exempted service members and veterans from the new restrictions of filing Chapter 7 bankruptcy. The amendment failed 38-58. In an attempt to save face, the Senate leadership jammed through a bill that would protect only active-duty troops and a few very low-income veterans. The right-wing needs to realize that we need to continue to support our troops even after they come home.

CREDIT CARD COMPANIES ALREADY PROFIT FROM BANKRUPTCY: Credit card companies claim reform is needed because individual bankruptcies are hurting their bottom line. It's not true. The LA Times reports, "by charging customers different interest rates depending on how likely they are to repay their debts and by adding substantial fees for an array of items such as late payments...the major card companies have managed to keep their profits rising steadily even as personal bankruptcies have soared." In other words, "companies have found ways to make money even on cardholders who eventually go broke." According to Robert Weed, a former aide to Newt Gingrich, "Most of the credit cards that end up in bankruptcy proceedings have already made a profit for the companies that issued them."

LOSING OWNERSHIP OF YOUR HUMAN CAPITAL: The purpose of the bankruptcy bill is to give the credit card companies access to the one pool of cash that was previously off-limits – the future income of people who have already declared bankruptcy. David A. Moss, a historian at Harvard, said, "until now, the principle in this country has been that people's future human capital is their own. If a person gets on a financial treadmill, they can declare bankruptcy and have what can't be paid discharged. But that would change with this bill."

• More from the Center for American Progress [here]