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House Panel OKs Bankruptcy Overhaul Bill

March 13, 2003

WASHINGTON (AP) _ The House Judiciary Committee approved legislation Wednesday to make it tougher for people to dissolve their debts in bankruptcy court, a victory for the Republican majority.

The committee approval, on an 18-11 vote on strict party lines, sent the legislation _ which barely failed last year _ to the full House.

Democrats voted against the bill largely because it had been stripped of a provision that would have barred anti-abortion protesters from declaring bankruptcy to avoid paying court-imposed fines.

Inclusion of that provision in last year’s legislation had led conservative anti-abortion Republicans to join with those House Democrats who oppose overhauling bankruptcy laws. The bill that ultimately failed was a House-Senate compromise that came the closest to passage of any of the six previous years’ versions.

Banks, credit card companies and retailers have pushed for the legislation since 1997. The record pace of new personal bankruptcies in 2002 is expected to continue this year in a weak economy.

Most Republicans and many Democrats _ and President Bush _ support an overhaul of the federal bankruptcy laws. Consumer and civil rights groups and unions oppose it, contending it is unfair to low-income working people and would remove a financial safety net for those who have lost their jobs or piled up onerous medical bills.

Proponents of the legislation insist it is needed to stop abuse of the bankruptcy system by people who can afford to repay their debts. The abuse, they say, creates a hidden tax of about $400 a year on every American family through higher interest rates passed on by consumer credit businesses and other charges.

Bankruptcy filings reached a record high last year, gaining 5.7 percent over 2001, according to data released last month. The data compiled by the Administrative Office of the U.S. Courts show that new bankruptcy filings in 2002 totaled 1,577,651, compared with 1,492,129 in 2001 as the economy slid into recession.

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