House Passes Bankruptcy Reform Bill

By Melanie Arter | July 7, 2008 | 8:31 PM EDT

( - In a vote of 302 to 126, the U.S. House Thursday passed a bankruptcy reform bill requiring people with incomes above their state's median income to pay their debts through a court-ordered bankruptcy plan.

Democrats criticized the bill, saying the Bankruptcy Abuse Prevention and Consumer Protection Act would hurt low-income workers, single mothers, minorities, and senior citizens and eliminate a safety net for laid-off workers and those facing overwhelming medical bills.

Republicans, like House Speaker Dennis Hastert (R-Ill.), who signed the legislation and sent it to the president's desk for signing, called it the "path towards greater responsibility."

"It goes from being the abuse system for those hiding from debt to its original intention: a program that helps those in real financial straits manage their bills," said Hastert.

"This action, which we expect will soon be signed into law by President Bush, restores integrity in the system. It makes it harder for those who want to use bankruptcy as a scapegoat to avoid debts," he said.

"We must stop abuse. Those who abuse the system make getting credit more expensive for everyone. Bankruptcy is for those who need help, not those who want to shift costs to other hard-working Americans," Hastert added.

Before the vote, Rep. Alcee Hastings (D-Fla.) said in debate on the House floor that the bill only "protects the credit industry at the expense of the consumer."

"It will drive more Americans deeper into financial crisis and weaken the nation's economy and social structure," said Hastings.

But Hastert said the bill will "go a long way towards improving our economy and protecting jobs." Only those who "truly need" to file bankruptcy will be able to do so, he said. "Debtors filing for bankruptcy should know there are severe consequences for trying to cheat the system and ultimately, cheat us all," Hastert added.

"Let me share just a few of the provisions that safeguard abuse while still helping consumers. A screening mechanism will identify debtors with the financial means to pay their financial obligations. Once these debtors are identified they'll be forced to pay all pending debts," the house speaker said.

"All debtors planning to file bankruptcy must first attend a credit counseling session. After filing, the debtor must complete an approved instructional course on personal financial management," Hastert explained.

The bankruptcy reform bill "is long overdue," Hastert said. "It strikes a balance to help those who are truly struggling to clear their debts and get back on their feet without making bankruptcy an easy out."

Hastert concluded by saying the bill's passage sends a message to "those looking to game the system - the federal bankruptcy system will no longer be a shelter for abuse."

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