WASHINGTON (AP) -- The Senate on Thursday neared passage of legislation to make it harder for people to wipe out debts in bankruptcy court, adding a provision aimed at preventing wealthy debtors from shielding their assets in luxury homes.
President Bush has signaled he would sign the legislation, the most sweeping overhaul of bankruptcy laws in 20 years, 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."
The bankruptcy legislation was vetoed in December by then-President Clinton, who contended it would hurt ordinary people and working families. It has been pushed by the banking, credit card, and retail credit industries, which have spent millions of lobbying dollars in recent years.
Consumer groups and unions have opposed the measure, contending it would take away an important means of relief for families hit by job losses in the slumping economy.
The legislation applies a new standard for determining whether people filing for bankruptcy should be forced to repay their debts under a court-approved reorganization plan rather than having them dissolved. If a debtor is found to have sufficient income to repay at least 25 percent of the debt over five years, a reorganization plan generally would be required.
Some proponents of the legislation have insisted that the real issue is not money, but fundamental values such as fairness and taking responsibility for one's actions.
"I think that it is a moral question," said Sen. Jeff Sessions, R-Ala. It is an "unhealthy value" to encourage people who can repay their debts to walk away from them, he said.
After days of debate in the Senate, the House and Senate versions of the overall legislation were similar. Negotiators from the two chambers would have to meld the versions into one.
Personal bankruptcies in this country reached a record 1.4 million in 1998, up more than 300 percent since 1980. The total declined to about 1.3 million in 1999 and 1.2 million last year.
In recent days, Senate Democrats have proposed a series of amendments aimed at tempering the legislation but have been rebuffed almost every time.
Senators engaged in a debate on states' rights before they accepted the amendment by Sen. Herb Kohl, D-Wis., allowing debtors in bankruptcy proceedings to keep no more than $125,000 of the equity in their homes.
Kohl had examples: actor Burt Reynolds, who wrote off millions in debt in bankruptcy court but kept his $2.5 million Florida estate, Valhalla; former corporate raider Paul Bilzerian, convicted of securities fraud, who filed twice for bankruptcy protection but kept his Florida mansion.
Florida and Texas allow an unlimited homestead exemption, which debtors can use to keep their homes' value out of the reach of creditors in bankruptcy court.
Congressional investigators have found that some 400 homeowners in the two states, all with more than $100,000 in home equity, profit from the exemption each year, according to Kohl.
"And while they continue to live in luxury, they write off an estimated $120 million owed to honest creditors," he said.
Sen. Bob Graham, D-Fla., said Kohl's provision "would threaten homeownership for millions of American families."
Sen. Kay Bailey Hutchison, R-Texas, contended it would threaten a 130-year-old right of the states. She noted that the White House has voiced opposition to such a change to the bankruptcy bill.
Home prices vary widely from state to state, making a national cap unfair, opponents said.
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The bills S. 420 and H.R. 333
