The Senate rejected the stronger of two approaches for softening the impact of new bankruptcy rules (S 256) on military
personnel, surviving spouses and some destitute veterans. Sponsored by Democrats, the measure sought to exempt military
families from the bill's new means test on bankruptcy filers. It proposed a $75,000 minimum exemption for homes in bankruptcy
courts in the 50 states. Also, the amendment sought to deny predatory "payday" lenders any claim on assets and to exempt debt
incurred after military service begins from the reach of creditors during bankruptcy. A yes vote backed the Democratic
amendment.
For: 38 / Against: 58 [Santorum voted against Democratic amendment]
The Senate
approved the milder of two pending measures for easing the impact of S 256 (above) on bankrupt military families and destitute
veterans with high medical costs. Republicans said their approach would protect people incapable of repaying debt because
of military service or poor health. They noted that federal law already shields active-duty personnel from most civil actions
regarding their finances. A yes vote backed the GOP plan.
For: 63 / Against: 32 [Santorum voted for GOP plan]
Washington Post, Mar 6, 2005 [vote Mar 2, 2005]
Democrats Push for Protections in Bankruptcy Bill
Democrats prepared yesterday to stymie a proposal to tighten federal bankruptcy laws, contending that the first overhaul
in over a decade would unduly penalize Americans who go broke from medical bills and harm some military personnel impoverished
after extended periods on duty away from home...
Democrats also want more safeguards for service members, reservists, and veterans, such as an Army reservist from Arkansas
and father of four whose convenience store went under after he left for duty in Iraq.
Senators Landrieu, Durbin, Bayh introduce bankruptcy amendment to protect military families from financial ruin
As the Senate begins debate on legislation to change federal bankruptcy rules, Sens. Mary Landrieu (D-La.), Dick Durbin
(D-Ill.) and Evan Bayh (D-Ind.) today introduced an amendment to protect military families from elements of the proposed standards.
"We ask our military service members to put their lives on the line to protect our homes and way of life," Sen. Landrieu
said. "Certainly, we in Congress should do all we can to protect their homes as they protect our freedoms."
The Senators said the financial casualties of war include Guardsmen and Reservists whose salaries dropped when they were
deployed and who were forced to take out high-interest loans to fill the gap. Other victims are soldiers whose small businesses
failed after they were called up for duty. The Government Accountability Office (GAO) found that approximately 16,000 active
duty members of the U.S. military file for bankruptcy each year - a number likely to increase as more citizen soldiers are
deployed for additional tours of active duty.
"We can't repay the debt we owe our soldiers and their families," Sen. Durbin said. "But we can protect them from having
to spend the rest of their lives buried in debt."
The G.I. Protection Amendment has four main provisions:
* First, it would protect service members from being dragged into destitution by the predatory practices of extremely
high interest rate lenders. It prevents a creditor from recovering in bankruptcy amounts owed on so-called "pay day" loans
secured by a personal check for future deposit or electronic access to a bank account. It would also disallow claims on a
debt exceeding an effective annual percentage rate of 36 percent or based upon assignment of military retirement or disability
payments, and would make such debts dischargeable in bankruptcy.
* Second, because service members must live wherever duty posts them, the amendment would allow them to choose to have
federal bankruptcy exemptions or those of their home state of record apply to their case. While many states do not make the
federal exemptions available to their residents, such restrictions should not apply to troops posted there temporarily and
with no choice in where they live.
* Third, it would exempt members of the armed services, veterans, and spouses of service members who die in military
service from application of the "means test" provisions of the bill. Military families and veterans are facing tough times.
They should not have to endure a new right of creditors to harass them in court and subject them to an arbitrary means test.
The amendment would allow them the application of current law, which gives the bankruptcy courts the flexibility to handle
each case independently.
* Fourth, it would save the homes of military personnel from being lost in the event of a bankruptcy. The amendment would
allow members of the military, veterans, and surviving spouses of those killed in military service to claim a minimum homestead
exemption of $75,000, no matter in which state they own their home. Under current law, retirement nest eggs invested in 401(k)s
are protected in bankruptcy proceedings. For many military families, their homes are their retirement nest eggs and they ought
to be protected as well.
Sen. Landrieu has been a leader in the Senate on issues of concern to our nation's military families. She will soon introduce
the Helping Our Patriotic Employers at Helping Our Military Employees (HOPE at HOME) Act, which offers a tax credit to employers
who continue to pay the difference in salary when a Guard or Reserve employee is activated.
The G.I. Protection Amendment has the support of the Military Officers Association of America, the Air Force Sergeants
Association, the National Consumer Law Center, the National Association for the Uniformed Services, and the Enlisted Association
of the National Guard of the United States.
Senate rejects Durbin's efforts to ease bankruptcy changes for soldiers
The Senate rejected Tuesday an effort backed by Sen. Evan Bayh, D-Ind., to exempt service members
from some of the tighter bankruptcy restrictions Congress is considering.
Instead, the Senate approved a Republican-backed amendment that Sen. Dick Durbin of Illinois, the No. 2 Democrat
in the Senate, said is not good enough.
"Is it too much to ask to give them a break if the bottom falls out while they're serving America?" Durbin said.
Unlike Durbin and other Democrats, Bayh has been supportive of tightening bankruptcy laws, arguing that people
need to be responsible for their actions.
Federal bankruptcy courts in Indiana took in a record 55,177 personal filings for the year that ended Sept.
30, a slight increase, while bankruptcy filings declined nationwide.
But Bayh said he thought special consideration should be given to members of the military and co-sponsored Durbin's
proposed changes.
"It's just not right (that) those who we have called upon to make the ultimate physical sacrifice -- loss of
life or limb -- should also be forced to make the ultimate financial sacrifice," Bayh said.
Under the amendment, members of the armed services and veterans who file for bankruptcy would not have been
subject to a new "means test" to determine whether they have the ability to repay some of their debt.
Other changes would have made it harder for service members to lose their homes, protected them from high-interest
rate loans when repaying debts and allowed them to chose between federal rules on exemptions or their home-state exemptions.
Sen. Jeff Sessions, R-Ala., said Durbin's amendment would have put a gaping hole in a central component of the
bill that ensures people who have the means to pay back their debts do so.
The Senate approved Sessions' alternative to allow active-duty status to be considered in the means test...
Durbin's office said the most recent government surveys found that about 16,000 active-duty military filed bankruptcy
in 2000. Durbin does not support the overall bill, arguing that it's tilted to favor credit card companies and other
lenders...
By Maureen Groppe, Indianapolis Star, Mar 2, 2005
