Newspaper article THE JOURNAL RECORD

Bankruptcy Reform Battle Continues

Newspaper article THE JOURNAL RECORD

Bankruptcy Reform Battle Continues

Article excerpt

WASHINGTON -- Senators from both parties are attacking a provision tucked into a bankruptcy bill passed by the Senate that would allow credit card companies to take some bankrupt consumers' retirement assets to pay off debts.

The Labor Department also opposes the provision, drafted by Sen. Charles Grassley, R-Iowa, the key author of the bill overhauling bankruptcy laws that cleared the Senate overwhelmingly in February.

Grassley was seeking to prevent wealthy debtors who file for bankruptcy protection from shifting their assets into protected retirement accounts to escape repaying debts, his aides say.

"Sen. Grassley's position is that it is wrong to let a big- spending debtor who has declared bankruptcy stick it to the little guy by stashing millions of dollars in a retirement account to avoid paying (his) fair share," they said in a statement.

But critics say his provision would encourage credit card companies, banks and retail businesses to put into the fine print of agreements waivers under which consumers would forfeit protection of their pensions and other retirement assets in the event of bankruptcy.

"The provision would permit boilerplate language to be inserted into credit card applications, requiring individuals to sign over their pensions in bankruptcy," Sen. Jim Jeffords, R-Vt., chairman of the Senate Committee on Health, Education, Labor and Pensions, said at a hearing on April 13.

"I fear that many individuals will sign away their pensions unknowingly. Even for knowledgable consumers, the cost of applying for a credit card should not be one's retirement security," Jeffords warned.

Sen. Edward Kennedy, D-Mass., who has consistently criticized the overall bankruptcy bill, said in a statement: "This harsh provision would give a further unfair advantage to the credit card industry. Our priority in Congress should be to strengthen the employees' pensions, not undermine them."

Sen. Charles Schumer, D-N.Y., a member of the Senate Banking Committee who supports bankruptcy overhaul in principle but voted against the legislation, said he strongly opposes Grassley's provision. …

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