Reform Movement Opposes Bankruptcy Bill: Proposed Changes Threaten American Social Safety Net
WASHINGTON May 2, 2000 — The Religious Action Center of Reform Judaism joined Senator Paul Wellstone (D-MN) and a broad-based alliance of consumer and advocacy groups in opposition to the Bankruptcy Reform Act (S. 625 / H.R. 833). By subjecting bankruptcy applicants to a complex and arbitrary means test the legislation would deny many applicants access to Chapter 7 bankruptcy, which excuses most debts, instead diverting these individuals into a Chapter 13 payment plan, thereby elevating the interests of creditors above the needs of working families.
The Bankruptcy Reform Act works against the goal of a just and compassionate society by seriously curtailing the amount of bankruptcy assistance currently available. As the House and Senate versions of the Bankruptcy Reform Act proceed to conference committee, the Religious Action Center representing the Reform Movement's Commission on Social Action has urged President Clinton to veto the legislation should it ever reach his desk.
At today's press conference, Rabbi David Saperstein, Director of the Religious Action Center, delivered the following remarks:
As we all know, there exists in our nation a tragic irony: As our nation prospers, as economic growth soars to new heights unseen by past generations, the United States Congress has supported legislation that would turn America's back on our least fortunate citizens.
Rather than enabling poor Americans to reconstruct their lives, the Bankruptcy Reform Act would force the nation's most vulnerable, our low-income citizens, into payment plans that are beyond their ability to complete. Over the past fifteen years, two-thirds of those who undertake such plans fail to complete them.
Crushing the poorest Americans beneath unrealistic payment plans would force them to make impossible choices-between repaying credit card debt and feeding their families, between repaying a loan and meeting child support. And since these provisions will particularly hurt divorced families living in poverty, this legislation can only deepen child poverty.
In biblical times, debt-relief was structured into the Sabbatical, or seventh year, remission of debt. It is specifically referred to as "God's remission of debt." A fair and equitable bankruptcy system plays the same role in our society. This bill mars the values of fairness and equity.
Bankruptcy assistance acts as a critical social safety net, relieving individuals suffering from financial disaster. S. 625 would make American families even more vulnerable when uncontrollable circumstances-layoffs, divorce, and medical crisis-plunge them into financial crisis.
S. 625 would make it much more difficult to save homes from foreclosure and cars from repossession in Chapter 13. It requires that a family pay creditors substantially more than the property is worth in order to keep it, overturning longstanding principles which protected both debtors and creditors. Chapter 13 trustees have estimated that up to half of the current Chapter 13 cases would not have been feasible if this bill were law. As the legislation moved debtors from Chapter 7 to Chapter 13, it would deny many any bankruptcy assistance whatsoever.
African-American and Hispanic families, both over-represented in bankruptcy, would suffer disproportionately if this legislation were to become law. In general, home-ownership represents a greater proportion of family wealth for these families than among whites and such families are more likely to seek bankruptcy protection to prevent losing their homes, according to a study done at Harvard Law School.
The legislation would give retailers license to repossess essential appliances such as refrigerators and washers. The bill also eliminates renters ability to catch up on back-rent through bankruptcy, including older tenants who fall behind in their rent payment due to medical costs or unexpected expenses. The Senate version's pension provisions exacerbate long-term problems by requiring that pension protection rights be waived in order to obtain new loans or credit cards.
For many religious-based groups, the Senate-passed bill contains another troubling provision that would allow the funneling of federal funds into private and religious schools though vouchers. The voucher language is extraneous and distracts from the substance of the bankruptcy bill. Slipping it into this bill is bad policy and bad law.
This wayward, misguided piece of legislation is based on misperception and falsehood. Contrary to the claims of the bill's proponents, the American bankruptcy system is NOT fraught with fraud and abuse warranting these reforms. The latest research reveals that only 4-10 percent of personal bankruptcy cases are filed in bad faith.
And the number of personal bankruptcies is NOT on the rise, necessitating legislation. According to data supplied by the Administrative Office of U.S. Courts, personal bankruptcies dropped by more than 100,000 in 1999 compared to 1998.
It says in Deuteronomy, "If there is among you anyone in need, a member of your community in any of your towns within the land that the Lord your God is giving you, do not be hard-hearted or tight-fisted toward your needy neighbor. You should rather open your hand, willingly lending enough to meet the need, whatever it may be." (Deut. 15:7-9)
Caring for the poor is more than an American value. For Jews, Christians and other people of faith, helping the poor is a sacred responsibility.
The more closely we look at this legislation, the more clearly we see that it would contradict the mandates of our common moral heritage and would gravely damage the wellbeing of so many who are struggling to survive financial reversals.
We call on President Clinton and on Congress to join us. Join us in championing the poor and the needy. Join us in assisting low-income Americans to repair their lives after financial disaster. Join us in doing everything in our power to stop the passage of this legislation.
The Religious Action Center of Reform Judaism is the Washington office of the Union of American Hebrew Congregations, representing its 895 congregations across North America, whose membership includes 1.5 million Reform Jews, and the 1700 rabbis of the Central Conference of American Rabbis.