S.256 – “Bankruptcy Reform”

Media 02.25.05

Recipient: U.S. Senate


February 25, 2005

Dear Senator:

On behalf of the Leadership Conference on Civil Rights (LCCR), the nation’s oldest, largest, and most diverse civil rights coalition, we write to express our strong opposition to the “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005” (S. 256). We urge you to oppose S. 256 because it poses significant concerns for the economic self-sufficiency of all working people in the United States and will cause substantial financial inequities in the process.

The issue of bankruptcy reform is of profound concern to LCCR because, as a general matter, disadvantaged groups in our society disproportionately find themselves in bankruptcy courts as a result of economic discrimination in its many forms. For example:

  • Divorced women are 300 percent more likely than single or married women to find themselves in bankruptcy court following the cumulative effects of lower wages, reduced access to health insurance, the devastating consequences of divorce, and the disproportionate financial strain of rearing children alone;

  • Since 1991, the number of older Americans filing for bankruptcy has grown by more than 120 percent. This age group tends to file after being pushed out of jobs and encountering discrimination in hiring, which could result in loss of health insurance, or victimization by credit scams or home improvement frauds that put their homes and security at risk, and;

  • African American and Hispanic American homeowners are 500 percent more likely than white homeowners to find themselves in bankruptcy court largely due to discrimination in home mortgage lending and housing purchases, and to inequalities in hiring opportunities, wages, and health insurance coverage.

S. 256 proposes a number of changes in current bankruptcy law, and supporters claim that enactment is thereby necessary to stop abuse of bankruptcy laws. Yet a majority of those who file are working families who are not abusing the system; instead, they have experienced financial catastrophe. S. 256 would make starting over virtually impossible.

In addition, hundreds of thousands of women and children who are owed child support or alimony would be harmed under S. 256, as it forces them to compete with credit card issuers and therefore would make it less likely that support payments will be made to those in need. S. 256 will also make it much more difficult for businesses to reorganize, thereby forcing them into bankruptcy and eliminating much needed jobs.

S. 256 also fails to address one of the key reasons that bankruptcy filings have increased in recent years–a reason that is the willful doing of many of the financial institutions that are lobbying in support of the bill–the aggressive marketing of credit cards to our most financially vulnerable citizens, such as women, students, seniors, and the working poor. According to a recent article in the Washington Post, credit card companies continue to offer credit in record amounts, in an aggressive campaign to saddle more Americans with debts. (Kathleen Day, Tighter Bankruptcy Law Favored, WASHINGTON POST, February 11, 2005 at A-05). Yet these same companies have steadfastly resisted even the most modest reforms to help consumers avoid placing themselves in financial jeopardy in the first place, such as requiring clearer disclosure about late payment fees, interest rates, and minimum payments.

LCCR has opposed bankruptcy reform proposals similar to S. 256 every year since 1998. Sadly, bankruptcy reform proponents are now pushing legislation that is every bit as flawed as previous legislation and, given today’s slow economy, would lead to even more inequitable results. We strongly urge you to reject S. 256 because it would radically alter the bankruptcy system in a way that imposes hardships particularly on the most vulnerable among us.

Thank you for your consideration. If you have any questions, please feel free to contact Rob Randhava, LCCR Counsel, at (202) 466-6058.


Wade Henderson, Executive Director

Nancy Zirkin, Deputy Director