Pension provision in bankruptcy bill attacked

WASHINGTON - Senators from both parties attacked a provision in a bankruptcy bill passed by the Senate that would let credit card companies take some bankrupt consumers' retirement assets to pay off debts.

The Labor Department opposes the provision drafted by Sen. Charles Grassley, R-Iowa, author of the bill overhauling bankruptcy laws. The Senate overwhelmingly approved the bill 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 Thursday.

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

''I fear that many individuals will sign away their pensions unknowingly. Even for knowledgeable consumers, the cost of applying for a credit card should not be one's retirement security,'' Sen. Jim Jeffords, R-Vt., chairman of the Senate Committee on Health, Education, Labor and Pensions, said at a hearing on April 13.

Sen. Edward Kennedy, D-Mass., who has criticized the bankruptcy bill as a whole, said the 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. It would especially hurt seniors ''struggling to provide for themselves,'' he maintained.

Sen. William Roth, R-Del., chairman of the Senate Finance Committee, has written a letter to Grassley criticizing the provision, aides said.

According to Labor Department figures, most retired workers get annual pension benefits of less than $7,000, while most employees have balances in their 401(k) retirement investment accounts of less than $15,000 and total retirement savings of under $30,000.

The Senate bill and a similar measure passed by the House last year, also by a veto-proof margin, would make it harder for people to sweep away credit card and other debts through bankruptcy.

They apply new standards for determining whether people filing for bankruptcy should be forced to repay their debts under a court-approved reorganization plan instead of having them dissolved.

The legislation has been pushed for several years by the banking industry, credit card companies and retail-business industry, which have spent millions of dollars in lobbying Congress.

House and Senate negotiators must meld the two bills into one measure to be approved by both chambers and sent to President Clinton. The two versions are fairly similar, but negotiations appear to have stalled over whether to remove a Senate provision to raise the $5.15 hourly minimum wage to $6.15 over three years and give billions in new tax breaks to small businesses.

The Clinton administration, which supports rewriting the bankruptcy laws in principle, has criticized both versions because it believes they are too hard on debtors. The White House also opposes the business tax breaks and wants to see the minimum wage increase over a shorter period of time.


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