Events Conspire Against Bankruptcy Reform

Consumer lenders had every reason to think 2001 would be the turning point in their long-running struggle against debt dodgers.

With a Republican president firmly on their side, the industry watched with glee as both the House of Representatives and the Senate passed bills in March 2001 that would have made it more difficult, and in some cases impossible, for borrowers to file for personal bankruptcy protection. Legislators even set the day to reconcile their differences and submit a bill for the president's signature.

The day was Sept. 12, and needless to say, bankruptcy reform suddenly was among the last things Congress or the president was ready to address. Since then, neither Republicans nor Democrats have set a new date for a conference, leading observers on both sides of the debate to conclude that, once again, bankruptcy reform is dead.

It's not just that cracking down on debtors is a lower priority in a nation consumed by the war against terrorism. Reform has become decidedly unpopular as the U.S. economy has fallen into recession, exposing the vulnerability of debt-strapped consumers in a critical election year. Nearly 1.5 million people filed for personal bankruptcy in 2001. ...