A bankrupt bill.

Byline: The Register-Guard

Pay attention to the pattern: An egregious abuse or crisis is cited; reforms are demanded; sweeping congressional legislation is drafted; moderating amendments are defeated. The result is as consistent as the campaign contributions - corporate special interests get everything they asked for, while consumers or at-risk populations lose ground.

It has happened already with tort reform and it is on the verge of happening again with the bankruptcy reform bill passed by the Senate last Thursday. The bill now moves to the House, where it is expected to pass easily.

At the behest of the credit industry, Republicans in Congress are asking the American people to believe that the preponderance of bankruptcy filings occur as the result of cheats, spendthrifts and irresponsible binge buyers gaming the system to stick creditors with the bills.

Here's their argument: Existing rules are so lax that personal bankruptcy filings are skyrocketing. The rate has climbed from one personal bankruptcy filing for every 336 U.S. households in 1980 to one for every 73 households in 2003.

Just last year, 1.4 million Americans sought to squirm out from under their debts by filing for Chapter 7 bankruptcy, the most permissive part of the bankruptcy code. It allows individuals and families to protect some of their assets, write off their debts and get a fresh start. Finger-wagging Republican senators say the stigma against declaring bankruptcy is almost nonexistent, allowing irresponsible consumers to max out the balances on their multiple credit cards knowing they can walk away scot free.

The truth, according to the nonpartisan American Bankruptcy Institute, is that the scofflaws who'll be scooped up by the sweeping changes in the bankruptcy law represent about 3 percent of those who file for bankruptcy under Chapter 7. The overwhelming majority of those who file for personal bankruptcy are driven to the option in desperation by circumstances beyond their control: catastrophic illness, divorce, job loss, unanticipated military service or old age.

A recent Harvard study found that half of Americans who declared bankruptcy did so because of illness or medical bills. Three-quarters of those bankrupted by illness had health insurance when the illness first struck. Many lost it after the illness forced them to stop working.

Not surprisingly, the less people earn, the more perilous their financial condition. One-third of those who file for personal bankruptcy have incomes below the federal poverty line.

In 2003, well into the Iraq war, 16,000 service men and women filed for bankruptcy, many as a result of leaving their family businesses after being called to active duty in the National Guard or Reserves.

Senators, mainly Democrats, offered amendments to exempt the most vulnerable from the tougher new rules. All were defeated; even one that would have protected U.S. soldiers fighting in Iraq. Yet, the indefensible "millionaire's loophole" that allows wealthy individuals in bankruptcy to shelter enormous assets in safe-haven states survived the "reform" process unscathed.

The Senate bill imposes a means test that would push anyone who earns more than the median income in their state and who has the ability to repay at least $6,000 over five years into Chapter 13, which mandates a repayment plan. Senators were so busy rounding up the cheaters that they apparently didn't have time to address predatory lending practices such as abusive penalty fees and interest rates that make it hard for many financially troubled consumers to dig out of debt.

And since the bill was largely written by the credit card industry, no attention was paid to the 5 billion solicitations credit card companies send out every year knowing full well the average American household already carries $8,000 in credit card debt.

Republicans are asking the American people to ignore the billions in profits reaped by banks and credit card companies every year and instead accept the proposition that these companies need immediate protection from the financial hardships of the sick, the elderly, the divorced and the unemployed.

They are wrong. Pay attention to the pattern. Beware of politicians bearing reform.