"Now is the time to change our bankruptcy laws, so that your pensions are protected ahead of CEO bonuses, and the time to protect Social Security for future generations."
From Senator Obama's floor statement on the Bankruptcy Abuse and Prevention Act of 2005 (S.256):
[T]his bill would take us from a system where judges weed out the abusers from the honest to a system where all the honest are presumed to be abusers. Where declaring Chapter 7 bankruptcy is made prohibitively expensive for people who already have suffered financial devastation. With this bill, it doesn't matter if you ran up your debt on a trip to Vegas or a trip to the Emergency Room, you're still treated the same under the law and you still face the possibility that you'll never get the chance to start over.S.256 passed the Senate 74-25.
Now, it would be one thing if most people were abusing the system and falling into bankruptcy because they were irresponsible with their finances. But we know that's not the case. We know that most people fall into bankruptcy as a result of bad luck. And we know that a recent Harvard study showed that nearly half of all bankruptcies occur because of an illness that ends up sticking families with medical bills they just can't keep up with.
Take the case of Suzanne Gibbons. A few years back, Suzanne had a good job as a nurse and a home on Chicago's Northwest Side. Then she suffered a stroke that left her hospitalized for five-days. And even though she had health insurance through her job, it only covered $4,000 of her $53,000 hospital bill.
Because of her illness, she was soon forced to leave her full-time nursing job and take a temp job that paid less and didn't offer health insurance. Then the collection agencies started coming after her for hospital bills that she just couldn't keep up with. She lost her retirement savings, she lost her house, and eventually, she was forced to declare bankruptcy.
If this bill passes as written, Suzanne would be treated by the law the same as any scam artist who cheats the system. The decision about whether or not she can file for Chapter 7 bankruptcy would never take into account the fact that she fell into financial despair because of her illness. With all that debt, she would have had to hire a lawyer and pay hundreds of dollars more in increased paperwork. And after all that, she still may have been told that she was ineligible for Chapter 7 bankruptcy.
And so, as much as we'd like to believe that the face of this bankruptcy crisis is credit card addicts who spend their way into debt, the truth is that it's the face of people like Suzanne Gibbons. It's the face of middle-class America.
The Republicans (including John McCain) were unanimous in their support for the bill. 18 Democrats and Independent Jim Jeffords voted with the majority. (Ron Paul and Duncan Hunter voted for the House version).
25 Democrats, including Barack Obama, voted against the bill.
Hillary Clinton was absent (on the day of Bill Clinton's heart surgery). However, she fought against it's passage in the days before the final vote.