Senate 107th Congress First Session
Education Savings Accounts
Approved by Senate Committee
Passes Bankruptcy Bill
SENATE 107TH CONGRESS FIRST SESSION
SAVINGS ACCOUNTS APPROVED BY SENATE COMMITTEE
March 13, 2001, a proposal passed in Committee that will go before
the full Senate to allow parents to open tax-free $2,000 savings accounts
for their children's K-12 education expenses including private
legislative package that includes an amendment by Senate Robert Torricelli
(Democrat - New Jersey) to expand an existing program allowing contributions
of $500 for college expenses was approved by the Senate Finance Committee
on March 13, 2001.
the past two sessions, the Senate has passed the legislation twice.
Unfortunately, both times former President Bill Clinton vetoed the
legislation that contained the measure.
that the proposed savings accounts would drain tax dollars from public
schools while subsidizing families who already can afford private
schools, many Democrats and teachers' unions have called the accounts
Democratic Leader Tom Daschle (South Dakota), one of several Democrats
who voted against the amendment said, "It may not be a vouicher,
but it's [a] cousin of a voucher." Republican Senator James Jeffords
(Vermont) joined the Democrats in their protest. But, despite the
opposition, the amendment passed by a vote of 12-8.
a proposal by President Bush, whose education plan supports allowing
families up to $5,000 per child for K-12 school expenses, the savings
plan amendment was introduced last month by Senators Torricelli and
Tim Hutchinson (Republican - Arkansas).
year's educational savings account is similar to legislation introduced
last year by Senators Torricelli and Paul Coverdell (Republican -
Georgia), who died last July. By naming the new bill the Paul Coverdell
Education Savings Account Act, the sponsors hope the popular senator's
memory will nudge it into law.
measure would allow tax free interest on savings in prepaid tuition
plans. It would also expand tax breaks so that companies and unions
could offer education savings accounts as employee benefits. State-level
programs that encourage such accounts can be found in only a few states,
including Minnesota, Iowa and Illinois.
[Pau]l Coverdell Education Savings Account Act of 2001(To view this
bill, visit: http://thomas.loc.gov/cgi-bin/query/z?c107:S.306.IS:)
is part of the finance committee's overall package called the Affordable
Education Act of 2001 which includes:
tax deductions for the past five years for college students' loan
teachers to deduct out-of-pocket costs for school supplies
distributions from tuition plans and college savings plans tax free
pre-paid tuition plans to be offered by private colleges and universities.
a substantial portion is spent on financing, public schools could
allow local governments to increase the amount of government bonds
Toppo, "Senate Considers Education Accounts, The Associated Press,
March 13, 2001)
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PASSES BANKRUPTCY BILL
March 15, 2001, the Senate approved legislation that would revamp
the nation's bankruptcy laws, making it harder for consumers to wipe
out their debts.
as unfair by consumer groups and hailed by the credit card industry,
the measure passed by an 83 to 15 vote (To see how your senators voted:
Possibly within weeks, the bill could become law, since it came to
the Senate only two weeks after the House approved a similar bill
(To see how your representatives voted: http://clerkweb.house.gov/cgi-bin/vote.exe?year=2001&rollnumber=25).
In addition, President Bush has already indicated his willingness
to sign the bill into law. It would be the most significant change
in the nation's bankruptcy laws in 22 years.
to make it harder for individuals to ease debts under chapter 7 of
the U.S. bankruptcy code and make more file under chapter 13, the
legislation would require debtors to repay a portion of their debt
over a five-year period.
Charles E. Grassley (Republican - Iowa), the bill's lead sponsor said,
"Reforming the system will be good for consumers and families;
it will bring more fairness for those who work hard to pay their bills."
voting for the bill with some reservation was Senator Patrick J. Leahy
(Vermont), the top Democrat on the Senate Judiciary Committee, which
has jurisdiction over bankruptcy. He said, "The credit card industry
is still getting a heck of a windfall and a lot more than they deserve."
to Senator Leahy, the industry needs to be more responsible about
how aggressively it markets credit.
before passing the bill, most senators made several major changes.
For example, the Senate added one amendment that would cap the home
equity a bankruptcy filer could keep at $125,000. Another amendment
would enable a person filing for bankruptcy who is separated from
a spouse to exclude the spouse's income when determining eligibility
for bankruptcy. However, most amendments favored by consumer groups
that might have unraveled compromises among lawmakers were fought
off by Republicans.
Senate members sit down with members of the House to reconcile the
two versions of the bill, these are likely to be sticking points.
the Senate bill, the House version of the bankruptcy legislation is
more complex. For example, if a home were purchased within two years
of filing for bankruptcy, the new legislation would permit bankruptcy
filers to keep home equity of up to $250,000. Homes purchased more
than two years before a bankruptcy filing would be subject to their
own state homestead laws, which in Texas, Florida and Kansas have
no limits on the value of homes. States with unlimited exemptions
created controversial debate because of the filings of several well-known
millionaires like Burt Reynolds.
unresolved is the topic of how many lawmakers from each party will
sit on the committee that will reconcile differences between the House
and Senate versions of the bills because Democrats and Republicans
each hold 50 Senate seats.
will take a final vote on the package and send it to the President
once those differences are settled.
surprisingely, the credit card industry lobbied heavily for this bill.
According to the Center for Responsive Politics, contributions to
federal candidates and their respective political parties from banks
and credit card companies during the 2000 election cycle totaled $37.7
million, compared to $20.9 billion in 1996.
Yingling of the American Bankers Association said, "Wealthier
fliers walk away from billions of dollars in debt each year, regardless
of their ability to pay. This is simply not fair for the 96 percent
of Americans who pay their bills on time each month."
disagreeing with this are consumer groups. Former Senator Howard M.
Metzenbaum, head of the Consumer Federation of America, a nonprofit
consumer advocacy group said, "I've never seen a bill that was
so one-sided. The cries, claims and concerns of vulnerable Americans
who have suffered a financial emergency have been drawned out by the
political might of the credit card industry."
current law, if bankruptcy filers agree to give up most of their assets,
excluding in most cases their houses and other essentials, individuals
can file bankruptcy under Chapter 7 of the federal bankruptcy code
to wipe out their debts. Insolvency does not have to be proven; however,
a court can deny bankruptcy if a judge feels the system is being abused.
the new legislation, individuals would still not be required to prove
insolvency. However, to decide if debts can be eliminated, a bankruptcy
judge would have to use a complex formula a system that is
expected to keep many people from qualifying.
increase of nearly 70 percent from 1990, more than 1.2 million people
filed for bankruptcy in 2000. This year the number is expected to
grow with the economic downturn. Chapter 7 is used by about 70 percent
of bankruptcy filers, and the remainder use Chapter 13.
Day, "Senate Votes to Tougher Bankruptcy. 36 Percent Support
Measure Backed By Bush," The Washington Post, March 16, 2001)
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