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"Any system will have weaknesses that should be fixed if possible. There are weaknesses in current bankruptcy law that could have been addressed with a much more balanced and fairly drafted bill."
The Republican majority in the Senate shot down several attempts by Democrats to add amendments to SB 256, including homestead exemptions for the elderly and special provisions for people who file for bankruptcy due to medical expenses.
Although a recent Harvard University study claims expenses from serious illnesses are the driving force behind approximately half of all personal bankruptcies, Sabatini said his experience is different.
"I would say, not in any particular order, the most frequent causes are job loss, family separation, and financial illiteracy - many people are unaware of how easy it is to fall into a large amount of credit card debt by carrying balances and making only minimum payments," he said.
Sabatini said another amendment defeated by Republicans Tuesday would have required disclosures on monthly credit card statements to show how long it would take to pay off a balance by making only minimum payments.
"This is an important disclosure, because many consumers are not aware of how long it takes to pay off if minimum payments are made," Sabatini said. "It was not part of the bill, even though it's a common-sense amendment that would be of little cost to the credit card companies and benefit the consumers."
Part of the dead amendment also would have capped interest rates on credit cards at 30 percent, he said.
Under Chapter 7 bankruptcy, which requires approval by a judge, debts are erased if the person forfeits certain assets. In Chapter 13 bankruptcy, a judge orders a debt repayment plan to be drawn up.
A new test proposed in SB 256 could possibly force many people who are currently eligible for Chapter 7 into Chapter 13 bankruptcy, Sabatini said.
The new bill also gives bankruptcy judges less discretion in certain instances, Sabatini said. For example, a judge would not be able to waive income requirements and allow the person to file Chapter 7 if that person is blameless in his or her financial situation - like because of a medical emergency.
Another thing the bill could affect is child support payments, Sabatini said. When a person comes out of bankruptcy, he or she has a limited amount of funds, and might be forced with the choice of making child support or credit card payments.
Credit card companies have sophisticated collection systems, and that would hurt the former spouses trying to collect child support, he said.
Furthermore, the bill has significant paperwork and filing requirements that are not useful in most cases, but will be required in all cases - thus making it harder to file for bankruptcy because of the amount of work involved, Sabatini said.
