What bankruptcy bills have been introduced this year in the 107th Congress?
Bills have been introduced in the House and Senate
that are essentially identical to the Committee report that passed Congress
at the end of last year and was vetoed by President Clinton. In the House,
H.R. 333, "The Bankruptcy Abuse Prevention and Consumer Protection Act of
2001", was introduced on January 31, 2001. In the Senate, S. 220 (renumbered
S.420),"The Bankruptcy Reform Act of 2001", was introduced on January 30,
2001. There are few, if any, differences between these two bills as originally
filed.
What is the current status of bankruptcy legislation?
On March 1, 2001, the House passed the bill by a
306-108 vote without accepting any significant amendments. The Senate bill
was reported out of the Judiciary Committee in late February and debate
then began on the floor of the Senate. Although there were to be over 100
amendments offered, a vote to cut off debate passed thereby limiting the
number of amendments considered. After seven days of debate and the approval
of several amendments, the Senate passed the bill on March 15, 2001 by a
vote of 83-15. Copies of the bills as passed with amendments (engrossed
versions) are available on the website: http://thomas.loc.gov.
If bankruptcy legislation is enacted, what will be its effective date?
Both the House and Senate versions of the bill (House
- Sec. 1401; Senate - Sec. 1501) provide that most of the provisions will
not go into effect until 180 days after enactment (the date the bill is
signed by President Bush). The bill will not have any retroactive effect
on pending cases filed before the effective date, except for the provision
reenacting Chapter 12 as to cases filed by family farmers. There are a few
provisions affecting consumer cases that have a different effective date,
such as:
Provision requiring random audits of individual chapter 7 and 13 cases
takes effect 18 months after enactment (Sec. 603)
Amendment to 28 U.S.C. § 1334 providing that district courts shall have
exclusive jurisdiction over matters involving bankruptcy professionals
effective as to cases filed after effective date (House - Sec. 324; Senate
- Sec. 323);
Provision to reenact and make Chapter 12 permanent is made retroactive
to July 1, 2000 (Sec. 1001);
Amendment to Truth In Lending Act providing for minimum payment disclosures
on credit card accounts shall be effective upon the later of: 1) 18 months
after enactment, or 2) 12 months from publication of final regulations
by the Federal Reserve Board (Sec. 1301);
Other amendments to the Truth In Lending Act shall be effective upon
the later of: 1) 12 months after enactment, or 2) 12 months from publication
of final regulations by the Federal Reserve Board (Secs. 1302 - 1306).
What is the likely next step?
There is some possibility that the House could accept
the Senate version of the bill to avoid a conference, but most observers
believe that this outcome is unlikely. The passage of amendments to the
Senate bill should ensure that the bill will go to conference to resolve
the differences between the bills. Negotiations over conference committee
assignments could slow down the process as the power sharing agreement reached
earlier this year between the parties did not address the composition of
conference committees. There is also the possibility, though less likely,
that informal negotiations similar to last year’s "shadow" conference could
occur thereby avoiding the procedural requirements of a formal conference.
What are some of the differences between the House and Senate bills?
One of the key differences is the treatment of the
homestead exemption. Significantly, the Senate adopted an amendment imposing
a $125,000 cap on the use of state homestead exemptions. (Amendment # 68
- Kohl, passed by voice vote). The House version (Sec. 322) provides a $100,000
cap on state homestead exemptions, but only as to property that was acquired
within 2 years of the bankruptcy filing (excluding any interest in the new
homestead that was transferred from a debtor’s previous residence acquired
more than 2 years before the bankruptcy filing). Both House and Senate versions
also include a domiciliary requirement providing that a debtor may use a
state’s exemptions if the debtor has lived in the state for the two-year
period prior to filing, or the debtor may use the exemptions of the state
where he or she lived during the six months (or the longer portion thereof)
just prior to the two-year period.
The homestead exemption could prove to be the most
contentious issue during the conference. President Bush and several legislators
from states with unlimited homestead exemptions have indicated that they
cannot accept the Senate’s $125,000 cap. Still other legislators have suggested
that they might reconsider their votes in favor of the legislation if the
exemption cap is stripped out at conference.
Another difference that may be controversial in
conference relates to abortion clinic violence. As the Senate bill was voted
out of the Judiciary Committee, a compromise was reached between Senators
Schumer and Hatch on language to an amendment making judgments arising from
abortion clinic violence nondischargeable (Sec. 328). No such provision
exists in the House bill.
Are there other differences between the bills?
Yes, approximately 30 amendments were approved by
the Senate. Some of the amendments affecting consumer cases are:
To reduce the period barring cramdown of debt secured by an automobile
from 5 to 3 years (Amendment # 105 - Leahy, passed by voice vote);
To increase the threshold for the presumption of nondischargeability
for luxury goods from $250 to $750 (Amendment # 42 - Boxer, passed by
voice vote);
To protect the identity of minor children in bankruptcy proceedings
(Amendment #41 - Leahy, passed by vote 99-0);
To retain the protection of the automatic stay for certain tenants facing
an eviction action if they remain current with postpetition rental payments
(Amendment adopted when bill voted out of the Judiciary Committee);
To clarify that income from a nondebtor spouse who is separated from
the debtor is not countable for purposes of the means test (Amendment
# 19 - Leahy, passed by vote 56-43);
To permit a debtor to modify a Chapter 13 plan to reduce amounts paid
under the plan by the actual amount expended by the debtor to purchase
reasonable and necessary health insurance (Amendment # 38 - Kennedy, passed
by unanimous consent);
To amend 28 U.S.C. §158 to permit a Court of Appeals to hear an immediate
appeal of an order or decree (not otherwise appealable) under certain
circumstances (Amendment # 58 - Sessions, passed by unanimous consent);
Several other technical correction amendments, including some minor
adjustments to the means test.
Isn’t there an amendment relating to predatory lending?
Several amendments dealing with predatory lending
were either rejected by the Senate or never came up for vote. However, one
amendment concerning the preservation of consumer claims and defenses offered
by Senator Schumer did pass (Amendment # 25 - Schumer, passed by voice vote).
It is intended to deal with predatory lenders who file bankruptcy by clarifying
that a sale under § 363 of the Bankruptcy Code of consumer loans and contracts
is made subject to consumers’ claims and defenses.
What about the provisions found in both bills. How will these affect consumer
bankruptcy cases if enacted?
They include changes to almost every aspect of the
consumer bankruptcy system, from eligibility requirements, to refiling bars,
to dischargeability, to treatment of reaffirmations and secured claims.
In virtually every respect, the bills would make it harder for debtors to
file and would undermine the relief available in the bankruptcy system.
Although both bills provide that debtors below the median income would be
protected from the means test, that provision is only the most highly publicized
provision of a bill that would drastically shift the balance of power in
bankruptcy cases in favor of creditors. And though the bills contain a few
consumer protection provisions that would slightly improve Truth in Lending
disclosure rules, provisions requiring more meaningful disclosures to consumers
found in prior bills, particularly those concerning the consequences of
making minimum payments on credit card accounts, were largely eviscerated
during the 106th Congress.
A summary of the consumer provisions of the bills
and of their impact on low-income debtors was reported last year in NCLC
Reports and remains substantially accurate. See Nov/Dec. 1999 and Jan/Feb.
2000 issues, NCLC Reports, Bankruptcy and Foreclosures Edition.
If legislation is enacted, what are NCLC’s plans for publications and training
events concerning the new law?
NCLC is committed to providing advocates with a
comprehensive analysis of the new law from a consumer perspective before
it goes into effect. This may be in the form of a special pamphlet edition
or a supplement to our Consumer Bankruptcy Law and Practice manual. We hope
to include a searchable CD-ROM with a copy of the new law and sample forms
and pleadings to assist debtor’s counsel in responding to new procedural
and substantive requirements. We will also dedicate future issues of NCLC
Reports, Bankruptcy and Foreclosures Edition, to developing practice issues.
Finally, we plan to prepare educational pamphlets and materials for consumers
and non-attorney advocates explaining any new changes.
As for training events, we will announce any upcoming
events on the Training page
of this website. Depending upon the outcome in Congress, we may include
panels or a mini-conference on the new legislation at this year's National
Consumer Rights Litigation Conference which will be at the Wyndham Baltimore
Inner Harbor Hotel in Maryland, Friday, October 26 through Monday,
October 29, 2001.
The National Association of Consumer Bankruptcy
Attorneys (NACBA) is also holding its annual convention this April
27-29, 2001 in Philadelphia. The convention will feature at least
eleven hours of CLE. If bankruptcy legislation is enacted before the convention,
NACBA intends to revise the program content accordingly. This may be one
of the first opportunities to learn about the new law. For more information
about the NACBA convention or how to register, call 202-331-8005, or visit
the NACBA website at www.nacba.org.
and NCLC