By Stephen Cooper, CCH Washington Staff Writer

The House passed the conference report to the Bankruptcy Reform Act of 1998 (HR 3150) by a vote of 300-125 on October 9. However, the measure stalled in the Senate when lawmakers only went as far as agreeing to consider it before the Senate concluded its work.

Senate lawmakers voted 94-2 to proceed to consideration of bankruptcy conference report on the last scheduled day of the 105th Congress, but the measure will likely die unless GOP lawmakers decide to roll it into an omnibus appropriations bill.

The White House promised to veto the bankruptcy legislation on grounds that it doesn't treat debtors fairly enough, even though Sen. Richard J. Durbin (D-Ill.) worked with GOP leaders to include a host of consumer protection provisions, said Senate Judiciary Committee Chairman Orrin Hatch (R-Utah).

Hatch told CCH that Republican lawmakers wanted to win White House support for bankruptcy reform, but the administration was never satisfied with the conference report since it really preferred to see the Senate version of the bill enacted rather than the House measure. "But, everybody knew the Senate bill wasn't going to be the final bill," he said.

Hatch said during the conference on HR 3150 that Republicans conceded to Democrat's demands on provisions dealing with child-care payments, homestead exemptions and many other areas. House Commercial and Administrative Law Subcommittee Chairman George W. Gekas (R-Pa.) said the House softened its approach to means-testing debtors to allow them access to Chapter 7 bankruptcy in order to win approval from Senate conferees.

Even after the conference agreement was reached, Republicans continued to hold the door open to work with the administration, but without success. "I'm not saying they were insincere, but I am saying they didn't cooperate with us," Hatch said.

Democratic Opposition

National Economic Advisor Gene Sperling told reporters October 9 that President Clinton would have signed the bill if it showed a real balance between creditors and debtors. "We said we could not sign that bill, but we still wanted to work in a bipartisan way," he said. Despite a last-minute trip to negotiate with GOP lawmakers, no deal was reached. "The bill that is going through right now does not meet our test, and we would not sign it," he said.

House Judiciary Committee member Sheila Jackson-Lee (D-Tex.) told CCH that the conference committee meeting was a sham, since Democratic lawmakers weren't given a real chance to participate. "We met one time to read opening statements, and Democrats were not able to offer any input to reconcile the differences between the House and Senate versions of the bill," Jackson-Lee said. "The conferees were never afforded the opportunity to deal with the substantive issues." Jackson-Lee said her amendments were "gaveled-down" by the chairman and never dealt with.

Bankruptcy Provisions

The bankruptcy legislation would establish clear guidelines to help judges and trustees determine on a case-by-case basis who receives a complete discharge under Chapter 7 and who should enter a Chapter 13 repayment plan. Debtors will be held to an objective standard already used by the Internal Revenue Service to estimate living expenses.

It contains requirements that child support and alimony be paid as the first priority in any bankruptcy liquidation, not as the seventh priority. No Chapter 13 plan could be confirmed by a court until the debtor is current on all of their child support and alimony obligations.

It includes provisions dealing with credit counseling for debtors, judicial review of reaffirmations, penalties for pressuring debtors after a discharge and for abusive reaffirmations, new credit card warnings and disclosures, protections from credit card cancellations, and protections from unjustified motions for dismissal.

The conference report contains an amendment to the Truth in Lending Act designed to protect consumers from having their credit line revoked because they fully pay their outstanding debt in a timely manner. The legislation doesn't include a Homestead Exemption cap of $100,000, but it does require a two-year residency or homeownership requirement before the exemption can be claimed.

The legislation protects tax-exempt retirement savings plans, including state pension funds and rollover funds, in bankruptcy cases. Also protected from creditor claims are postsecondary education accounts to the extent that they don't exceed $50,000 per child or in the aggregate $100,000. It also re-establishes and makes permanent Chapter 12 for farmers.

"Our reforms restore our bankruptcy laws to their proper purpose: providing relief for those unexpectedly plunged into debt rather than providing a crutch for those who live beyond their means," said House Majority Leader Dick Armey (R-Tex.).

Tax Provisions

The tax-related portion of the legislation makes changes to the treatment of tax obligations in bankruptcy cases and is not substantially different from what passed the House earlier this year, according to a Democratic House aide.

The bill would amend current law to provide greater protection for ad valorem tax liens on real or personal property in a debtor's estate. The bill also stipulates that real or personal property that is exempt under any federal or state law in a bankruptcy proceeding must remain subject to nondischargeable tax and support claims under bankruptcy law.

The bill contains provisions dealing with: Tax Court proceedings, periodic payment of taxes in Chapter 11 cases, avoidance of statutory tax liens, and payment of taxes in the conduct of business. Other provisions deal with tardily filed priority tax claims, income tax returns prepared by tax authorities, and the discharge of estate liability for unpaid taxes. The bill also has provisions that deal with requirements to file tax returns to confirm Chapter 13 plans, standards for tax disclosure, and setoffs of tax refunds.