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PrintBankruptcy Reform Act of 1999 Introduced in House
By Stephen Cooper, CCH Washington Staff Writer
Supporters of bankruptcy reform hope 1999 will be the year Congress passes a measure to overhaul the nation's troubled system for debtors and creditors, but that depends largely on whether Republicans and Democrats can iron out differences over a needs-based test for personal filers.
Last year's measure failed to win White House approval because President Clinton and many Democrats also believed it would hurt women who receive child support payments.
On February 24, Rep. George Gekas, (R-Pa.) who chairs the House Commercial and Administrative Law Subcommittee, introduced the Bankruptcy Reform Act of 1999, which includes the provisions of last year's conference report on H.R. 3150 that passed the House but never reached a vote in the Senate. This year's version has already won support from House GOP leaders.
"Despite our ongoing economic prosperity, a record 1.4 million bankruptcies were recorded last year under our negligent bankruptcy laws," said House Majority Leader Dick Armey (R-Tex.). "I urge the President to support this broad bipartisan legislation that rewards responsibility and thrift, while still providing for emergencies."
The 1999 bankruptcy legislation is co-sponsored by a bipartisan group of 34 lawmakers. Gekas said he plans to hold a hearing on the measure soon.
The 1999 legislation would redefine eligibility for certain types of bankruptcy by forcing Chapter 7 debtors to file Chapter 13 if they earn more than the national median income and can afford to repay either $5,000 or 25 percent of debts over five years. Bankruptcy judges would determine whether to transfer debtors after considering any special circumstances.
Gekas said he believes a low-income family of four would be "well protected," since their income threshold is currently set at $51,000. In addition, child support payments are considered a priority so they wouldn't have to take a back seat to the repayment of credit card debt, Gekas said.
Sen. Paul Sarbanes, (D-Md.) speaking before the Credit Union National Association on February 23, said he believes the bill's chances for passage are good, but only if Congress takes a centrist approach to bankruptcy reform.
"I expect we'll get a bill though this year," said Sarbanes, who is the ranking member on the Senate Banking Committee. "I think to get a bill through we need to have a fairly reasoned, balanced approach."
Critics Speak Out
Two of the bill's most outspoken critics, Rep. Jerrold Nadler (D-N.Y.) and Rep. Sheila Jackson-Lee (D-Tex.), are already voicing their opposition to the bankruptcy reform legislation. Nadler, the ranking member of Gekas' subcommittee, said the bill is a product of special interest campaign contributions that would hurt families trying to work their way out of debt.
"The bill uses an inflexible, one-size-fits-all formula for deciding how much families can repay, which relies on guidelines written by IRS bureaucrats," he said. "If a family's real expenses are different from what the IRS says that, on average, they might be, they will have to hire a lawyer and prove it in court. How many truly bankrupt families can afford to do that?"
Nadler noted that last year's bill was criticized by bankruptcy professionals, bankruptcy judges, some of the nation's top professors of bankruptcy law, child and family advocacy organizations, and victims rights organizations.
He noted that the Small Business Administration doesn't support the legislation either, because it would create rigid deadlines and costly paperwork requirements that will force many distressed small businesses into liquidation, thereby depriving them of the opportunity the present law provides to reorganize and work out their debts.
"The result will be shuttered businesses, lost jobs, and a lost opportunity for many trade creditors to receive payment on their debts," he said.
