House Senate Approve Sweeping New Law Conference Committee Next Step Forward

House Senate Approve Sweeping New Law Conference Committee Next Step Forward

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On March 15, the Senate passed S. 420, the Bankruptcy Reform Act, by a bipartisan margin of 83-15. Because there are some differences with the House-passed bill (H.R. 333), a short conference committee will be necessary. President Bush has signaled that he will sign the bill. He could receive it by early next month, as one of the first pieces of public law in the 107th Congress. The legislation would take full effect 180 days after the president's signature.

Before reaching final passage, the Senate struck a controversial non-bankruptcy provision contained in both the House and Senate bill. The provision (in §1310) would bar the enforceability of certain foreign judgments against U.S. investors in Lloyds of London. The investors, collectively called "Names," are seeking to void the judgments based on alleged fraud by Lloyds from 1975 to 1993. Both the State and Treasury Departments strongly oppose the special-interest provision, however, saying it would jeopardize U.S. foreign policy interests to use a U.S. legislative body or domestic court to override judgments legally entered in England.

The Senate bill contains a $125,000 cap on home equity that could be shielded from creditors under state law. The House-passed bill has a two-year residency requirement before a $100,000 exemption can be used, rather than a fixed cap. Senators from unlimited exemption states such as Kay Bailey Hutchison (R-Texas) and Sam Brownback (R-Ks.) vowed to oppose the bill should it return from conference in this form. The Bush administration supports the House version. Both Democratic Senators from Florida, another unlimited-exemption state, also opposed the amendment.

In another departure from the House bill, the Senate limited the scope of the automobile anti-cramdown rule to three years, rather than the five years in H.R. 333.

The Senate also adopted a privacy amendment by Sen. Patrick Leahy (D-Vt.) to protect the names of minor children from being disclosed in bankruptcy case schedules. A similar amendment was adopted by the House on March 1. The Senate agreed to another Leahy amendment to correct the treatment of certain spousal income for purposes of means testing.

Also adopted was an amendment to raise to $750 the threshold for luxury goods classification under the bill. Before the amendment, any debt of $250 owed to a single creditor and incurred within 90 days of filing could be deemed non-dischargeable as a luxury item. This provision is in the House bill.

The Senate defeated several amendments, including one from Sen. Paul Wellstone (D-Minn.) that would have measured the debtor's income for purposes of the means test from current income, rather than averaging the debtor's income over the six months prior to filing. Another defeated amendment would have struck the bill's five-year wait on refiling under chapter 13.

Journal Date: 
Sunday, April 1, 2001