Over the course of
the past 7 years powerful
credit card companies
and financial institutions
have successfully lobbied
Congress to make changes
to current bankruptcy
laws. Congress has
been close to passing
a new bill in each
of the last two years,
only to be held up
by the controversial
Schumer Amendment.
The Schumer Amendment,
sponsored by Senator
Charles Schumer D-NY,
would deny a discharge
for government fines
imposed on those arrested
for abortion clinic
violence.
However, progress
is being made on getting
the bill pushed through
Congress and onto the
President's desk. In
late January 2004,
the U.S. House of Representatives
voted to combine a
non-controversial Senate
passed bill (S. 1920)
providing bankruptcy
protection to family
farmers under Chapter
12 of the U.S. Bankruptcy
Code, with H.R. 975,
the bankruptcy abuse
reform bill that has
passed in the House
in 2003 without the
Schumer amendment,
and in 2002 with the
Schumer Amendment.
Though the Schumer
amendment is also absent
on this new "packaged" version
of the bill, political
pressure on Democrats
to pass the bill to
assist farmers may
be too great, resulting
in the enactment of
the new bankruptcy
laws.
If enacted, the legislation
would require more
from debtors, including
pre-filing consultations
with an approved consumer
credit counseling service
in an attempt to force
consumers to pay their
debts outside of bankruptcy.
Additionally, in order
to file, a debtor would
need certification
from that credit counseling
agency.
An income-based "means-test" would
be implemented to determine
which debtors may have
the ability to pay
back some of their
debts under a Chapter
13. Those who do not
pass the means-test
would be forced into
a Chapter 13.
In addition, more
documentation from
the debtor would be
required, repeated
filings would be discouraged,
the waiting period
between Chapter 7 filings
would be extended from
6 to 8 years, and a
debtor's final discharge
would be subject to
completing a course
in financial management.
These are only a few
changes that would
occur if the legislation
were signed into law.
Unlike former President
Clinton, President
Bush has indicated
that if the bill reaches
his desk, he would
sign it. And, although
the new legislation
may be perceived to
be too politically
distasteful prior to
the upcoming election.,
there is a good possibility
that legislators will
push the legislation
through after the November
elections after the
concerns of political
fallout are no longer
a consideration. Therefore,
this leaves little
time for consumers
to file bankruptcy
under the current,
more favorable, system.
It does appear that
enactment of new bankruptcy
legislation may only
be months away, though
it is not clear if
the bill will actually
pass and be signed
into law under the
version now on the
Senate floor. Republican
Senators in late February
wrote a letter to Senate
Majority Leader, Bill
Frist R-TN, which sought
to persuade him to
expedite the consideration
of H.R. 975.
Though public pressure
to put a priority on
the legislation was
placed on Senator Frist
by fellow Republicans
and other organizations
such as the Credit
Union National Association,
it was noticeably not
included on Senator
Frist's list of legislative
priorities for the
summer of 2004. While
this does not represent
an indication that
the bill will not be
considered before the
targeted October adjournment
of this Congressional
session, it does reflect
an acknowledgment that
this bill may be too
difficult to push through
before the November
elections.
However, before any
proposed legislation
becomes law, consumers
who need financial
relief now, should
consider filing sooner
rather than later.
This would ensure getting
a case filed under
the current, more favorable
bankruptcy laws, and
also would provide
a last chance opportunity
to avoid the potential
hardships and extra
costs associated with
the proposed changes.
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