Magazine article American Banker

Bankruptcy Reform Bill Seen Endangered by Partisanship

Magazine article American Banker

Bankruptcy Reform Bill Seen Endangered by Partisanship

Article excerpt

Partisan squabbling is threatening to derail legislation to reform the bankruptcy code this year.

The fighting is likely to erupt publicly at Thursday's markup of Rep. George Gekas' needs-based bill in the House Judiciary Committee's commercial and administrative law subcommittee. The Pennsylvania Republican, chairman of the panel, is pushing a formula that would determine which debtors must use Chapter 11 and repay at least some unsecured credit.

The leading critic of the Gekas approach is Rep. Jerrold Nadler, the subcommittee's ranking Democrat. He has proposed his own needs-based system that would let many more people use Chapter 7, which lets people eliminate all debts.

Partisan bickering could make it impossible to move a bill in this Congress, whose session will be shortened by the November elections. "I don't see how this can help the bill," a banking lobbyist said. "It has become extremely partisan. If this is carried over to the Senate side, it could be the end of this bill for this Congress."

In a letter Friday to Rep. Gekas, Rep. Nadler predicted "a lengthy and contested markup" unless the bill were significantly changed.

The New Yorker urged Rep. Gekas to drop his bill and accept the Democrats' approach. Failing that, Rep. Nadler said, Rep. Gekas should drop his needs-based formula and commission a study on the causes behind the rapid rise in consumer bankruptcy filings. He also should protect retirement funds from the bankruptcy process and make it easier for judges to bar high-income debtors from using Chapter 7, Rep. Nadler said.

Rep. Nadler also asked that Thursday's subcommittee vote be delayed so both parties may work on a compromise. "Taking the time necessary to work out the complicated details of this legislation and the underlying factual questions seems to me the basic due diligence we owe to the taxpayers on this important matter," he wrote. …

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