Magazine article American Banker

Uphill Battle Expected for Reconciliation of Bankruptcy Reform Bills

Magazine article American Banker

Uphill Battle Expected for Reconciliation of Bankruptcy Reform Bills

Article excerpt

The Senate voted 97 to 1 in favor of consumer bankruptcy reform legislation Wednesday, but the resounding tally belies the difficult challenge lawmakers face reconciling vastly different versions of the bill before adjourning next month.

Sen. Charles E. Grassley, the chief sponsor of the bill, told reporters after the vote the odds are "very realistic" that the House and Senate can reach a compromise that President Clinton will support.

"In the short time that is left in this legislative session, I will work hard to reconcile my proposal with the somewhat different approach adopted by the House," the Iowa Republican said. "Discussions will begin immediately."

Yet he acknowledged that House and Senate leaders will have to maneuver around strong, divergent mandates reflected in the wide margins of approval in each chamber. The House passed its version June 10 on a 306-to-18 vote.

Both bills would make it harder for consumers to eliminate unsecured debts in bankruptcy, but their approaches vary significantly.

The Senate bill would let creditors ask bankruptcy judges to force consumers to repay some unsecured debts in Chapter 13 rather than discharging them all in Chapter 7. Only court-appointed trustees may make such requests under the current system.

The creditor would have to prove that the debtor is "abusing" the system by attempting to eliminate debt in Chapter 7 rather when the borrower could afford to repay at least 30% of unsecured debt over five years. The full Senate adopted that 30% standard in an amendment, raising it from the 20% threshold in an earlier version. …

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