For other versions of this document, see http://wikileaks.org/wiki/CRS-RS20196 ------------------------------------------------------------------------------ Order Code RS20196 Updated August 9, 1999 CRS Report for Congress Received through the CRS Web Comparison of Selected Consumer Provisions in H.R. 833 and S. 625, the Bankruptcy Reform Acts of 1999 Robin Jeweler Legislative Attorney American Law Division Summary The Senate Judiciary committee reported S. 625 favorably on April 27, 1999 by a vote of 14-4. Many of the controversial issues that were not addressed in committee are likely to be addressed on the floor. The House passed its version of bankruptcy reform, H.R. 833, on May 5, 1999 by a vote of 313-108. The bill, a manager's amendment to H.R. 833, is similar to H.R. 3150, passed by the House during the 105th Congress, although several amendments were adopted. The President has threatened to veto the Bankruptcy Reform Act if it is enacted in a form comparable to H.R. 833 as passed by the House. This report will be updated as legislative developments warrant. The full Senate may soon consider S. 625, 106th Cong., 1st Sess. (1999), addressing bankruptcy reform.1 In the meantime, the House recently passed H.R. 833, 106th Cong., 1st Sess (1999).2 Several floor amendments were agreed to, including those which expand the scope of nondischargeability of student loans to include all qualified loans rather than just federally backed ones;3 an amendment to modify the Truth in Lending Act (TILA) to require credit card issuers to make disclosures regarding minimum monthly payments;4 and an amendment imposing certain disclosure and notice requirements on debt relief 1 See S.Rept. 106-49 (1999). See also, S. 945, 106 th Cong., 1 st Sess. (1999), entitled the "Consumer Bankruptcy Reform Act of 1999," introduced May 3, 1999 by Sen. Durbin. 2 145 CONG. REC. H2769 (daily ed., May 5, 1999). See H.Rept. 106-123, Part I (1999). 3 H.R. 833 at § 218 4 Id. at § 112. Congressional Research Service ~ The Library of Congress CRS-2 agencies.5 Among proposed amendments to the bill which did not pass was the Hyde- Conyers proposal to soften the means test by substituting Internal Revenue Service living expense standards with cost-of-living guidelines based on a "reasonable and necessary" standard that would be tailored to bankruptcy purposes. The chart below provides a summary comparison of selected consumer provisions in the Senate and House bills as they presently stand: Selected Provisions S. 625 as reported by the H.R. 833 as passed by Senate Judiciary the House Committee Means test: Implementation Would amend 11 U.S.C. § All parties may move for 707 to permit creditors, the conversion to chapter 13, but trustee, or any party in the standing trustee must interest to challenge a review each filing and move debtor's eligibility to file for conversion where abuse under chapter 7. If indicated, is found. § 102. the U.S. trustee must file a statement indicating that the debtor's case would be a presumed abuse of chapter 7. § 102. Presumed abuse If challenged, the debtor Abuse exists if, by would be presumed to be calculating monthly income abusing chapter 7 if current after deducting charitable monthly income, multiplied contributions, administrative by 60, would permit a debtor expenses, private school to pay the lesser of 25% of tuition of up to $10,000, and nonpriority unsecured debt secured debt payments, and or $15,000. § 102. multiplying by 60 months, there is a surplus of not less than $6,000 (or $100 per month). § 102 5 Id. at § 154. CRS-3 Calculation of monthly Expenses to be calculated Expenses to be calculated as living expenses "under standards issued by specified under the National the Internal Revenue Service Standards and Local for the area in which the Standards, and the debtor's debtor resides." §102. actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service for the area in which the debtor resides. A debtor may also subtract an allowance of up to 5% of the IRS food and clothing categories. § 102. To rebut the presumption The debtor must demonstrate The debtor must demonstrate "special circumstances." § "extraordinary 102. circumstances." § 102. Exemption The U.S. trustee or No party may make a motion bankruptcy administrator to convert the debtor to may file a statement that a chapter 13 if the debtor (and conversion motion would spouse combined) have a not be appropriate if the monthly income "equal to or debtor's current monthly less than the regional median income is less than the household income calculated highest national or on a semiannual basis." § applicable State median 102. family income. § 102. Attorneys' fees If a trustee determines that a If a panel trustee brings a debtor's case should be successful motion for converted, the debtor must dismissal or conversion, reimburse costs, including counsel for the debtor will be attorneys' fees. § 102. liable to reimburse the trustee for costs, attorneys' fees, and payment of a civil penalty. § 102. Mandatory credit Debtor must undergo credit Comparable provisions, but counseling counseling within 180 days the debtor must undergo of filing, and may not obtain credit counseling within 90 a chapter 13 discharge until days of filing. Chapter 7 completion of a personal debtors must also complete financial management an approved instructional instructional course. Chapter course. § 302. 7 debtors must also complete an approved instructional course. § 105. CRS-4 Promotion of alternative Creditor's allowable claim The court may reduce a dispute resolution may be reduced by 20% if a creditor's claim by 20% if court finds that the creditor the debtor can prove by "unreasonably refused to "clear and convincing" negotiate a reasonable evidence that a creditor alternative repayment unreasonably refused to schedule proposed by an negotiate alternative approved credit counseling repayment of at least 60% of agency." § 201. the debt. § 109. Reaffirmation agreements Imposes enhanced Imposes enhanced requirements for approval of requirements for approval of a reaffirmation agreement a reaffirmation agreement when the debtor is not when the debtor is not represented by counsel; represented by counsel. § requires U.S. Attorney and 108. FBI to investigate abusive reaffirmation practices; Allows a debtor to recover authorizes states attorney actual damages or $1000, generals to bring class whichever is greater, when a actions to recover damages creditor violates for violations of reaffirmation agreement reaffirmation provisions. requirements, but prohibits § 204. class actions to enforce abusive reaffirmation practices by creditors. § 114. Homestead exemption No monetary cap; imposes Imposes lengthened lengthened residency residency requirements. requirements. §§ 307-308. §§ 124-125. Imposes a $250,000 cap on homestead exemptions (except for family farmers). Allows states to opt out of the monetary cap; delays effective date until the end of the first regular session of each state legislature following enactment. § 147. Exemption for saving for No comparable provision. Allows a debtor, subject to postsecondary education certain requirements, to exempt up to $50,000 for one child, or $100,000 per family for postsecondary education. § 113. CRS-5 Domestic support owed to Would move domestic Comparable provision at individuals and support obligations to first § 139. government units made priority, which is currently first priority allocated to administrative expenses of the bankruptcy estate. § 212. Trustee notification of child Would direct the trustee to Comparable provision at support claim holders notify a priority child § 149. support recipient of the existence of a state child support enforcement agency, and, upon discharge, the existence of nondischargeable and reaffirmed debt. § 219. Definition of "household Defines household goods Defines household goods goods" narrowly to include only 1 more broadly to include radio; 1 television; 1 VCR; "personal property normally and 1 personal computer but found in or around a only if used for the education residence," excluding motor or entertainment of a minor vehicles. § 145. child. § 313. Plan duration Debtors who have been Chapter 13 plans to have 5 converted to chapter 13 from year duration for families chapter 7 will have 5 year whose monthly income is not plans; other debtors will less than the highest national have 3 year plans. § median family income. 318. Families below the highest national median income would have 3 year plans. § 606. Debts incurred to pay Debts incurred with an intent Comparable provision, but nondischargeable debts are to pay a nondischargeable all debts incurred within 90 nondischargeable debt will become days of filing to pay nondischargeable; debts nondischargeable debts are incurred within 70 days will nondischargeable without be presumed to be regard to intent. § 146. nondischargeable. § 314. Lien stripping on security Chapter 13 debtors would Consumer debtors would not interests in consumer not be permitted to bifurcate be permitted to bifurcate goods security interests in an secured claims for consumer automobile purchased within goods purchased within 5 5 years of the filing; or in years of the bankruptcy other consumer goods filing. A secured creditor's purchased within 6-months allowable claim would be the of the filing. § 306. retail cost to replace the item. §§ 122- 123. ------------------------------------------------------------------------------ For other versions of this document, see http://wikileaks.org/wiki/CRS-RS20196