WASHINGTON -- Bankruptcy reform legislation gathered steam Thursday, winning unanimous approval from the House Judiciary Committee.
Bank lobbyists are satisfied that the bill, if enacted into law, will provide some long-awaited relief in dealing with debtors.
"It's a pretty good bill," said Phil Corwin, lobbyist for the American Bankers Association. "We got a great deal of what we had pushed for, and we're very optimistic, although there's a great deal left to do and very little time to do it in."
The measure was approved by voice vote, reflecting bi-partisan support.
"I am justifiably proud of our work product," said Rep. Hamilton Fish, D-N.Y.
House Judiciary Committee Chairman Jack Brooks of Texas said he hoped to expedite passage of the bill by employing a voting procedure reserved for noncontroversial measures.
The final hurdle before the legislation reaches the House floor is a House Rules Committee vote, expected Monday. The bill could reach the House floor as soon as Tuesday. It would then go to the Senate for final action in what is likely to be the last few days of this congressional session.
The bill, introduced by Mike Synar, D-Okla., mirrors one approved by the Senate in April. Key members of the House and Senate have already worked out their differences, so bankers hope the version moving through the House will win quick Senate approval.
The measure aims to streamline parts of Chapter 11 of the bankruptcy code, making bankruptcy less expensive for all parties involved.
More important for banks and other creditors, it would make it more difficult for individuals to use the bankruptcy courts to evade paying off debts.
Under the measure, the ceiling on personal debts for Chapter 13 filings would increase from $350,000 to $1 million, making court-approved repayment plans available to more people.
This would help high-debt consumers reorganize their debts, rather than be forced to liquidate under Chapter 7 of the code.
It would also prohibit "cramdowns;' in which the principal amount of a home mortgage is reduced in value, and debts incurred for the purpose of paying taxes could not be discharged by the courts.
The bill also would make it easier for debtors to commit to repay certain debts, as well as making it impossible to discharge cash-advance and credit card debts incurred within 60 days of filing bankruptcy, "so people can't go on one last wild spending spree," Mr. Corwin said.
However, there are a few wrinkles in thehill that still need to be ironed out.
A provision that-gives owners of single-asset real estate 90 days to reorganize is now limited only to properties with a value of $2 million or less.
"We are working to get that limit higher," Mr. Corwin said.
Nonetheless, bankers scored a victory by including a provision that places a $250,000 cap on unsecured debt, "to avoid the discharge of fraudulentiy acquired debt," he said.
Bankruptcy reform was approved by the House in 1992, but the Senate did not act then.
Mr. Nielsen writes for Medill News Service