Congress is working to pass legislation clarifying bankruptcy laws before it adjourns for the year.
Under a scenario approved by members of both houses, the House will take up the bill, H.R. 5116, Tuesday, Oct. 4, on the suspension calendar after making "technical amendments" on the floor. The "technical amendments" are aimed at conforming the house bill to legislation that passed the Senate April 21 as by a 94-0 vote.
Optimism that legislation clarifying bankruptcy law could be surfaced passed after staff officials of both the House and the Senate worked until midnight Sept. 28 negotiating language acceptable to both houses of Congress. Legislation was then approved by the House Judiciary Committee on voice vote Sept. 1993. The legislation has been languishing this year after having been approved by the senate judiciary committee in Sept. 1993.
The bill codifies an April 1993 Supreme Court decision in Nobelman that bars modification of a secured claim in a debtor's principal residence but would allow modification of junior liens.
One of the key components of the legislation tightens up an abuse that has particularly bedeviled lenders, the use of Chapter 11 protection to keep lenders from foreclosing on secured property.
Another main element of the legislation restricts rules dealing with preferences. Such language in current rules have forced lenders to return rents received from properties where the borrower has defaulted and walked away from the property.
To ensure that individuals fully realize the consequences associated with filing for bankruptcy, the legislation requires trustees to fully inform the debtor of their options under the bankruptcy code, including the Chapter 13 procedure that allows them to pay debts over a period of time rather than the outright bankrupting of debts.
