On January 28, the House approved, 265-99, a bill (S. 1920) to make permanent Chapter 12 bankruptcy protection for family farmers. The Senate approved S. 1920, by unanimous consent, on November 25. Prior to final approval, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2003 (H.R. 975), as passed by the House on March 19, 2003 (see The Source, 3/21/03), was substituted for the bill, sending it to conference.
As amended, S. 1920 mirrors the bankruptcy reform conference report (H.R. 333) approved in the 107th Congress, but does not include a provision sponsored by Sen. Charles Schumer (D-NY) that would have barred anti-abortion protesters from declaring bankruptcy to avoid paying court-ordered fines (see The Source, 11/15/02). In 2003, the legislation stalled in the Senate after Sen. Schumer announced his intention to again offer the abortion language.
Sponsored by Rep. James Sensenbrenner (R-WI), the bill would establish a means test for debtors seeking to file for bankruptcy under Chapter 7, which excuses unpaid balances once debtors liquidate most of their assets. The legislation aims to make it more difficult for individuals judged as qualified to be able to pay some of their bills to walk away from their debts.
Several aspects of the measure would affect women and their families. In 2001, nearly 1.5 million American families filed for bankruptcy. Under S. 1920, “domestic support obligations,” such as alimony and child support, would be classified as nondischargeable, which means they must be paid despite a bankruptcy filing. Although current law also lists alimony and child support as nondischargeable debts, the bill would make support payments the first priority among nondischargeable debts. Under current law, support payments are ranked seventh. Under the measure, a debtor also would have to pay dischargeable debts, such as credit card charges, if the charge was incurred to pay a debt that must be paid under bankruptcy proceedings.
Rep. Melissa Hart (R-PA) lauded passage of the bill, stating, “This legislation…helps women and children in bankruptcy. It prioritizes the collection and payment of spousal and child support, giving them the highest payment priority under the bankruptcy law. The legislation also allows child and domestic violence proceedings to continue, notwithstanding the debtor’s filings for bankruptcy protection.”
Rep. Sheila Jackson Lee (D-TX) disagreed. “While the bill purports to elevate the priority of child support payments, in reality, credit card companies would receive repayment of debt at the same rate as child support obligations. Those provisions would have a severe impact on the most vulnerable members of society, including women and children who rely on alimony and child support payments to live,” she argued.
S. 1920 also would allow a debtor to legitimately claim as necessary expenses incurred to maintain the safety of the debtor and the debtor’s family from domestic violence; expenses incurred for the care and support of an elderly, chronically ill, or disabled family member; and expenses up to $1,500 per child per year for public or private elementary and secondary school. Additionally, the bill would protect most tax-exempt retirement savings accounts from creditor claims and would protect most education savings account deposits made one year prior to filing for bankruptcy.
During consideration of the measure, the House opposed, 158-204, a substitute amendment offered by Rep. Tammy Baldwin (D-WI) that would have made permanent the Chapter 12 bankruptcy protections for family farmers, striking the bankruptcy reform provisions from the bill.
The House also opposed, 170-198, a motion to recommit offered by Rep. Jan Schakowsky (D-IL) that would have exempted military personnel, veterans, and their families from the means test in the bill.
Finally, the House opposed, 146-203, a motion to instruct conferees to strike section 414 of the measure. Section 414 would repeal a provision in current law protecting against conflicts of interest on the part of investment bankers involved in the reorganization of a bankrupt company.
