skip to main content

House Approves Bankruptcy Reform Conference Report

The House on October 12 approved, by voice vote, a bankruptcy reform conference report (H.R. 2415). The Senate is expected to consider the measure during the week of October 16, although the White House has indicated that the President intends to veto it. With the conclusion of the 106th Congress looming, it is unlikely there will be time for Congress to attempt a veto override.

Earlier in the 106th Congress, the House approved a bankruptcy reform measure (H.R. 833) (see The Source, 5/7/99, p. 1). A separate version was approved by the Senate on February 2, 2000 (see The Source, 2/4/00, p. 1). Although it assumed the bill number H.R. 833, the Senate-passed measure contained several provisions not included in the House bill.

Because the appointment of a conference committee was complicated by some of those provisions, congressional leaders moved an informally negotiated agreement under the bill number for another measure. H.R. 2415’s original language, which reauthorized the State Department, received congressional approval last year as part of an omnibus spending package (P.L. 106-113). The original language was removed from H.R. 2415, and the bankruptcy conference report was substituted.

An official conference committee was not appointed because the Senate approved its version of H.R. 833 with a minimum wage increase and a package of tax breaks for businesses. According to the Constitution, revenue-raising measures must originate in the House; if the Senate brings such provisions into a conference, a point of order can be raised by House conferees.

Opponents of the bankruptcy reform legislation were critical of the strategy for bringing the agreement to the floor. Rep. Nita Lowey (D-NY) expressed “outrage,” saying: “After months of negotiations on this bill, we have been given a day’s notice to consider a measure that does not represent a true compromise and is still in the process of being worked out.” In response, Rep. Jeff Sessions (R-TX) said the conference report reflects “a bipartisan agreement,” adding: “The process we are going through was done in the light of day.”

In addition to the minimum wage/tax break package, the Senate-passed bill included an amendment by Sen. Charles Schumer (D-NY) to prohibit the discharge of debt resulting from a conviction under the Freedom of Access to Clinic Entrances (FACE) Act (P.L. 103-159). The conference agreement does not include the provisions pertaining to minimum wage, tax breaks, or the FACE Act. However, the agreement retained language included in the Senate bill by Sen. Orrin Hatch (R-UT), which sought to address concerns expressed by advocates for women and children regarding child support and alimony.

In an effort to discourage abuse of the bankruptcy system, the legislation would expand the category of nondischargeable debts—those that must be paid despite a bankruptcy filing—to include credit card debt incurred within 90 days of a filing. Under current law, child support and alimony payments are nondischargeable, but most credit card debt is not. The move to increase the amount of nondischargeable debt has drawn concern from women’s and children’s advocates, who have argued that custodial parents whose ex-spouses file for bankruptcy would be forced to compete against large credit card companies for the limited resources available for paying the credit card debt, as well as alimony and child support. Seeking to address those concerns, Sen. Hatch negotiated the matter with the National Women’s Law Center (NWLC) and the National Association of Attorneys General. Under his language, custody and divorce proceedings would be allowed to move forward despite the automatic stay that otherwise freezes the legal actions affecting an individual declaring bankruptcy. The language also would increase access to information about the employers of deadbeat parents, in an effort to expedite wage withholding. In addition, the amendment would bar the approval of a bankruptcy plan or the discharge of debt until arrears are paid on outstanding alimony and child support.

Rep. Deborah Pryce (R-OH) offered “strong support” for the bill, stating: “This legislation contains important protections for children and spouses who are owed child support or alimony. By equipping state child support agencies with the necessary tools and codifying the importance of child support and alimony obligations, this legislation will increase our commitment to children and families, and will hold parents, husbands, and wives to their responsibilities.”

However, Rep. Carolyn Maloney (D-NY) said she joins the NWLC and “many leading women’s organizations” in opposing the bill. “Bankruptcy reform is important to the American people, but so is protecting women’s safety and reproductive freedom,” she said.

In addition to making more debt nondischargeable, H.R. 2415 would establish a new means test formula. The new income calculations would require more filings under the bankruptcy code’s Chapter 13, rather than Chapter 7. Under Chapter 13, debtors are required to repay a significant portion of debt, while most debt is excused for Chapter 7 filers.

In calculating income for the means test, H.R. 2415 would allow those filing for bankruptcy to include as expenses the costs associated with securing safety from potential domestic violence; up to $1,500 of the costs associated with a dependent child’s education at a private elementary or secondary school; the continual costs associated with the care of an elderly, chronically ill, or disabled member of the household; the costs associated with maintenance of a vehicle necessary for transportation to the workplace; and up to 5 percent of the reasonable costs associated with food and clothing.

The Spring 2023 internship applications are now open!Apply Now!