Bankruptcy Reform Clears the House and Senate

On March 15, 2001 the U.S. Senate voted by an overwhelming 83-15 margin to overhaul the federal bankruptcy statutes. Two weeks earlier, on March 1, the U.S. House of Representatives passed a similar bill, also by an overwhelming and bipartisan vote of 306-108. Although widely characterized in the popular press as making it harder for American consumers to erase their debts, in fact the bill's provisions are likely to directly limit the ability to file Chapter 7 of 10 percent or fewer debtors who seek such a discharge under the current rules. The vast majority of households seeking Chapter 7 relief under the current law would still be able to do so under the new law.

The differences between the two bills must now be resolved in conference committee. President Bush has signaled a general willingness to sign either version that passed out of Congress. But, as of the last week in March, a political power struggle in the Senate appears to be forming a new obstacle. Bankruptcy reform is not the only legislation threatened by the Senate bottleneck. Much of President Bush's legislative agenda could be threatened because of the unique 50-50 split between Republicans and Democrats in the Senate, and the resulting disagreement about the composition of any conference committee that is a necessary part of resolving differences in House and Senate legislation.

According to USA Today, Senate majority leader Trent Lott (R-MS) and minority leader Tom Daschle (D-SD) are at odds over the number of Senate Republicans and Democrats appointed to any conference committee. An historic power-sharing deal struck in January gave both parties equal representation on Senate committees, but did not address conference committees. Republicans want a one-vote majority on conference committees to reflect Vice President Cheney's tie-breaking vote, but the Democrats insist on equal representation. One alternative for pushing forward the bankruptcy reform effort would be to skip the conference committee and send the Senate bill back to the House for revision, but several controversial differences in the House and Senate versions could ignite new battles and reopen old ones.