Bankruptcy Reform Should Progress
During August Recess

Early last spring the U.S. House and Senate each passed versions of a bankruptcy reform bill. The next step was to appoint a House-Senate conference committee to mold the already-similar bills into one piece of legislation. But, the unique politics surrounding a 50-50 split in the Senate stalled the appointment of a conference committee. Then, when the Senate shifted back to Democratic control in May, the appointment of a conference committee was further delayed. Now, after languishing for nearly 4 months without any progress, bankruptcy reform appears to be moving again. In mid-July the Senate named 13 members to the conference committee, including Judiciary Committee chairman Patrick Leahy (D-VT), Orrin Hatch (R-Utah), Joe Biden (D-DE), Edward Kennedy (D-MA), Herb Kohl (D-WI), Russell Feingold (D-W), Charles Schumer (D-NY), Richard Durbin (D-IL), Charles Grassley (R-IA), Jon Kyl (R-AZ), Mike Dewine (R-OH), Jeff Sessions (R-AL), and Mitch McConnell (R-KY).

By July 30, the House had still not named its conferees, but was expected to do so before the August recess. In any case, Senate Judiciary Chairman Patrick Leahy accepted an offer from House Judiciary Committee Chairman James Sensenbrenner (R-WI) to begin pre-conference reconciliation work on the two versions of the bill. Perhaps the largest and most contentious issue to be resolved is reconciliation of a $125,000 cap on homestead exemptions in the Senate version of the bill. The House version does not cap the homestead exemption but prevents the transfer of assets into an exempt homestead within two years prior to a filing for bankruptcy. Some Democratic opponents of the House version of the bill have seized upon the homestead exemption issue as an example of a "loophole for millionaires," which makes a good soundbite. That particular strategy also complicates the politics of passage since Texas bankruptcy law allows the homestead exemption, the Texas congressional delegation is strongly opposed to attempts to limit it and a Texan sits in the White House. Nevertheless, it appears now that some progress will be made over the August recess, perhaps enough to lead to passage of the reconciled version of the bill this fall.