Scott Gottlieb, CPA
Assistant editor: Susan A. Maffetone, CPA
Bankruptcy Reform Act of 2001
Bankruptcy Reform Act of 2001 (S. 420). disqualifies
many debtors from filing for Chapter 7 bankruptcy,
which allows them to wipe out their debts, and instead
forces them into Chapter 13, which requires some
form of repayment.
is an excerpt from the U.S.
Senate Republican Policy Committee website:
Legislation Notice of March 2, 2001.
420 is based on the Bankruptcy Reform Conference
Report that Congress passed overwhelmingly last
year, but it has amendments adopted by the Judiciary
Committee during markup. President Clinton (pocket)
vetoed the conference report last year.
House passed its bankruptcy bill, as amended, on
March 1, 2001, by a vote of 306 to 108. The House
bill (H.R. 333) also is based on last year's conference
Senate approved last year's reform act (the Conference
Report to H.R. 2415) on December 7, 2000, by a vote
of 70 to 28 (after invoking cloture two days earlier).
Fifty-three GOP Senators voted for the conference
report, as did 17 Democratic Senators. The House
had approved the conference report on October 12,
2000, by voice vote. The 106th Congress adjourned
sine die without a vote on overriding the President's
the Senate first passed its bankruptcy reform bill
in the 106th Congress on February 2, 2000, the bill
included several nongermane amendments, including
minimum wage, tax reform, health insurance, and
drug enforcement amendments. That bill (S. 625 /H.R.
833) passed by a vote of 83 to 14.
to the U.S. Department of Justice, creditors lose
$3.22 billion every year because of bankruptcies
filed by persons who could repay their debts. S.
Rept. 106-49 at 2. Those costs are then passed along
to all Americans. Based on research by the Congressional
Budget Office, Senator Grassley has shown that bankruptcies
cost each American household about $400 annually
in higher costs for goods, services, and credit.
Authority. The Constitution gives Congress express
power "To establish . . . uniform Laws on the subject
of Bankruptcies throughout the United States." Art.
I, §8, cl. 4. Bankruptcy laws have been a permanent
part of the federal code for 100 years. The bankruptcy
code was overhauled in 1978, and that 1978 act (as
amended) governs all bankruptcy cases filed today.
See 11 U.S.C. §101 et seq.
Explosion in Bankruptcy Filings. The reform
effort is motivated in large part by an explosion
in consumer bankruptcies, which is especially troubling
because the economy has been healthy. Some of the
relevant data are shown in Table 1, which shows
that nonbusiness filings have quadrupled since the
of the bill argue that the bill does nothing to
end the abuses by banks and credit card companies
that flood the mail with solicitations for easy
high interest credit to people who can't handle
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