Clinton Vetoes Bankruptcy Reform Bill

As expected, President Clinton vetoed the Bankruptcy Reform Act of 2000 (H.R. 2415) on December 19th. The American Bankruptcy Institute reported the President asserted that the bill was too hard on ordinary debtors who fall on hard times, while permitting wealthy debtors a loophole through the homestead exemption.

The President’s veto message stated, “I firmly believe that Americans would benefit from bankruptcy reform legislation that would stem abuse of the bankruptcy system by debtors and creditors alike. Unfortunately, this bill is not balanced reform and it omits critical language to require accountability and responsibility from those who unlawfully bar access to legal health services.”

President Clinton could not support the final bill that removed a hard cap on homestead exemptions, which he said would allow “debtors who own lavish homes to shield their mansions” while moderate income debtors would have to live frugally under rigid repayment plans. President Clinton also cited the bill’s removal of language to make nondischargeable those debts arising from abortion clinic violence claims. The American Bankruptcy Institute noted the message made no mention of opposition to the concept of a means test, or even the bill’s specifics to implement the test. Clinton applauded the bill’s move to “improve credit card disclosures – although more can and should be done-while imposing limits on misleading creditor practices that encourage debtors to reaffirm dischargeable debts.” However, President Clinton said these beneficial provisions are outweighed by the bill’s flaws and omissions.

The 106th Congress made a bipartisan effort since 17 Senate Democrats voted for the bill on final passage and nearly as many House Democrats voted for the bill as were opposed. The American Bankruptcy Institute reported the new Chairman of the Senate subcommittee with jurisdiction over bankruptcy, Sen. Jeff Sessions (R-Ala.) says bankruptcy will be an early priority of the new Congress. However, he may find it more difficult in a Senate that is equally divided and a subcommittee where the top Democrat may be opposed to the concept of means testing Chapter 7 relief.

This Alert was written by Alan P. Fox, Esq., Shareholder in Capehart Scatchard’s Commercial Group. Should you have questions or like more information, please contact Mr. Fox at 856.914.2056, by fax at 856.235.2786, or by e-mail at afox@capehart.com.

© 2000 Capehart & Scatchard, P.A.

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