Order Code RS20196
Updated August 9, 1999
CRS Report for Congress
Received through the CRS Web
Comparison of Selected Consumer Provisions in
H.R. 833 and S. 625,
the Bankruptcy Reform Acts of 1999
Robin Jeweler
Legislative Attorney
American Law Division
Summary
The Senate Judiciary committee reported S. 625 favorably on April 27, 1999 by a
vote of 14-4. Many of the controversial issues that were not addressed in committee are
likely to be addressed on the floor.
The House passed its version of bankruptcy reform, H.R. 833, on May 5, 1999 by
a vote of 313-108. The bill, a manager’s amendment to H.R. 833, is similar to H.R.
3150, passed by the House during the 105 Congress, although several amendment
th
s
were adopted. The President has threatened to veto the Bankruptcy Reform Act if it is
enacted in a form comparable to H.R. 833 as passed by the House.
This report will be updated as legislative developments warrant.
The full Senate may soon consider S. 625, 106 Cong., 1
th
Sess. (1999), addressing
st
bankruptcy reform. In the meantime, the House recently passed H.R. 833, 106
1
Cong.,
th
1 Sess (1999).
st
2 Several floor amendments were agreed to, including those which expand
the scope of nondischargeability of student loans to include all qualified loans rather than
just federally backed ones; an amendment to modify the Truth in Lending Act (TILA) to
3
require credit card issuers to make disclosures regarding minimum monthly payments; and
4
an amendment imposing certain disclosure and notice requirements on debt relief
1
See S.Rept. 106-49 (1999).
See also, S. 945, 106 Cong., 1
th
Sess. (1999), entitled th
st
e
“Consumer Bankruptcy Reform Act of 1999,” introduced May 3, 1999 by Sen. Durbin.
2 145 CONG. REC. H2769 (daily ed., May 5, 1999).
See H.Rept. 106-123, Part I (1999).
3 H.R. 833 at § 218
4 Id. at § 112.
Congressional Research Service ˜
The Library of Congress
CRS-2
agencies. Among proposed amendments to the bill which did
5
not pass was the Hyde-
Conyers proposal to soften the means test by substituting Internal Revenue Service living
expense standards with cost-of-living guidelines based on a “reasonable and necessary”
standard that would be tailored to bankruptcy purposes.
The chart below provides a summary comparison of selected consumer provisions in
the Senate and House bills as they presently stand:
Selected Provisions
S. 625 as reported by the
H.R. 833 as passed by
Senate Judiciary
the House
Committee
Means test:
Implementation
Would amend 11 U.S.C. §
All parties may move for
707 to permit creditors, the
conversion to chapter 13, but
trustee, or any party in
the standing trustee must
interest to challenge a
review each filing and move
debtor’s eligibility to file
for conversion where abuse
under chapter 7. If indicated,
is found. § 102.
the U.S. trustee must file a
statement indicating that the
debtor’s case would be a
presumed abuse of chapter
7. § 102.
Presumed abuse
If challenged, the debtor
Abuse exists if, by
would be presumed to be
calculating monthly income
abusing chapter 7 if current
after deducting charitable
monthly income, multiplied
contributions, administrative
by 60, would permit a debtor
expenses, private school
to pay the lesser of 25% of
tuition of up to $10,000, and
nonpriority unsecured debt
secured debt payments, and
or $15,000. § 102.
multiplying by 60 months,
there is a surplus of not less
than $6,000 (or $100 per
month). § 102
5 Id. at § 154.
CRS-3
Calculation of monthly
Expenses to be calculated
Expenses to be calculated as
living expenses
“under standards issued by
specified under the National
the Internal Revenue Service
Standards and Local
for the area in which the
Standards, and the debtor’s
debtor resides.” §102.
actual monthly expenses for
the categories specified as
Other Necessary Expenses
issued by the Internal
Revenue Service for the area
in which the debtor resides.
A debtor may also subtract
an allowance of up to 5% of
the IRS food and clothing
categories. § 102.
To rebut the presumption
The debtor must demonstrate
The debtor must demonstrate
“special circumstances.” §
“extraordinary
102.
circumstances.” § 102.
Exemption
The U.S. trustee or
No party may make a motion
bankruptcy administrator
to convert the debtor to
may file a statement that a
chapter 13 if the debtor (and
conversion motion would
spouse combined) have a
not be appropriate if the
monthly income “equal to or
debtor’s current monthly
less than the regional median
income is less than the
household income calculated
highest national or
on a semiannual basis.” §
applicable State median
102.
family income. § 102.
Attorneys’ fees
If a trustee determines that a
If a panel trustee brings a
debtor’s case should be
successful motion for
converted, the debtor must
dismissal or conversion,
reimburse costs, including
counsel for the debtor will be
attorneys’ fees. § 102.
liable to reimburse the
trustee for costs, attorneys’
fees, and payment of a civil
penalty. § 102.
Mandatory credit
Debtor must undergo credit
Comparable provisions, but
counseling
counseling within 180 days
the debtor must undergo
of filing, and may not obtain
credit counseling within 90
a chapter 13 discharge until
days of filing. Chapter 7
completion of a personal
debtors must also complete
financial management
an approved instructional
instructional course. Chapter
course. § 302.
7 debtors must also complete
an approved instructional
course. § 105.
CRS-4
Promotion of alternative
Creditor’s allowable claim
The court may reduce a
dispute resolution
may be reduced by 20% if a
creditor’s claim by 20% if
court finds that the creditor
the debtor can prove by
“unreasonably refused to
“clear and convincing”
negotiate a reasonable
evidence that a creditor
alternative repayment
unreasonably refused to
schedule proposed by an
negotiate alternative
approved credit counseling
repayment of at least 60% of
agency.” § 201.
the debt. § 109.
Reaffirmation agreements
Imposes enhanced
Imposes enhanced
requirements for approval of
requirements for approval of
a reaffirmation agreement
a reaffirmation agreement
when the debtor is not
when the debtor is not
represented by counsel;
represented by counsel. §
requires U.S. Attorney and
108.
FBI to investigate abusive
reaffirmation practices;
Allows a debtor to recover
authorizes states attorney
actual damages or $1000,
generals to bring class
whichever is greater, when a
actions to recover damages
creditor violates
for violations of
reaffirmation agreement
reaffirmation provisions.
requirements, but prohibits
§ 204.
class actions to enforce
abusive reaffirmation
practices by creditors.
§ 114.
Homestead exemption
No monetary cap; imposes
Imposes lengthened
lengthened residency
residency requirements.
requirements. §§ 307-308.
§§ 124-125.
Imposes a $250,000 cap on
homestead exemptions
(except for family farmers).
Allows states to opt out of
the monetary cap; delays
effective date until the end of
the first regular session of
each state legislature
following enactment. § 147.
Exemption for saving for
No comparable provision.
Allows a debtor, subject to
postsecondary education
certain requirements, to
exempt up to $50,000 for
one child, or $100,000 per
family for postsecondary
education. § 113.
CRS-5
Domestic support owed to
Would move domestic
Comparable provision at
individuals and
support obligations to first
§ 139.
government units made
priority, which is currently
first priority
allocated to administrative
expenses of the bankruptcy
estate. § 212.
Trustee notification of child
Would direct the trustee to
Comparable provision at
support claim holders
notify a priority child
§ 149.
support recipient of the
existence of a state child
support enforcement agency,
and, upon discharge, the
existence of
nondischargeable and
reaffirmed debt. § 219.
Definition of “household
Defines household goods
Defines household goods
goods”
narrowly to include only 1
more broadly to include
radio; 1 television; 1 VCR;
“personal property normally
and 1 personal computer but
found in or around a
only if used for the education
residence,” excluding motor
or entertainment of a minor
vehicles. § 145.
child. § 313.
Plan duration
Debtors who have been
Chapter 13 plans to have 5
converted to chapter 13 from
year duration for families
chapter 7 will have 5 year
whose monthly income is not
plans; other debtors will
less than the highest national
have 3 year plans. §
median family income.
318.
Families below the highest
national median income
would have 3 year plans. §
606.
Debts incurred to pay
Debts incurred with an intent
Comparable provision, but
nondischargeable debts are
to pay a nondischargeable
all debts incurred within 90
nondischargeable
debt will become
days of filing to pay
nondischargeable; debts
nondischargeable debts are
incurred within 70 days will
nondischargeable without
be presumed to be
regard to intent. § 146.
nondischargeable. § 314.
Lien stripping on security
Chapter 13 debtors would
Consumer debtors would not
interests in consumer
not be permitted to bifurcate
be permitted to bifurcate
goods
security interests in an
secured claims for consumer
automobile purchased within
goods purchased within 5
5 years of the filing; or in
years of the bankruptcy
other consumer goods
filing. A secured creditor’s
purchased within 6-months
allowable claim would be the
of the filing. § 306.
retail cost to replace the
item. §§ 122- 123.