Following intense lobbying efforts by banks and other lending institutions, both houses of Congress recently approved a major overhaul of the United States Bankruptcy Code. As of September 20, 1999 a joint reconciliation bill has not yet been worked out and passed for the President's approval. On June 10, 1998, the House of Representatives passed a pro-creditor measure strongly opposed by the Clinton administration. In September 1998, the Senate passed a slightly less restrictive bill. For a more detailed explanation of bankruptcy terms and procedures see What You Should Know About Financial Reorganization And Bankruptcy. The key features of the Senate bill include the following proposed changes to the Bankruptcy Code:

1. Debtor's will be required to file for financial reorganization under chapter 13, subject to a court-ordered repayment plan, if they can pay back 30% or more of their debt within three years.

2. A $100,000 nationwide cap would be put on homestead exemptions for bankruptcy. States may choose to adopt lower homestead exemption amounts, however.

3. Child support and alimony payments would get top priority in bankruptcy, putting them ahead of federal income taxes, bankruptcy attorneys' fees and other obligations.

4. Parents who set up special savings accounts for their children's college education and later filed for bankruptcy would be able to keep the money in their accounts.

5. Credit card debt incurred within 90 days of a bankruptcy filing would generally be declared nondischargeable.

In June 1998, the House passed H.R. 3150. Key provisions of that bill include the following:
1. All debtors must file a repayment plan under Chapter 13 if they have incomes of more than $50,000 and sufficient resources to repay 20% of their debts within 5 years.

2. After debtors receive their discharge, they would be ineligible for any bankruptcy relief for a period of 5 years and ineligible for chapter 7 relief for a period of 10 years, without consideration of good faith or economic situation.

3. In both Chapter 7 and Chapter 13 cases, secured creditors would receive payment of their claims in an amount no less than the retail value of the collateral that secures the claim, and, in some circumstances, the full amount of the claim, regardless of the collateral value.

4. Chapter 13 repayment plans would be changed by increasing minimum plan terms. 5. "Fraudulently incurred" credit card debt would be determined without regard to the intent of the debtor to repay, but rather on the debtor's objective financial situation at the time the debt was incurred.

In sum, it is expected that the bankruptcy laws will be significantly tightened for many debtors. Depending upon the facts of your particular situation it may be to your advantage to file bankruptcy now. As always, consult an attorney to find out your rights before filing bankruptcy. Also, consult an attorney before pursuing a claim against a bankrupt debtor.

If you would like to obtain regular updates on bankruptcy laws or need legal representation as a debtor or creditor in any bankruptcy matter in Southern California, call Darren Gordon Smith, a Professional Law Corporation today at (714) 505-2700.

DISCLAIMER: THE ABOVE IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS LEGAL ADVICE. BANKRUPTCY LAWS ARE COMPLEX AND CONSTANTLY CHANGING. YOU SHOULD FIRST SEEK THE ADVICE OF AN ATTORNEY TO FIND OUT HOW CERTAIN LAWS MAY AFFECT YOUR SITUATION.