Senate Passes Massive Bankruptcy Overhaul Bill; Sent to House for Certain Approval
The Senate today passed S. 256, the onmibus bankruptcy bill by a vote of 74–25. The bill has been a top priority of the consumer credit industry and has been pending in Congress over much of the past eight years. The bill makes the most significant changes to the Code in a generation. As in the past, the bill had bipartisan support in the Senate, though its many vocal opponents decried the expected impact on those forced into bankruptcy.
Today’s final action followed another full day of the proponents methodically defeating a series of amendments designed to lessen the bill’s effect. The Senate rejected amendments to redefine “current monthly income” under the means test, exempt debtors who did not receive scheduled alimony payments and limit claims by certain unsecured creditors. One amendment on the means test was approved: to exempt from the means test disabled veterans who incur debt while on active duty. The amendment passed 99–0. A number of other pending amendments were withdrawn. Cloture was invoked on Tuesday.
The Senate, after much overnight and apparent back room discussion, beat back an important conflict of interest amendment that would have removed a carve out for investment banking firms under the disinterestedness rule (§414 of the bill). The SEC had previously warned the Senate about easing conflict rules for investment banks serving as advisors to the debtor post-bankruptcy where the bank had been the debtor’s underwriter prior to the bankruptcy. However, the amendment’s inclusion would have jeopardized passage in the House. The vote was 44–55 with Sen. Clinton absent. Five Republicans voted with Democrats to strike the preferred treatment, while an equal number of Democrats voted to sustain the position favored by the large investment banks.
The Senate accepted an amendment by Sen. Jim Talent (D–Mo.) to limit the scope of asset protection trusts that could be placed beyond the reach of the bankruptcy trustee. The amendment (No. 121 on ABI’s legislative news page) provided that the trustee could avoid any transfer within 10 years of the bankruptcy where the trust was created with “actual intent to hinder, delay or defraud.” Also covered are transfers made in anticipation of a money judgment, settlement, civil penalty, equitable order or criminal fine resulting from a Securities Act violation or securities fraud. The amendment passed 73–26. It was opposed by a group of Democratic Senators who didn’t think the language went far enough to close a so-called “millionaire’s loophole.” The Talent amendment was favored after the Senate rejected 43–56 a broader limit on asset protection trusts offered by Democrats.
The bill is expected to quickly pass the House of Representatives. It will be referred to the House Judiciary Committee. The Committee’s chair, James Sensenbrenner (R–Wis), was consulted by Senate leaders on various amendments and issues during the last week, including the disinterestedness amendment. The House is in session during the week of March 14–18, but then will be on recess through April 3.
Specter Continues to Adjust Asbestos Measure Language
Senate Judiciary Chairman Arlen Specter (R–Pa.) plans to put his long-negotiated asbestos bill in final form possibly the week Congress returns from its Easter recess, he said today, CongressDaily reported. Committee Republicans said the revised bill will incorporate changes suggested by GOP committee members. Republicans leaving a meeting with Specter this morning said they were encouraged by the talks and thought the bill ultimately will win bipartisan support, the newswire reported.