The Florida Bankruptcy Reform Act

      The consumer credit industry, led by the credit card issuers, has sought reform of the Bankruptcy Code to make it less "consumer friendly." The major prongs of the industry's desired "reforms" are means testing to force more debtors to elect to file Chapter 13 bankruptcies rather than Chapter 7 bankruptcies, debtor counseling both pre- and post-petition, less liberal exemptions, and broadened exceptions to discharge. These "reforms" have been embodied in the proposed Bankruptcy Reform Act of 1999. Like its predecessor, the Bankruptcy Reform Act of 1998, the 1999 Act quickly ran into legislative hurdles, which caused a bifurcation between the relatively flexible Senate version (S.625) and the less flexible House version (H.R. 833). Each of these bills largely adopted the pre-conference version of the 1998 Act, which had been passed by the respective houses of Congress. On May 5, 1999, the House passed H.R. 833. Senate consideration of S. 625 was to occur in May 1999 as well. However, the Senate's deliberations were postponed until fall 1999 due to the press of business precipitated by the Kosovo crisis, the impeachment trial of President Clinton, and various emergency supplemental appropriations bills related to disaster relief. President Clinton may have effectively postponed any meaningful consideration of many of the proposed "reforms" until the 107th Congress convenes in 2001 by virtue of his threat to veto any bill that contains many of the keystone provisions sought by the consumer credit industry, such as rigid "means testing" requirements for Chapter 7 relief.

     Various studies and scholarly articles have cast doubt on the effectiveness of the proposed "reforms." These studies suggest that means testing would have, at best, a modest but significant impact on Chapter 7 filings. Some of these studies also suggest that the "exemption" reform proposals, especially those centered around the very large and unlimited homestead exemptions of states including Florida, Texas, and Kansas, would have an impact only on a relative handful of cases nationally. Other studies suggest that women, minorities, and the poor would be disproportionately affected by the enactment of the proposed legislation.

     The American Bankruptcy Institute's ABIWorld Web site, www.abiworld.org, contains synopses of the various proposed bills and the studies of their probable impact on bankruptcy filings. The status and content of the proposed legislation, and therefore its impact on practitioners, remain quite fluid as of late summer 1999 when this comment was written.

     The sole item of bankruptcy legislation that was enacted into law by September 1, 1999, was Pub. L. 105-277, as amended by Pub. L. 106-5. Collectively, these laws extended the "sunset" of Chapter 12 (11 U.S.C. §§ 1201, et seq.) from October 1, 1998, to October 1, 1999, retroactively to October 1, 1998. The retroactive provision was necessary to "ratify" some Chapter 12 filings that had been accepted by the bankruptcy courts between October 1, 1998, and the March 31, 1999, enactment date of the legislation. Some districts had refused to permit any new Chapter 12 filings during this period. If the 1999 Reform Act is not enacted by October 1, 1999, a similar extension bill will likely be enacted to further extend Chapter 12's sunset. The various Reform Act versions would all make Chapter 12 permanent. Congress' failure to make Chapter 12 permanent in the March 31, 1991, legislation seems to be due to a Congressional desire to avoid any piecemeal amendment of the code.

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