WASHINGTON - Bank-ruptcy filings declined 8.5% in 1999, but are still near record levels.
According to the latest statistics from the Administrative Office of U.S. Courts, bankruptcy filings dropped from 1.4 million in 1998 to 1.3 million in 1999. Looking at the fourth quarters of `98 and `99 and there is a 10% drop in filings. Preliminary data from NCUA indicates that bankruptcy filings among credit union members dropped 12% in 1999.
Despite the falling numbers, credit unions are still calling for major bankruptcy reform-which was expected to get a push due to certain provisions being stripped out of bankruptcy legislation awaiting conference action.
At press time, the House was expected to pass their own version of a minimum wage bill, which would likely strip out the minimum wage provisions in the Senate's bankruptcy bill. That's significant because there is expected to be some fierce debate over the minimum wage issue and it could have bogged down the bankruptcy legislation.
Also, tax provisions were expected to be stripped from bankruptcy legislation.
"If those two things do get stripped out of the bill, bankruptcy will get quick movement. I think you'll see conferees selected and action taken very fast," said Murray Chanow, director of legislative affairs for NAFCU.
Gary Kohn, vice president and senior legislative counsel for CUNA said the stripping out of the minimum wage provision would be a "big boost" to the potential passage of bankruptcy legislation, but he said it's still unclear what the White House will do if Congress passes bankruptcy reform.
"I think that's one of the things that's still in the background. They have had a veto threat over the House bill, and still have some problems with the Senate bill," said Kohn.
Kohn said that doesn't necessarily mean the President wouldn't sign the bill coming out of conference, but that the Administration does have concerns with means testing (included in both bills) and some other issues.
He said it's too early to tell how the Administration will react because bankruptcy has not made it to conference yet and it's unclear which provisions will be kept and which ones will be eliminated.
If there is no debate on minimum wage provisions or tax provisions, the points of the bankruptcy bills that might get the most attention from congress are the means testing and homestead exemption differences in the bills.
Chanow said the House version of means testing would definitely capture more filers. The House and Senate bills differ on the income levels for means testing; what makes up a debtor's monthly expenses, and others.
Homestead exemptions vary widely from state to state. States like Texas and Florida have virtually no homestead exemption, meaning bankrupt filers in those states are able to keep their homes even if they are worth millions of dollars.
There are other states that have homestead caps as low as $15,000.
The Senate bill seeks to make homestead exemptions uniform throughout the country. That bill calls for a $100,000 homestead cap for all states.
The House bill calls for a $250,000 cap for all states, but individual states have the right to opt out from that provision. Therefore states that didn't want to change their homestead limits wouldn't necessarily have to if the House language is kept.
"There was a well-publicized case in Florida where Burt Reynolds declared bankruptcy but was still allowed to keep a $5 million house. It's an issue where there will be some debate on," said Chanow. -pgentile@cutimes.com
