NACM Celebrates Passage of Bankruptcy Bill.(Brief Article)

Most Sweeping Overhaul of Bankruptcy Legislation in 20 Years

On Thursday, March 16, the US Senate approved S. 420, the Bankruptcy Reform Act of 2001, by a vote of 83-15. The House has already approved its version of the bill, and now a conference committee will be formed to resolve the differences between the two bills. It is not anticipated that there will be major delays in the working of the conference committee, and President Bush has indicated that he is supportive of the legislation (especially the House version of the measure).

The legislation has been highly controversial because of the means testing provisions that have been included as part of the bill. Under these provisions, formulas for income levels have been established so that those consumers who can afford to repay part of their debt will be required to do so. Generally, the legislation places greater emphasis on moving consumer debtors who can repay some of their debts into Chapter 13 and away from Chapter 7.

NACM has worked hard to ensure that provisions important to the trade credit industry were included in both versions of the legislation. While there are differences in treatment between the House and Senate versions of the legislation on several of these critical issues, the efforts for the Government Affairs team are now to adopt the more favorable Senate bill.

Among the issues on which the two bills are identical are:

Preference Changes - Both bills make identical changes on three items. One, there cannot be a preference challenge for payments of less than $5,000. Two, preference challenges between $5,000 and $10,000 must be brought in the jurisdiction of the creditor. Three, the definition of "ordinary course of business" has been broadened to codify industry standards and norms or the usual business relationship between the creditor and debtor.

The significant differences between the two bills include: