Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, October 8, 1994 TAG: 9410110009
SECTION: BUSINESS PAGE: A-4 EDITION: METRO
SOURCE: FROM STAFF AND WIRE REPORTS
DATELINE: WASHINGTON LENGTH: Medium
The Senate approved the bill unanimously on voice vote shortly after midnight and sent it to President Clinton. It was passed Wednesday by the House.
The measure will allow federal judges to resolve bankruptcy cases faster, clearing court dockets, particularly of small-business cases.
Last year, more than 900,000 bankruptcy cases were filed, nearly three times the number just eight years earlier.
John Craig, clerk of the Roanoke-based U.S. Bankruptcy Court for Western Virginia, said that "the bill in its final form is very different from what was expected." Congress, he said, made "dramatic changes" in the law during the last 10 days of deliberations.
One change, he said, eliminated the proposed new Chapter 10 form of bankruptcy. If it had passed, Craig said, it would have enabled small "mom and pop" businesses to pursue a fast track in handling and emerging from financial reorganization.
Craig said he could not comment on the final bill until he has a chance to review the new law.
Andrew S. Goldstein, a bankruptcy specialist with the Roanoke law firm of Magee, Foster, Goldstein & Sayers, said he likes a provision making it easier for more people to file under Chapter 13, which provides for repayment of debts rather than liquidation.
Under present debt limits, Goldstein said, many people must either liquidate or file for Chapter 11 reorganization. The latter type of reorganization, he said, is expensive and time consuming.
The bill enables more individuals to file for Chapter 13 bankruptcy, which permits them to work out payment plans, rather than Chapter 7, which requires the sale of most of a debtor's property. The debt limit for Chapter 13 would be raised from $450,000 to $1 million.
Under Chapter 13, debtors would be allowed to pay arrearages on their home mortgages until the foreclosure sale.
The legislation also has provisions strengthening creditors' rights:
Mortgage ``cramdowns'' would be prohibited in cases where the value of a property has declined below the amount owed on the mortgage. In cramdowns, a debtor asks a court to rule that the lender's secured interest is only the fair market value of the home. The rest of the mortgage becomes an unsecured interest and has a lower priority in being paid off.
Bankruptcy courts would be barred from relieving debtors of criminal fines.
Credit card companies could recoup the full payment from debtors who use their cards to pay taxes and then file for bankruptcy.
Parents must continue paying child support even after declaring bankruptcy.
Staff writer Mag Poff contributed to this story.
by CNB