Pending Bankruptcy Legislation

Recap of pending bankruptcy legislation and rules

Each year, both Representatives and Senators propose a wide assortment of bills advocating amendments to the current federal code. Collectively, pending bankruptcy legislation could substantially alter the balance of rights and duties existing between debtors and their creditors. A few of these proposals during the last congress included the following:

On 2-9-05, Representative James F. Sensenbrenner (R-WI) introduced HR685. This proposed amending Section 707 of the code by requiring mandatory dismissals of all consumer cases, if, rather than including the term "substantial abuse" as the condition for dismissal of debtor cases, the court finds any "abuse". Further, the proposed legislation, as offered, also includes a mandatory presumption of debtor abuse in all case in which debtors earn income above the statutorily defined cut-off point providing be the means testing requirement.
On 3-14-05, Representative Emanuel Rahm (R-IL) introduced HR1278. This proposal provided for an increase in the look back period, from one year to ten years, for a trustee's right to avoid transfers of property from a debtor's estate to certain trusts, including non-revocable trusts.
On 12-05-05, Representative Lamar Smith (R-TX) introduced amended HR420. This proposal related to mandatory sanctions against a debtor's attorney upon the finding of error. The previous proposal limited sanctions to a reasonable amount, whereas the new proposal reversed the provision, and increased sanctions to at least an amount reasonable to deter future errors.