The Bankruptcy Abuse and Consumer Protection Act (HR 975), sponsored by Representative James Sensenbrenner Jr., (R-Wisconsin), sailed through the House on a 315-113 vote, attracting three voice-vote amendments, according to news reports. The bill includes a provision that tries to better preserve workers’ retirement money by keeping creditors with a higher priority than participants from being able to dip into employee retirement assets to pay earlier claims.
The most significant of the amendments came from Representative Christopher Cannon (R-Utah) that upped the monetary cap on wage and employee benefit claims entitled to priority under the Bankruptcy Code from $4,650 to $10,000, and lengthened the reachback period for wage claims form 90 days to 180 days.
Restoring Modified Benefits
Cannon’s amendment also provided that certain compensation payments to a corporation’s insiders during this reachback period can be rescinded under certain circumstances and mandates that the court restore retiree benefits that a corporate debtor modified within the 180-day period preceding the bankruptcy filing unless the modification can be justified.
“The time for these reforms is long overdue,” said Sensenbrenner, Judiciary Committee Chairman, on the House floor. “This body has on six previous occasions passed similar bankruptcy reform bills. Perhaps this seventh attempt will prove to be a charm and finally lead to enactment of these critically important reforms.”
HR 975 passed the House Judiciary Committee March 12 (See House Bill Shields Employee Retirement Assets in Bankruptcy).
A prominent business group applauded the House passage. “People who can’t afford to pay their debts have nothing to fear from bankruptcy reform, but those who can will be held accountable,” US Chamber of Commerce President Thomas Donohue said in a statement. “The Senate must pass – and the President sign – a bill that will prevent wealthy debtors from abusing the system and passing the buck to American businesses and consumers.”
The number of bankruptcies has risen from 348,000 to 1.4 million during the past 15 years. Businesses cope with nearly $40 billion in bankruptcy losses each year, a figure that the Chamber said costs the average American family about $400 a year.
The measure goes onto the Senate where observers say its fate is uncertain.