As expected, the House last week voted overwhelmingly, 302-126, to pass bankruptcy reform legislation and send it to President Bush, who signed it on April 20th. Passed by the Senate last month on a 74-25 vote, the legislation represents the biggest rewrite of the bankruptcy code in a quarter-century.
“This bill is a high priority for automobile dealers, and NADA appreciates the assistance of dealers nationwide for making their views heard by House and Senate members,” said NADA Chairman Jack Kain. Significantly, the bill includes NADA provisions that will help dealers protect their secured credit for a motor vehicle when a customer files for bankruptcy.
The legislation is a victory for executives in the credit card, retail and auto financing industries who have pushed it for nearly a decade. They argue that the changes are necessary to weed out abusers of the system who use Chapter 7 bankruptcy protection to shirk debt they can afford to pay.
The new rules set up an income-based test for measuring a debtorês ability to repay debts, according to the Associated Press. Those with insufficient assets or income could still file a Chapter 7 bankruptcy, which, if approved by a judge, erases debts entirely after certain assets are forfeited. Those with income above the state’s median income who can pay at least $6,000 over five years $100 a month would be forced into Chapter 13, where a judge would then order a repayment plan. The legislation also would require people in bankruptcy to pay for credit counseling.
Under the current system, a federal bankruptcy judge determines whether individuals must repay some or all of their debt.
The new rules take effect six months from enactment. In the meantime, the 30,000 to 210,000 people the American Bankruptcy Institute estimates will be affected can escape its impact if they file for bankruptcy before then.
Bankruptcy attorneys anticipate a rush to the courthouse.
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