Bankruptcy filings soar in anticipation of new rules
By Rupert Welch -- Furniture Today, September 3, 2001
WASHINGTON — In anticipation of the passage of strict new bankruptcy rules when Congress returns from recess, bankruptcy filings by American businesses and individuals soared in the April-June period.
Filings for the quarter hit 400,394, the highest quarterly total ever, up 24.5% from the same period a year earlier, according to the Administrative Office of the U.S. Courts. Experts have been predicting that filings would increase as the U.S. economy continued its slowdown.
Consumer bankruptcy filings have been the bane of furniture retailers for several years, and have played a part in pushing some retailers themselves into bankruptcy. Last month, the board of the National Home Furnishings Assn., which represents the retailers, voted to make bankruptcy reform its top priority this year, said John Satagaj, Washington counsel for the NHFA.
Both the Senate and the House have passed bankruptcy reform measures, S. 420 and H.R 333, and a conference committee is set to resolve the differences in the versions sometime after Labor Day. President Bush is expected to sign the bill.
The Senate bill puts a cap at $125,000 on the amount that bankrupts can shelter in home equity. This provision, opposed by Bush, aims at closing a loophole created by homestead laws in some states, including Texas and Florida.
Furniture retailers were successful in inserting "cram-down" provisions in both House and Senate bills. This means that furniture purchased by a customer prior to his filing for bankruptcy protection retains its full value for one year from date of purchase.
The legislation would bar some debtors who are able to repay some of their debt from filing under Chapter 7, which wipes out all unsecured debts. Instead they would have to file under Chapter 13, which calls for repayment of a portion of the debt over five years.
