What Happened to the Bankruptcy Reform Act of 2001?

by David M. Reeder

The Bankruptcy Reform Act of 2001 (the "Act") was passed by resounding majorities of both houses of Congress in early 2001. The bankruptcy world prepared for sweeping changes in the law. The only variable was exactly when during 2001 the law would signed by President George Bush, and become final.

The act, however, was slowed by the legislative process and eventually took a back seat to the events of September 11, 2001. When the House and Senate passed their respective versions of the Act, there was sufficient difference to require the formation of a Conference Committee to work out the differences. Due to the newly reconstituted Senate, which was evenly divided between the two political parties, it took an unprecedented length of time for the Conference Committee to even be formed. The Conference Committee did not start meeting in any serious way until late Summer of 2001. Even then, very little progress was made toward resolution. The events of September 11 put the Act far in the background as Congress dealt with more pressing matters. Congress adjourned in December, 2001 without any the Act being any closer to becoming

Not to be dissuaded, the proponents of the Act attempted to push it forward again during the 2002 session, only to be blindsided by an unexpected fight over an abortion-related provision of the Act which would have made claims stemming from anti-abortion actions non-dischargeable. This emotionally charged conflict was sufficient to keep the legislation bogged down during the past year.

To further complicate matters, the far-reaching effects of high-profile bankruptcy cases such as Enron, WorldCom, and Adelphia, and an economy with continues to give mixed signals, have both proponents and opponents of the legislation pondering their next move. Given the ripple effect of a cases like Enron, the severe restrictions put on business cases and individual cases by the Act may not have the appeal that they had during more stable and prosperous times.

Stay tuned for further developments.