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From a political perspective, the prospects of overhauling bankruptcy laws in the U.S. should be better than ever now that the Republicans have tightened their grip over Congress. “Everybody is hopeful in January,” said Samuel Gerdano, executive director of the American Bankruptcy Institute. “It’s like spring training. Everybody can make the World Series.” Yet many observers remain pessimistic that lawmakers will finally approve bankruptcy legislation, which has been in the offing for eight consecutive years. The proposal, which would mostly affect consumer bankruptcy, also includes significant provisions that would toughen rules for business. Among the legislation’s more controversial corporate measures is one that would narrow the discretion of bankruptcy judges in allowing a company to work out its problems under Chapter 11. The proposal also would impose several new deadlines on corporate debtors. In each Congress, Republicans have viewed the bankruptcy bill as unfinished business, and have tried to pick up where they left off in their efforts to pass it into law, only to run into roadblocks. One impediment in particular has blocked the way. In 2000 Sen. Charles Schumer, D-N.Y., introduced an amendment that would bar anti-abortion protesters from filing for bankruptcy protection to evade court-ordered judgments and fines. In January 2004, the House approved the bankruptcy bill without that amendment. Senate Democrats, however, refused to consider the redacted version, so the bankruptcy legislation never made it to the floor in that chamber last year. In 2005, the House is again expected to clear bankruptcy legislation. In the Senate, the bill no longer must contend with former Minority Leader Thomas Daschle, who opposed the measure but who lost his bid for re-election from South Dakota in November. Daschle’s replacement, Sen. Harry Reid, D-Nev., has previously voted for the bill. As Senate Minority Leader, however, “He may have to take a different view,” Gerdano said. “He may want to protect his members who want to add amendments.” As it stands, the bill primarily addresses debtor conduct, while Democratic amendments aim to change lender practices. There has been talk through the years that portions of the bankruptcy bill would be carved out and passed as separate pieces of legislation. That has not occurred. For instance, efforts have failed to get more bankruptcy judges appointed. The House Judiciary Committee slashed 36 proposed bankruptcy judgeships from separate legislation it was considering in September. The original bill included four bankruptcy judges for the U.S. Bankruptcy Court for the District of Delaware — the most for any jurisdiction — and two for the U.S. Bankruptcy Court for the Southern District of New York in Manhattan. The three dozen bench positions were initially part of the Bankruptcy Judgeship Act of 2003, which Sen. Joseph Biden, D-Del., managed to keep alive by inserting in a general judgeship bill for all federal courts. Once the combined bill was passed on to the House Judiciary Committee, however, the judges’ provision was axed. Lawmakers, meanwhile, let expire the only temporary provision of the bankruptcy code, Chapter 12, which allows farmers to reorganize debt. Yet they quickly revived it, passing a new bill to continue Chapter 12 until June 30, 2005. Republicans hope the pending expiration of the farm legislation in five months will add extra impetus to pass overall bankruptcy reform. Some observers aren’t getting their hopes up. Lawrence Ausubel, professor of economics at the University of Maryland who has testified before Congress as an expert on bankruptcy matters, would not speculate regarding the prospects for bankruptcy legislation this session. After eight years, he said, “you just run out of energy.” Copyright �2005 TDD, LLC. All rights reserved.

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