U.S. bankruptcy laws were last overhauled in 2005. Will another wave of reform occur during President Obama’s second term? Perhaps.
Some Groups Already Planning for Bankruptcy Reform
Two groups are already looking at how bankruptcy laws and rules can be updated:
- The American Bankruptcy Institute, which is a trade group for bankruptcy attorneys and other professionals, has assembled a group called the “Commission to Study the Reform of Chapter 11.” By April 2014 the Commission expects to make recommendations to Congress for overhauling Chapter 11 bankruptcy, which is generally used by businesses as well as individual debtors who don’t qualify for Chapter 13 bankruptcy.
- The U.S. Supreme Court has an Advisory Committee on Bankruptcy Rules. The committee, which includes practice lawyers, judges and law professors, recommends to the U.S. Supreme Court changes to the federal bankruptcy laws. The Supreme Court takes those recommendations under advisement and can accept or reject them. (If Congress acts simultaneously on the same issue, then Congress’ changes would override the Court’s changes.)
Will Congress Act?
Some experts predict that Congress will drive bankruptcy reform during Obama’s second term.
In January 2013, Senators Dick Durbin (D-Ill.), Sheldon Whitehouse (D-R.I.) and Jack Reed (D-Ill.) introduced the Fairness for Struggling Students Act of 2013, which—if passed—would allow private student loans to be discharged in bankruptcy. At the time this article was written, the legislation had been referred to the Committee on the Judiciary.
Others expect newly elected Senator Elizabeth Warren (D-Mass.) to lead the effort toward more consumer friendly bankruptcy laws. Warren, who previously worked as a Harvard University bankruptcy law professor, is a strong consumer advocate. Since being sworn into the Senate in January 2013, she has been appointed to the Senate Banking Committee.