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Federal lawmakers passed a law more than a decade ago that required more people in bankruptcy to pay off some debt before getting a fresh start. However, some consumer advocates say that the rule has disproportionately squeezed money from disabled veterans, retired people and the unemployed, who have had to dip into pensions and public-assistance income to pay back debt through a much more arduous bankruptcy process, WSJ Pro Bankruptcy reported. Lawmakers held a hearing yesterday on a proposal that would change one piece of the 2005 rule by enabling more veterans to keep disability payments and get through bankruptcy faster. “There’s been long-simmering frustration over this — that veterans or state pension employees or railroad workers are treated worse than other people,” said Edward Boltz, a North Carolina lawyer and a member of ABI's Commission on Consumer Bankruptcy. More than 80 percent of teachers and other government workers in Ohio, Massachusetts and Nevada, for example, work in positions that draw public-pension money for retirement compensation instead of Social Security payments. Retired railroad workers receive money from a separate government agency. The rule also affects the country’s disabled military veterans, whose payments from the Department of Veterans Affairs and Defense Department are more likely to be diverted to pay creditors if they file for bankruptcy protection. A 2017 study found that veterans — a group that faces higher rates of homelessness, mental health problems and debt from medical expenses deriving from combat-related injuries — are twice as likely to file for bankruptcy protection. Read more.

The House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law hearing yesterday titled "Oversight of Bankruptcy Law and Legislative Proposals" featured a number of ABI members speaking on key legislation and issues. Robert J. Keach of Bernstein Shur (Portland, Maine), a former ABI President and co-chair of the ABI Commission to Study the Reform of Chapter 11, testified on ABI's behalf. The following were the legislation and issues that were discussed:

- The Small Business Reorganization Act (S. 1091, H.R. 3311) takes into account recommendations from ABI's Chapter 11 Commission to remove barriers to bankruptcy for financially struggling small and medium-sized businesses.

- The Family Farmer Relief Act of 2019 (H.R. 2236; S. 897) is supported by ABI to raise the debt cap to $10 million for family farmers seeking chapter 12 protection.

- Honoring American Veterans in Extreme Need Act of 2019 (HAVEN Act) (H.R. 2938; S. 679) would exclude VA and DoD disability payments from the monthly income calculation used for bankruptcy means testing. The law currently allows Social Security benefits to be excluded from the calculation, but not veterans disability payments. ABI's Veterans’ Affairs Task Force member Holly Petraeus testified before the subcommittee.

- Puerto Rico Recovery Accuracy in Disclosures Act of 2019 (PRRADA) (H.R. 683; S. 1675) would impose certain requirements on the payment of compensation to professional persons employed in voluntary cases commenced under PROMESA.

- The subcommittee will also be looking at the issue of student loan debt treatment in bankruptcy, which was the subject of the first set of reform recommendations in the Final Report of the ABI Commission on Consumer Bankruptcy. Commissioners Prof. Dalié Jiménez of the UC Irvine School of Law, John Rao of the National Consumer Law Center and Ed Boltz of the Law Offices of John T. Orcutt, P.C. (Durham, N.C.) testified on the issue.

To view an archived webstream and obtain prepared witness testimony, please click here. 

The House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law will hold a hearing today at 10 a.m. EDT titled "Oversight of Bankruptcy Law and Legislative Proposals." Robert J. Keach of Bernstein Shur (Portland, Maine), a former ABI President and co-chair of the ABI Commission to Study the Reform of Chapter 11, will testify on ABI's behalf. The hearing will examine a number of bills and priority issues important to business and consumer bankruptcy practice. Most of the bills enjoy bipartisan and bicameral support in Congress. The following are the legislation and issues to be discussed:

- The Small Business Reorganization Act (S. 1091, H.R. 3311) takes into account recommendations from ABI's Chapter 11 Commission to remove barriers to bankruptcy for financially struggling small and medium-sized businesses.

- The Family Farmer Relief Act of 2019 (H.R. 2236; S. 897) is supported by ABI to raise the debt cap to $10 million for family farmers seeking chapter 12 protection.

- Honoring American Veterans in Extreme Need Act of 2019 (HAVEN Act) (H.R. 2938; S. 679) would exclude VA and DoD disability payments from the monthly income calculation used for bankruptcy means testing. The law currently allows Social Security benefits to be excluded from the calculation, but not veterans disability payments. ABI's Veterans’ Affairs Task Force member Holly Petraeus is scheduled to testify.

- Puerto Rico Recovery Accuracy in Disclosures Act of 2019 (PRRADA) (H.R. 683; S. 1675) would impose certain requirements on the payment of compensation to professional persons employed in voluntary cases commenced under PROMESA.

- The subcommittee will also be looking at the issue of student loan debt treatment in bankruptcy, which was the subject of the first set of reform recommendations in the Final Report of the ABI Commission on Consumer Bankruptcy. Commissioners Prof. Dalié Jiménez of the UC Irvine School of Law and Ed Boltz of the Law Offices of John T. Orcutt, P.C. (Durham, N.C.) will be testifying on the issue.

To watch via live webstream and obtain witness testimony, please click here.