Thursday, August 28, 2008

Prospects for Amendments to BAPCPA Under an Obama-Biden Administration

by Andrew Toth-Fejel, Bankruptcy Litigation Support for Attorneys:

Bankruptcy legislation is not usually fodder for Presidential campaigns. But this has been in so many respects an unusual campaign, and so proposed amendments to bankruptcy law have made it to the campaign trail.

On one hand, in his website John McCain refers to his vote at the time of BAPCPA in support of military personnel, but nowhere in this website does he propose any future bankruptcy legislation. In contrast in Barack Obama's website one of his 10 key bullet-points on the Economy is "Reform Bankruptcy Laws." He proposes amending bankruptcy law to allow modifications of mortgages, and to create some kind of streamlined medical bankruptcy.

More dramatically, a few weeks ago Obama gave an entire speech (even if it was only 15-mintutes long) focusing primarily on bankruptcy reform proposals, one to "fast-track" bankruptcies for military families and disaster victims by exempting them from the means test and from credit counseling, another to provide seniors a larger federal homestead exemption.

But that was a few weeks ago. Now Obama has chosen as his vice-presidential nominee the person who was probably the most ardent and public Democratic supporter of BAPCPA. Not only did Joe Biden vote for BAPCPA while Obama voted against it, they voted on the opposite side of virtually every one of the numerous amendments voted on before the final bill was passed. AND Biden's votes on virtually all these amendments matched John McCain's.votes. This leaves us with the rather unusual situation that the two major political differences of the last 5 years between these presidential and vice-presidential nominees are BAPCPA and the Iraq war (which Biden originally supported and then became one of its most vigorous opponents).

Some bankruptcy observers are saying that Biden's ascension to the ticket makes BANCAP amendment less likely, regardless what's on Obama's website or in his populist speeches. They point to the fact that MBNA and its employees have as a group been Biden's largest campaign contributors over the years, and that one of his sons has worked as a consultant for MBNA. (See this bankruptcy attorney's blog and an Associated Press story of 8/26/08.)

Perhaps a more realistic view turns on broader economic and political developments in the next few months. IF Obama-Biden win in November, and especially IF there are some Democratic gains, as is generally expected, in both the House and the Senate, there will be tremendous political pressure on the Democrats to address the foreclosure and other economic problems. The new Housing and Economic Recovery Act's $300 billion voluntary program to refinance troubled mortgages begins being implemented on October 1, 2008, with much speculation about whether it will indeed help 400,000 households as was projected. If this program, and the other components of the Act, are successful, together with all the other forces on the real estate and financial sectors, at significantly improving the foreclosure and general economic situation, there may be less pressure to act. Given that this is just a few months from now, a greatly improved outlook seems doubtful. More likely BANCAP reform of some sort would be part of their "first 100 days" plan.

by Andrew Toth-Fejel, Bankruptcy Litigation Support for Attorneys,

© 2008 Bankruptcy Litigation Support for Attorneys