Bankruptcy Reform Bill Clears Homestead Exemption Hurdle
by Robin Ronquillo De Leo*
The partisan discord regarding the homestead exemption, which many believed would forever doom the passage of the Bankruptcy Reform Bill, has recently been resolved. Under current law, the Bankruptcy Code allows a debtor to rely upon state law exemptions in order to protect certain assets from his or her bankruptcy estate. Five states, Texas, Florida, South Dakota, Iowa and Kansas, have an unlimited homestead exemption, allowing debtors in those states to shield all home equity from their bankruptcy estate. Under the agreement approved by the bankruptcy committee in its April 23, 2002 meeting, the Bankruptcy Reform Bill would cap the homestead exemption in certain situations and would enact a 40‑month residency requirement aimed at stopping debtors from shielding assets and filing for bankruptcy protection in states with an unlimited homestead.
Sole Remaining Issue
The last controversial issue stopping passage of the Bankruptcy Reform Bill is continued disagreement as to the discharge of debts incurred as a result of violence targeted at abortion clinics. Although no further meeting date has been scheduled at this time, the bankruptcy committee staff has been instructed to continue working on resolution of this remaining issue.
Truth in Lending Amendments Included
In addition to the reform of bankruptcy laws, the Bankruptcy Reform Bill contains numerous amendments to the federal Truth in Lending Act, affecting disclosures applicable to open‑end credit and credit extensions secured by a dwelling.
If the Bankruptcy Reform Bill passes, it will be effective 180 days following passage.
If you would like more information regarding the proposed bill or the included Truth in Lending Act amendments, or if we can be of any other assistance with your consumer bankruptcy or compliance activities, please do not hesitate to call us.
*Robin serves as of counsel to Dreher Tomkies LLP in our New Orleans area office. She can be reached directly at 985-727-1664