Administration speaks out on homestead exemption

WASHINGTON-The Office of Management and Budget (OMB) penned a letter August 1 on behalf of the president warning that the White House prefers the House language regarding the homestead exemption to the more restrictive Senate version. The letter noted, “consideration of the Administration’s views would be appreciated.” “The Administration supports the overall goal of the bankruptcy reform legislation. The commonsense reforms in these bills will curb many of the abuses of the current bankruptcy laws,” the letter signed by OMB Director Mitchell Daniels, Jr. read. “However, the Administration strongly opposes the Senate-passed language regarding the homestead exemption and strongly urges the conferees to return to the bipartisan compromise language that was adopted by the last Congress.” This is the most definitive statement from the White House to date on its support for bankruptcy reform. Lobbyists are encouraged that the administration has not uttered the dreaded term veto. While credit union lobbyists are keeping an eye on the situation, they do not expect President George W. Bush to veto the bankruptcy reform legislation based on his objections to the homestead provision. Daniel’s letter concluded, “The Administration looks forward to working with the conferees to resolve these and any other outstanding issues and secure passage of the bankruptcy reform legislation.” Texas, Bush’s home state, is one of five states that does not set a cap on homestead exemption under current bankruptcy law. The other states are Florida, Iowa, Kansas, and South Dakota. The House and Senate bills require debtors to have owned a residence for two years before filing bankruptcy to protect their home from being liquidated during the bankruptcy procedures. However, the Senate bill caps the homestead exemptions at $125,000, while the House bill does not create a limit. The homestead exemption is intended to prevent wealthy bankruptcy filers from concealing their assets in a home. Informal conferences between conferee staffers are expected to take place during the August recess. Credit union lobbyists are confident that most of the details will be worked out in this time. When the conferees return from their districts, the homestead provision is expected to be one of two contentious issues facing them. The other controversial issue is a provision to prevent persons convicted of committing violent acts against clinics from escaping their crime-related fines by filing for bankruptcy. Last year, President Bill Clinton pocket vetoed the bankruptcy reform legislation following a lame duck congressional session. According to the Clinton administration, the legislation was too pro-industry. Proponents of the bankruptcy reform legislation have been optimistic this year with a Republican White House. The bill has been a hot button topic in Congress for the past four sessions. Credit unions have been particularly interested in three provisions, including the means test, mandatory financial education for bankruptcy filers, and voluntary reaffirmations for credit union members. None of these portions are expected to change during the conference. [email protected]