WASHINGTON — The U.S. Senate on Thursday passed legislation sought by department stores and credit card companies that would overhaul bankruptcy laws for the first time in 27 years. The measure is likely to be approved by the House, and President Bush has promised to sign it.
The legislation requires more people filing for bankruptcy to repay at least a portion of their debt. It creates an income-based test that excludes living expenses, but includes child support in determining an individual’s ability to repay. The test would generally bar from Chapter 7 a debtor whose adjusted monthly income is more than 25 percent of their unsecured claims or $6,000, whichever is greater. Thousands of bankruptcy filers are expected to be affected.
The measure, which passed 74 to 25, also had some benefits for shopping mall owners and was criticized by some Democrats and consumer advocates. It would take effect six months after being signed by the President.
“Some of these bankruptcies have been occurring among those who clearly have an ability to repay,” said Katherine Lugar, the National Retail Federation’s vice president of legislative and political affairs.
Lugar said merchants pass along the cost of absorbing bad debt at the rate of $550 a year per household. The number of people seeking to wipe out debts in bankruptcy has more than doubled to 1.6 million a year in the last 10 years.
“There has been an explosion of bankruptcies,” said Sen. Charles Grassley (R., Iowa), the bill’s key sponsor.
Opponents said the number of new personal bankruptcy filings declined slightly last year, and about half of those filing continue to be saddled by health care bills. They also said multiple and compounding credit card fees for late or delinquent payments were central to bankruptcy filings by lower and middle-income people. Sen. Edward Kennedy (D., Mass.), derided the bill for its “entire lack of balance and fairness.”
The measure benefits merchants by increasing the limit on purchases of luxury goods or services that can be shielded in bankruptcy. The bill would also make it easier for retailers to approach debtors in bankruptcy with so-called reaffirmation agreements that allow them to keep merchandise bought on credit by renegotiating payment schedules.The bankruptcy rule changes might crimp the plans of retailers who themselves file for protection from their creditors. The measure sets a 120-day deadline for bankrupt tenants in shopping malls to decide whether they will terminate their lease, and it can be extended one time for 90 days. While tenants now have 60 days to decide about their store occupancy plans, a judge may extend the period indefinitely.
“This provision makes it more difficult to determine whether a reorganization plan is going to work,” said Mallory Duncan, the NRF’s senior vice president and general counsel.
Shopping mall owners argued a more defined period for a retailer to decide whether to abandon a lease was needed. Another shopping mall provision in the bill would bar a retailer in bankruptcy from subletting a space to a tenant that doesn’t match the mix of tenants in a center.
House Majority Leader Tom DeLay (R., Tex.) has said the bill will be quickly decided in the House, where passage is considered certain.
Bush said in a statement that he will sign the bill, which would mark his second legislative victory of his second term after a measure passed last month making it more difficult to bring class action lawsuits.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty