One of the only good provisions of the bad Bankruptcy Reform legislation — the anti-forum shopping provision for business bankruptcies — was pulled out of the Senate bill yesterday in what appears to be a political deal between Texas Senator John Cornyn and Delaware Senator Joseph Biden to protect Texas’ liberal homestead exemption law and Delaware’s favored nation status for business bankruptcies.
This proposed legislation is the quintessential example of poorly-concieved special interest legislation. Outside of the credit card industry, there is no meaningful public support for these proposed reforms of the U.S. Bankruptcy Code, which is the preferred model for emerging countries to use in establishing their own insolvency and business reorganization systems. A radical overhaul of such a successful system is not only unnecessary, but unwise.
However, the credit card industry has contributed large amounts of cash to the campaign war chests of many Republican legislators, and the industry is now expecting a return on that investment in the form of this bad legislation. Remember that next time you are considering a vote for either Mr. Cornyn or Kay Bailey Hutchison, both of whom are supporting this abomination despite an extraordinary number of appeals to them from experts and professionals in the insolvency and reorganization field to do the right thing and reject this legislation.