By Peter Feltman and Paula Cruickshank, CCH Washington Staff Writers

President Clinton pocket vetoed the Bankruptcy Reform Act of 2000 (HR 2415), choosing not to return the measure to Congress on the final date for presidential action on December 19, 2000, White House Press Secretary Jake Siewert confirmed.

Siewert, at a press briefing, said that Clinton would not sign the bankruptcy measure because the administration believes it failed to strike the necessary balance, "punish(ing) some debtors and not others." Administration officials have contended that the measure would not treat middle- and lower-income creditors the same as wealthy debtors, who would be able to shield certain assets.

The reform bill would have revised existing law concerning the types of bankruptcy a person can file. It also set conditions for who may file for Chapter 7 and Chapter 13 bankruptcy. Section VII of the legislation addressed an individual's tax obligations after filing for bankruptcy. The bill also stated that, if a debtor fails to file a tax return in a timely fashion, or fails to seek an extension, a taxing authority may petition the court to convert or dismiss a case, whichever is in the best interests of the creditors and the bankruptcy estate.

Administration officials say the bill was rejected because it would continue to allow the "homestead" exemption where bankruptcy filers can keep their mansions in certain states; and because it failed to prevent abortion clinic blockaders from escaping monetary penalties through bankruptcy. However, Clinton did praise the bill's added credit card disclosures.

The President's concerns were outlined in a "Memorandum of Disapproval" issued by the White House on December 19. Since Congress was out of session, the President's failure to either sign or to formally return the bill to Congress kills the bill, under what is known as a pocket veto.

The President decried that fact that the version sent to him by Congress failed to contain a homestead compromise worked out by White House and Congress. "[t]he current bill's unlimited homestead exemptions allow debtors who own lavish homes to shield their mansions from their creditors, while moderate-income debtors, especially those who rent, must live frugally under rigid repayment plans for 5 to 7 years," the memorandum states.

The vetoed bill would have allowed state homestead exemptions if the home was owned for two years before the bankruptcy filing. Some states, such as Florida and Texas, protect the homes of bankruptcy filers.

"Moreover, I have made clear that bankruptcy legislation must require accountability and responsibility from those who unlawfully bar access to legal health services," the memorandum continues. While the Senate version of the bill contained a clause to prevent abortion clinic blockers from using the bankruptcy code to avoid fines, the final version sent to the White House did not contain this provision.

The President did praise the bill's added credit card disclosures, but said they did not outweigh the negatives of the bill. The bill would have amended the Truth in Lending Act to provide more disclosure on the effects of minimum payments, introductory rates, the tax consequences of loans secured by homes, and late penalties.

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