Legislative Reforms Affecting Bankruptcy: Congressional Bankruptcy Reform and Revised UCC Article 9

By: E. Lee Morris (Co-author)
Presented at Bankruptcy: A Creditor's Perspective in Texas, Lorman Educational Services
October 2001

I. Introduction

A. Overview

Over the past several years, two major legislative efforts have been underway which will have a significant impact on bankruptcy proceedings: reform of the Bankruptcy Code, itself, and the promulgation of revised Article 9 of the Uniform Commercial Code ("Revised Article 9").  Both legislative fronts are largely geared towards providing creditors more protection and certainty in the context of bankruptcy proceedings, as well as a greater potential for recovery.  As of the date of preparation of this paper, Congressional reform of the Bankruptcy Code remains pending and somewhat uncertain due to certain differences in the bills passed by the House of Representatives and Senate and the informal threat of a veto by the President.  With respect to Revised Article 9, on the other hand, all of the states and the District Court of Columbia have now adopted the revisions, subject to relatively minor non-conforming amendments.  Accordingly, this paper first addresses the status of pending Bankruptcy Code reform, highlighting key aspects of the bills which are pending.  Thereafter, this paper highlights the changes effectuated through multi-state adoption of Revised Article 9.

The background, rationale for, and implications of both legislative efforts could easily consume a multi-volume treatise.  While this paper attempts to provide basic insight into such areas, for obvious practical reasons, it is by no means intended to be an exhaustive dissertation.  The primary objective of the authors is to highlight those aspects of the legislation of which bankruptcy practitioners, financial consultants, and business managers should be generally aware in order to prepare for and fully appreciate the changes which are likely to be encountered under such legislation.

B. Historical Considerations

Before turning to the two separate legislative packages, themselves, it is appropriate to begin with the backdrop of the legislative tensions which have historically existed in relation to the discharge of debt, bankruptcy distributional policies, and secured creditor rights.

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