| Christopher Lee: Lawmakers plan to fight bankruptcy reform bill Bush has opposed ending Texas' homestead exemption 04/08/2001 By Christopher Lee / The Dallas Morning News
WASHINGTON – Texas members of Congress are facing a familiar legislative problem, but with a new twist.
For the third time in four years, Congress is moving a bankruptcy reform bill that would do away with Texas' unlimited homestead exemption. That's the 130-year-old provision in the state Constitution that says creditors can't take your home even if you can't pay your debts.
The twist is that this year a Texan is in the White House. And unless the Texas delegation comes to his rescue, President Bush could have to choose between vetoing a bill supported by business and signing one that is unpopular with home state residents.
"It's fair to characterize it as a provision that would certainly gain his attention," said Kevin Washington, spokesman for House Majority Leader Dick Armey, R-Flower Mound.
Mr. Armey, Sen. Kay Bailey Hutchison, R-Texas, and Rep. Ken Bentsen, D-Houston, are among the lawmakers trying to turn the bill back into something that Texans can swallow.
"I'm going to use every parliamentary procedure that is available to me to try to uphold the Texas Constitution," Ms. Hutchison said. "I plan to take the strongest stand possible to ensure that we prevail."
Here is what started all this:
Last month, the Senate overwhelmingly approved a bill that would overhaul the nation's century-old bankruptcy laws and make it more difficult for Americans to avoid bill collectors. The legislation was backed by banks, credit card companies and other businesses that get stuck holding the bag when their customers file for personal bankruptcy.
The bill was amended to cap the homestead exemption at $125,000. That hurts Texas and four other states – Florida, Iowa, Kansas and South Dakota – that have unlimited homestead exemptions.
Proponents said the cap protected most middle-class homeowners from creditors while preventing wealthy people from sinking their money into expensive houses to avoid paying big debts.
A similar bill had passed the House with a key difference.
The House bill said that anyone who owned a home in Texas for more than two years before filing for bankruptcy, or who moved from one home in Texas to another, could protect their home from creditors, whatever it is worth. But a debtor who purchases a Texas home within that two-year window can shield no more than $100,000 from the bill collectors. (The same applies in the other states with unlimited homestead exemptions.)
Texas members of Congress said the House version was a compromise they could live with, and they are unhappy that the Senate stripped it out.
"It is unacceptable for the federal government to infringe on the rights of homeowners in Texas or any other state," Mr. Bentsen said.
He sent a letter to Mr. Bush urging him to veto the bill if it reaches his desk with the Senate language unchanged. Fifteen Texas Democrats and seven Texas Republicans signed the letter.
A Bush spokesman said the president was hoping for a compromise.
As governor, Mr. Bush strongly objected when the House passed similar legislation in 1998, calling it "a clear violation of states' rights." That bill never made it to President Clinton.
Mr. Clinton, who said it was too hard on borrowers, vetoed a nearly identical bankruptcy bill last year. It contained a two-year residency requirement for Texans similar to this year's House bill.
Because the House and Senate must reconcile differences in the two versions of this bill before sending it to the president, there is hope for the homestead exemption, Texas members said.
"It will go to a conference, in my opinion, and we will work it out," said Sen. Phil Gramm, R-Texas, who voted for the Senate version but wanted to restore the homestead exemption.
Ms. Hutchison said she voted against the Senate bill, which she generally supports, to demonstrate the importance of the homestead exemption.
Mr. Armey said he was involved in negotiations with the Senate to change the bill before each house votes on a final version.
"You can clearly say, without any doubt, that the Senate provisions on the homestead exemption are simply not acceptable in the House," Mr. Armey said. "The bill will never pass the House."
Christopher Lee covers Congress and the Texas delegation for The Dallas Morning News.
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