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Chairman Nadler Statement for the Markup of H.R. 8366, the Protecting Homeowners in Bankruptcy Act of 2020

Washington, September 29, 2020

Washington, D.C. – Today, House Judiciary Committee Chairman Jerrold Nadler (D-NY) delivered the following opening remarks, as prepared, during the markup of H.R. 8366, the Protecting Homeowners in Bankruptcy Act of 2020: 

"H.R. 8366, the 'Protecting Homeowners in Bankruptcy Act of 2020,' would increase the amount of home equity that homeowners and their families can protect from creditors when they are forced into bankruptcy.  This simple, but important change, would help people stay in their homes while they engage in the hard work of emerging from financial distress.

"If there is one foundational principle of American bankruptcy law, it is the promise of the 'fresh start.'  As the Supreme Court has repeatedly explained, a central purpose of the Bankruptcy Code is to provide a procedure by which “honest but unfortunate debtors can reorder their affairs, make peace with their creditors, and enjoy a new opportunity in life with a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”

"The fresh start is a quintessentially American idea.  It is the promise that even when your best efforts have failed, you will have a chance to get back up and try again.  It is the promise that your debts will not destroy you. 

"We all benefit from the fresh start that bankruptcy provides.  When it works as intended, it boosts economic growth, reduces unemployment, and encourages innovation and entrepreneurship.

"Unfortunately, the Bankruptcy Code does not always provide the fresh start it is supposed to deliver.  In order to make this second chance meaningful, the Bankruptcy Code allows debtors to protect certain assets from creditors by exempting them from the bankruptcy process.

"These exemptions are meant to ensure that people emerge from bankruptcy with the basic necessities of life and the means to support themselves and their families.

"The federal 'homestead' exemption is supposed to support the fresh start by allowing a debtor to protect a certain amount of the equity they have put into their home.  This provision embodies a long-standing tradition in American law that a family’s home should be protected from creditors in order to preserve the family’s wellbeing and to promote a fresh start.  

"But the exemption has not been amended since 1978, when it placed just $15,000 of home equity off limits to creditors.  Even after indexing for inflation, as provided under the law, today the homestead exemption only protects roughly $25,000 of home equity. 

"That amount is far too low.  Today, the nationwide median sales price of a home is $330,000.  The median cost of a new single-wide mobile home stands at $51,000.  But the current exemption protects just $25,000.  If the homestead exemption is supposed to keep people in their homes, it has failed.

"Against this backdrop, H.R. 8366 is a step in the right direction.  It would increase the federal homestead exemption to $100,000.  It would allow states to use their own, more generous homestead exemptions, as many already do.  But it would ensure that, at the very least, people will be able to protect a meaningful amount of the equity that they have put into their homes. 

"One might ask why the number isn’t higher—why, for example, H.R. 8366 does not protect the whole $330,000 it might take to buy a home today.  There are certainly compelling arguments for doing so.  Texas and Florida, for example, have unlimited homestead exemptions.  

"This bill attempts to strike a balance between allowing states the flexibility to provide more generous exemptions and ensuring that, at the very least, the federal homestead exemption will help lower income Americans stay in their homes and will ensure that more families will have enough equity for a new home. 

"This bill is especially important now, with so many Americans reeling from the economic fallout of the ongoing pandemic.  At a time when remaining in one’s home can be a matter of life or death, the importance of the homestead exemption in providing a meaningful fresh start is as clear as ever.  

"I thank my colleague, the Gentlelady from Pennsylvania, Ms. Dean, for championing this bill, and I urge all Members to support H.R. 8366."
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