A Ken Lay protection act?
From the Journal Sentinel
Last Updated: April 21, 2002
Enron is the poster boy for so many things these days that
invoking its corporate name in association with bankruptcy
seems uncreative and almost pedestrian., But consider this:
If one piece of a bankruptcy bill now in a Washington
conference committee passes the way House members
want, some Enron executives could file for bankruptcy
protection and still shield a considerable fortune. There is
an opportunity to stop this robbery, but only if Sen. Herb
Kohl (D-Wis.) prevails in a critical vote on Tuesday.
The wrinkle here is something called the homestead
exemption. Because America places a high value on home
ownership, special protections have been given in personal
bankruptcies to the petitioner's primary residence. In
Wisconsin, for example, creditors cannot touch an
individual's equity in a house, up to a cap of $40,000. But
five states, including Texas, where Enron is headquartered,
do not have a cap on their homestead exemption. In Texas,
the house need not even be the primary residence: The
owner could rent the dwelling and live somewhere else.
If former Enron CEO Kenneth Lay were to file for bankruptcy
- and his wife has suggested the possibility - he could
protect from creditors the 13,000-square-foot penthouse he
maintains in Houston. Estimated value: $7.1 million.
In the Senate version of bankruptcy legislation, Kohl pushed
through an amendment that would cap the homestead
exemption at $125,000 of equity. He has since said that he
would raise the ceiling to $175,000 if that's what it took to
sway opponents. The House, in contrast, would establish a
cap of $100,000 - but only on homes purchased within 30
months of a bankruptcy filing.
Rep. F. James Sensenbrenner (R-Wis.), who happens to be
the chairman of the conference committee, favors the House
version. But the House proposal would leave Lay's Houston
penthouse outside the reach of creditors, and it might even
be an incentive for those considering personal bankruptcy to
string out creditors until the 30-month restriction elapses.
Article 1 of the U.S. Constitution establishes Congress' right
to enact "uniform laws on the subject of bankruptcies
throughout the United States. . . . " It is now up to the
current Congress to enact not only a uniform law on a
homestead exemption, but to enact one that does not permit
the kinds of abuses that have occurred in Texas, Florida and
other states with no caps.
Wisconsin's junior senator, Democrat Russ Feingold, who
also serves on the conference committee, understands this
and backs Kohl's position. Sensenbrenner should, too. You
can contact Sensenbrenner by e-mail at
sensen09@mail.house.gov or by phone at (202) 225-5101.
Appeared in the Milwaukee Journal Sentinel on April 22,
jsonline.com. |
