[Congressional Record Volume 140, Number 44 (Wednesday, April 20, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]
[Congressional Record: April 20, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]
BANKRUPTCY AMENDMENTS ACT OF 1993
The Senate continued with the consideration of the bill.
Mr. HEFLIN addressed the Chair.
The PRESIDING OFFICER. The Senator from Alabama is recognized.
Amendment No. 1633
(Purpose: To amend section 524 of title 11, United States Code, to
authorize the issuance of supplemental injunctions)
Mr. HEFLIN. Mr. President, I send an amendment to the desk on behalf
of Senator Brown and ask for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Alabama [Mr. Heflin], for Mr. Brown, for
himself and Mr. Graham, proposes an amendment numbered 1633.
Mr. HEFLIN. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
On page 211, after line 21 insert the following:
SEC. 222. SUPPLEMENTAL INJUNCTIONS.
Section 524 of title 11, United States Code, is amended by
adding at the end the following new subsection:
``(g)(1)(A) After notice and hearing, a court that enters
an order confirming a plan of reorganization under chapter 11
may issue an injunction to supplement the injunctive effect
of a discharge under this section.
``(B) An injunction may be issued under subparagraph (A) to
enjoin persons and governmental units from taking legal
action for the purpose of directly or indirectly collecting,
recovering, or receiving payment or recovery of, on, or with
respect to any claim or demand that, under a plan of
reorganization, is to be paid in whole or in part by a trust
described in paragraph (2)(B)(i), except such legal actions
as are expressly allowed by the injunction, the confirmation
order, or the plan of reorganization.
``(2)(A) If the requirements of subparagraph (B) are met at
any time, then, after entry of an injunction under paragraph
(1), any proceeding that involves the validity, application,
construction, or modification of the injunction or of this
subsection with respect to the injunction may be commenced
only in the district court in which the injunction was
entered, and such court shall have exclusive jurisdiction
over any such proceeding without regard to the amount in
controversy.
``(B) The requirements of this subparagraph are that--
``(i) the injunction is to be implemented in connection
with a trust that, pursuant to the plan of reorganization
``(I) is to assume the liabilities of a debtor which at the
time of entry of the order for relief has been named as a
defendant in personal injury, wrongful death, or property-
damage actions seeking recovery for damages allegedly caused
by the presence of, or exposure to, asbestos or asbestos-
containing products;
``(II) is to be funded in whole or in part by the
securities of 1 or more debtors involved in the plan of
reorganization and by the obligation of such debtor or
debtors to make future payments;
``(III) is to own, or by the exercise of rights granted
under the plan could own, a majority of the voting shares
of--
``(aa) each such debtor;
``(bb) the parent corporation of each such debtor; or
``(cc) a subsidy of each such debtor that is also a debtor;
and
``(IV) is to use its assets or income to pay claims and
demands; and
``(ii) the court, at any time pursuant to its authority
under the plan, over the trust, or otherwise, determines
that--
``(I) the debtor may be subject to substantial future
demands for payment arising out of the same or similar
conduct or events that gave rise to the claims that are
addressed by the injunction;
``(II) the actual amounts, numbers, and timing of such
future demands cannot be determined;
``(III) pursuit of such demands outside the procedures
prescribed by the plan may threaten the plan's purpose to
deal equitably with claims and future demands;
``(IV) as part of the process of seeking approval of the
plan of reorganization--
``(aa) the terms of the injunction proposed to be issued
under paragraph (1)(A), including any provisions barring
actions against third parties pursuant to paragraph (4)(A),
shall be set out in the plan of reorganization and in any
disclosure statement supporting the plan; and
``(bb) a separate class or classes of the claimants whose
claims are to be addressed by a trust described in clause (i)
is established and votes, by at least 75 percent of those
voting, in favor of the plan; and
``(V) pursuant to court orders or otherwise, the trust will
operate through mechanisms such as structured, periodic or
supplemental payments, pro rata distributions, matrices, or
periodic review of estimates of the numbers and values of
present claims and future demands or other comparable
alternates, that provide reasonable assurance that the trust
will value, and be in a financial position to pay, present
claims and future demands that involve similar claims in
substantially the same manner.
``(3)(A) If the requirements of paragraph (2)(B) are met
and the order approving the plan or reorganization was issued
or affirmed by the district court that has jurisdiction over
the reorganization proceedings, then after the time for
appeal of the order that issues or affirms the plan of
reorganization--
``(i) the injunction shall be valid and enforceable and may
not be revoked or modified by any court except through appeal
in accordance with paragraph (6);
``(ii) no entity that pursuant to the plan of
reorganization or thereafter becomes a direct or indirect
transferee of, or successor to any assets of, a debtor or
trust that is the subject of the injunction shall be liable
with respect to any claim or demand made against it by reason
of its becoming such a transferee or successor; and
``(iii) no entity that pursuant to the plan of
reorganization or thereafter makes a loan to such a debtor or
trust or to such a successor or transferee shall, by reason
of making the loan, be liable with respect to any claim or
demand made against it, nor shall any pledge of assets made
in connection with such a loan be upset or impaired for that
reason;
``(B) Subparagraph (A) shall not be construed to--
``(i) imply that an entity described in subparagraph (A)
(ii) or (iii) would, if this paragraph were not applicable,
have liability by reason of any of the acts described in
subparagraph (A);
``(ii) relieve any such entity of the duty to comply with,
or of liability under, any Federal or State law regarding the
making of a fraudulent conveyance in a transaction described
in subparagraph (A) (ii) or (iii); or
``(iii) relieve a debtor of the debtor's obligation to
comply with the terms of the plan of reorganization or affect
the power of the court to exercise its authority under
sections 1141 and 1142 to compel the debtor to do so.
``(4)(A)(i) Subject to subparagraph (B), an injunction
under paragraph (1) shall be valid and enforceable against
all persons and governmental units that it addresses.
``(ii) Notwithstanding section 524(e), such an injunction
may bar any action directed against a third party who--
``(I) is identifiable from the terms of the injunction (by
name or as part of an identifiable group); and
``(II) is alleged to be directly or indirectly liable for
the conduct of, claim against, or demands on the debtor.
``(B) With respect to a demand (including a demand directed
against a third party who is identifiable from the terms of
the injunction (either by name or as part of an identifiable
group) and who is alleged to be directly or indirectly liable
for the conduct of, claims against, or demands on the debtor)
that is made subsequent to the confirmation of a plan against
any person or entity that is the subject of an injunction
issued under paragraph (1), the injunction shall be valid and
enforceable if, as part of the proceedings leading to its
issuance, the court appointed a legal representative for the
purpose of protecting the rights of persons that might
subsequently assert such a demand.
``(5) In this subsection, the term `demand' means a demand
for payment, present or future, that--
``(A) was not a claim during the proceedings leading to the
confirmation of a plan of reorganization;
``(B) arises out of the same or similar conduct or events
that give rise to the claims addressed by the injunction
issued under paragraph (1); and
``(C) pursuant to the plan, is to be paid by a trust
described in paragraph (2)(B)(i).
``(6) Paragraph (3)(A)(i) does not bar an action taken by
or at the direction of an appellate court on appeal of an
injunction issued under paragraph (1) or of the order of
confirmation that relates to the injunction.
``(7) This subsection applies to an injunction of the
nature described in paragraph (1)(B) in effect, and any trust
of the nature described in paragraph (2)(B) in existence, on
or after the date of enactment of this subsection.
``(8) This subsection does not affect the operation of
section 1144 or the power of the district court to refer a
proceeding under section 157 of title 28 or any reference of
a proceeding made prior to the date of enactment of this
subsection.
``(9) Nothing in subsection (g) shall affect the court's
authority to issue an injunction (including an injunction
that requires claims and demands to be presented for payment
solely to a trust or any other type of court approved
settlement vehicle) which is entered pursuant to an order
approving a plan of reorganization.
``(10)(A) If, upon a motion by a representative appointed
by the court identified in paragraph (1)(A) to protect the
interests of persons with demands of the kind described in
paragraph (2)(B)(ii)(I) or on its own motion, the court
finds, as a result of enhanced credible estimating procedures
with respect of such demands, inequities in the distribution
process of a trust of the nature described in paragraph
(2)(B), the court shall have, in addition to the powers over
the trust that the court may lawfully exercise under
applicable nonbankruptcy law, plenary equitable power to
reform, restructure, or modify the trust, the procedures
under which it operates, or the timing, manner, and amount of
distributions to its beneficiaries and other rights of the
beneficiaries, giving special attention to cases presenting
exigent circumstances, as it shall determine to be fair,
just, and reasonable in light of the circumstances prevailing
at the time of reformation, restructure or modification.
``(B) Nothing in this paragraph shall be construed to grant
the court authority to modify or in any way alter the
debtor's obligation to comply with the terms of the plan of
reorganization.''.
Mr. BROWN. Mr. President, the proposed amendment would codify a
court's existing authority to issue a permanent injunction to channel
claims to an independent trust funded by the securities and future
earnings of the debtor. In plain English, this means that when an
asbestos-producing company goes into bankruptcy and is faced with
present and future asbestos-related claims, the bankruptcy court can
set up a trust to pay the victims. The underlying company funds the
trust with securities and the company remains viable. Thus, the company
continues to generate assets to pay claims today and into the future.
In essence, the reorganized company becomes the goose that lays the
golden egg by remaining a viable operation and maximizing the trust's
assets to pay claims.
Without a clear statement in the code of a court's authority to issue
such injunctions, the financial markets tend to discount the securities
of the reorganized debtor. This in turn diminishes the trust's assets
and its resources to pay victims. The amendment is intended to
eliminate that speculation so that the marketplace values the trust's
assets fairly.
This amendment is about growing the pie available to victims. The
result could be significant. In the case of one such trust, for
instance, every dollar increase in the value of the reorganized
company's stock translates to $96 million more for compensating
asbestos victims.
Some suggest that claimants should be able to sue the reorganized
debtor again. Such suits would fly in the face of the fundamental
rationale of chapter 11, that a reorganized debtor emerges from
bankruptcy free and clear other than the liability set by the plan.
Unfortunately, the very speculation that a claimant may be allowed to
sue the company hurts its ability to maximize the trust's assets to pay
victim's claims.
Essentially, this amendment means more money for the victims of
asbestos exposure. It also means added stability and job security for
the thousands of workers employed by reorganized companies. This
amendment is a good public policy in that it not only serves the
interest of reorganizing the debtor but in that it maximizes amount
existing and future asbestos claimants can recover.
Mr. GRAHAM. Mr. President, this legislation provides companies who
are seeking to fairly address the burden of thousands of current
asbestos injury claims and unknown future claims, and who are willing
to submit to the jurisdiction of the U.S. Bankruptcy Courts, a method
to pay their current asbestos claims and provide for equitable
treatment of future asbestos claims. It will preserve the going concern
value of those companies, thus providing a source of payment for those
future claims. The legislation recognizes the inherent equitable power
of the bankruptcy courts to provide for equitable treatment of all of a
debtor's creditors, including those having claims arising out of
asbestos products. This legislation also recognizes the bankruptcy
courts' injunctive powers to implement fair distribution of payments to
claimants. The amendment recognizes the need to provide an on-going
source of payment for future asbestos-products claims against a debtor
within the fabric of a centralized claims mechanism.
It is the uncertainty of the number and amount of these future
claims, and the need to implement a procedure that recognizes these
future claimants as creditors under the U.S. Bankruptcy Code, that
necessitates this amendment, as well as the need to provide some
assurance that funds will be available to pay future claims. To those
companies willing to submit to the stringent requirements in this
section designed to ensure that the interests of asbestos claimants are
protected, the bankruptcy courts' injunctive power will protect those
debtors and certain third parties, such as their insurers, from future
asbestos product litigation of the type which forced them into
bankruptcy in the first place.
Mr. President, upon the establishment of a trust to pay asbestos
claims, the bankruptcy court may enjoin claims against the debtor and
certain third parties alleged to be liable for the asbestos claims
against the debtor, channeling such claims to the trust for payment.
The section provides such trust and injunction be implemented only in a
case where the numerous safeguards are met. There must have been a
representative appointed to protect the interests of future claimants.
An affirmative vote of approval by a 75-percent supermajority of the
affected asbestos claimants must occur. There are still additional
procedural safeguards to ensure that a reorganized debtor, and the
trust created, in fact provide a meaningful and viable method of
payment of asbestos claims, including future claims. The trust's assets
and income are to be used to pay present and future claims. It is to be
funded in whole or in part by the securities of one or more debtors
involved in the plan of reorganization and by the obligation of such
debtor or debtors to make future payments. It is to own, or by the
exercise of rights granted under the plan could own, a majority of the
voting shares of the debtor or its parent or a subsidiary debtor.
A bankruptcy court that implements such a trust and the injunction
directing asbestos claims to the trust for payment must determine that
in fact the debtor will be subject to substantial future claims which
cannot then be determined as to amount, numbers and timing; that the
terms of the injunction are fully disclosed to those voting for the
plan and trust, and that the claimants affected by the trust vote by a
75-percent affirmative supermajority.
The bankruptcy court must also determine that the trust will operate
through mechanisms that provide reasonable assurance that it will value
and be in a financial position to pay present and future claims of a
similar nature in substantially the same way.
If all of the foregoing criteria more specifically set forth in the
amendment are met, the bankruptcy court may approve the plan and the
trust and may enjoin claims against the debtor and against certain
third parties identifiable from the injunction's terms, such as the
debtor's insurers. By providing a trust to pay claims and an injunction
channeling the present and future asbestos claims to that trust, the
debtor and third parties who are alleged to be liable for the asbestos
claims against the debtor will be encouraged to participate in a system
that will maximize the assets available to pay asbestos claims, present
and future, and provide for an equitable distribution and method of
payment.
Mr. HEFLIN. Mr. President companies faced with extensive asbestos or
other mass tort liability have a limited range of alternatives. Some
defendant companies choose to litigate claims individually. Other
parties have sought resolution of their present and future liability
through claim aggregation and mass settlements. Faced with liabilities
in excess of assets, others are forced to file for bankruptcy.
For companies forced to file bankruptcy any plan of reorganization
must contain a mechanism to address equitably the debtor's liability to
all creditors, including mass tort claims--both those whose injuries
are manifest and those who, although already exposed, will not manifest
any inquiry until sometime in the future. Without that mechanism,
liquidation may be inevitable and little or nothing would be left to
compensate future claimants.
To ensure that all latent disease claimants are compensated
equitably, bankruptcy courts have approved reorganization plans
providing for the establishment of a trust charged with the resolution
of both present and future claims and funded by the securities and
future earnings of the reorganized debtor. To that end, courts have
closed the door on any additional liability (over and above that
prescribed by the plan) for the reorganized debtor for the claims
covered by the trust.
The injunction legislation would codify a court's existing authority
to close that door by issuing a permanent injunction that channels
claims to an independent trust funded by the securities and future
earnings of the debtor. The reorganized company becomes the goose that
lays the golden egg by remaining a viable operation and maximizing the
trust's assets to pay claims.
The injunction provision is simply about growing the pie available to
pay victims. Without a clear statement in the code of a court's
authority to issue such injunctions, the financial markets tend to
discount the securities of the reorganized debtor. This in turn
diminishes the trust's resources to pay victims. The provision is
intended to eliminate that speculation so that the marketplace values
the trust's assets fairly.
The higher the value of the stock, the more value for the victim's
trust. In the case of one such trust, every dollar increase in the
value of the reorganized company's stock translates to $96 million more
for compensating asbestos victims.
Some parties have suggested that claimants should be able to sue the
reorganized debtor again. Such suits would fly in the face of the
fundamental rationale of chapter 11, that a reorganized debtor emerges
from bankruptcy free and clear other than the liability set by the
plan. Unfortunately, the very speculation that a claimant may be
allowed to sue the company hurts its ability to maximize the trust's
assets to pay claims.
Essentially, the provision means more money for the victims of
asbestos exposure or other mass torts. It also means added stability
and job security for the thousands of workers employed by the
reorganized companies.
Last Congress, the Senate approved this provision as part of a larger
bankruptcy bill passed 97 to 0. The injunction is supported by several
former asbestos manufacturers, the independent victims' trusts created
to pay claims, and the key members of the asbestos trial bar. Enactment
of this provision is critical to ensuring that a trust's assets and its
ability to pay victims are maximized.
Mr. President, this amendment has been agreed to on both sides, and
there is no objection to it, and I urge its adoption.
Mr. CAMPBELL. Mr. President, at the outset, I emphasize my support
for the Brown-Graham injunction amendment. A lot of work over many
months--years--has gone into the effort to fashion this compromise
between the bankrupt producers, plaintiffs, unions, and third party
nondebtors.
Upon reflection though, I ask if the procedure crafted here might
serve as a model for other producers confronted with the same claims
and issues and who have not sought protection under bankruptcy. As you
know, over 15 companies previously engaged in the production and
manufacture of asbestos and asbestos containing materials have filed
for bankruptcy. Few have emerged from that process, and a number have
completely gone out-of-business.
In those instances where other producers of such materials meet all
of the criteria contained in the amendment but have not filed under
chapter 11, perhaps a mechanism to reach a just, responsible, and
expeditious disposition of their pending liability while preserving the
viability of the former manufacturers could be established. Obviously
such a concept would also cover third tier companies which specified in
engineering designs, supervised the installation or actually conducted
the installation of such materials.
Would my colleague from Colorado be willing to support the
exploration of such a concept as this legislation moves through the
process and support the result in conference?
Mr. BROWN. I want to thank the Senator for his support of this effort
and for the amendment. Yes, I think the thought and effort that has
gone into fashioning this provision may well hold the essence of a
procedure that has relevance to other parties faced with the same
situations. If this procedure can serve as a model for other parties
without exigencies, pain, and dislocations of bankruptcy, I would join
with my colleague in encouraging and supporting such an effort and look
forward to the results.
The PRESIDING OFFICER. The question is on agreeing to the amendment.
The amendment (No. 1633) was agreed to.
Mr. HEFLIN. Mr. President, I move to reconsider the vote.
Mr. FORD. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
vote on amendment no. 1632
The PRESIDING OFFICER. Under the previous order, the Senate is taking
a recorded vote at 1:15 on the McCain amendment No. 1632.
The Clerk will call the roll.
The assistant legislative clerk called the roll.
Mr. FORD. I announce that the Senator from Ohio [Mr. Glenn] is
necessarily absent.
I further announce that the Senator from Alabama [Mr. Shelby] is
absent due to illness.
I also announce that the Senator from Michigan [Mr. Riegle] is absent
because of death in the family.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 44, nays 53, as follows:
[Rollcall Vote No. 94 Leg.]
YEAS--44
Bingaman
Boren
Boxer
Bradley
Brown
Bryan
Burns
Byrd
Chafee
Cohen
Conrad
Coverdell
Craig
D'Amato
Feingold
Feinstein
Gorton
Graham
Gramm
Grassley
Hatch
Hutchison
Kempthorne
Kennedy
Kerrey
Kerry
Kohl
Lautenberg
Lieberman
Mack
McCain
McConnell
Moynihan
Nickles
Pressler
Robb
Roth
Sarbanes
Sasser
Smith
Stevens
Warner
Wellstone
Wofford
NAYS--53
Akaka
Baucus
Bennett
Biden
Bond
Breaux
Bumpers
Campbell
Coats
Cochran
Danforth
Daschle
DeConcini
Dodd
Dole
Domenici
Dorgan
Durenberger
Exon
Faircloth
Ford
Gregg
Harkin
Hatfield
Heflin
Helms
Hollings
Inouye
Jeffords
Johnston
Kassebaum
Leahy
Levin
Lott
Lugar
Mathews
Metzenbaum
Mikulski
Mitchell
Moseley-Braun
Murkowski
Murray
Nunn
Packwood
Pell
Pryor
Reid
Rockefeller
Simon
Simpson
Specter
Thurmond
Wallop
NOT VOTING--3
Glenn
Riegle
Shelby
So the amendment (No. 1632) was rejected.
Mr. REID. Mr. President, I move to reconsider the vote by which the
amendment was rejected.
Mr. FORD. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. DeCONCINI addressed the Chair.
The PRESIDING OFFICER. The Chair recognizes the Senator from Arizona
[Mr. DeConcini].
Mr. DeCONCINI. May I make an inquiry of what the pending amendment
is?
The PRESIDING OFFICER. The committee reported substitute for the bill
is currently pending before the Senate.
Mr. DeCONCINI. Is it open for amendment?
The PRESIDING OFFICER. The Senator is correct.
Mr. DeCONCINI. Mr. President, I want to offer an amendment, but if
there is some agreement here, I would be glad to get in line.
The PRESIDING OFFICER. The Senator from Arizona has the floor.
Mr. DeCONCINI. Mr. President, I first want to compliment the Senator
from Alabama and the Senator from Iowa for getting this bill put
together. This is not an easy task by any means. I had a little bit to
do with this, having chaired that Judiciary Subcommittee prior to
Senator Heflin taking it over. I did a bankruptcy reform bill. It is a
hard, hard bill to get together and I appreciate the job he has done.
Amendment No. 1634
(Purpose: To provide additional trustee compensation)
Mr. DeCONCINI. Mr. President, I send an amendment to the desk and ask
for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Arizona [Mr. DeConcini], proposes an
amendment numbered 1634.
Mr. DeCONCINI. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
On page 160, insert between lines 6 and 7 the following new
section:
SEC. 116. ADDITIONAL TRUSTEE COMPENSATION.
Section 330(b) of title 11, United States Code, is
amended--
(1) by inserting ``(1)'' after ``(b)''; and
(2) by adding at the end thereof the following new
paragraph:
``(2) The Judicial Conference of the United States shall
prescribe additional fees of the same kind as prescribed
under section 1914(b) of title 28, to pay $15 to the trustee
serving in such case after such trustee's services are
rendered. Such $15 shall be paid in addition to the amount
paid under paragraph (1).''.
Mr. DeCONCINI. Mr. President, this amendment would increase the
compensation for chapter 7 private trustees by $15, but only in those
chapter 7 cases where there are no assets. The 1978 amendment to the
Bankruptcy Code placed the administrative role in bankruptcy cases in
the hands of private panel trustees. The U.S. Trustees Program is
responsible for supervising the private trustees.
There are over 1,700 chapter 7 panel trustees in this country. The
duties and responsibilities of panel trustees have grown considerably.
But the trustees' compensation has not kept pace. Trustee compensation
is fixed by statute. In cases where assets are recovered approximately
5 percent of the chapter 7 cases trustees receive a small percentage of
the assets distributed to the creditors.
S. 540 actually improves chapter 7 trustees' compensation in asset
cases by providing a sliding scale for payment based upon the amount
dispensed to creditors. S. 540, however, does not provide for an
increase in no-asset cases, which now accounts for 95 percent of the
chapter 7 cases.
What my amendment would do is increase the level of compensation for
the panel trustees $15, from $45 bringing it up to $60. I believe this
is a modest increase.
I understand the concern of the managers of the bill as to the cost
and where do we get the money to pay for the increase. Panel trustees
have not had an increase in 10 years, believe it or not, since 1984.
The panel trustees perform a wide variety of tasks in connection with
the bankrupt estate. They are responsible for establishing a case file,
attending statutory meetings of creditors, examining the debtors under
oath, answering creditors' inquiries, and filing reports with the
courts or U.S. trustee.
Trustees are responsible for filing tax returns for the estate, and
for paying taxes incurred by the estate. Private trustees also uncover
hidden or concealed assets.
Mr. President, $45 is not fair or adequate compensation to administer
a bankruptcy case. The National Association of Bankruptcy Trustees has
conducted a detailed survey of bankruptcy trustees covering various
issues, including trustee compensation, and of the approximate 110
responses, 79 percent stated they could not administer a no-asset case
for $45.
This amendment is needed to ensure that private trustees are
adequately and fairly compensated. It will also provide some incentives
for qualified individuals to serve as trustees. This in turn will help
improve the function of the bankruptcy process, which is the intent,
after all, of the underlying bill.
Concern has been raised about how to fund the $15 increase in
compensation. It will cost somewhere between $9.5 million and $10
million, and I have suggested a number of ways to the judicial
conference.
I first recommended increasing chapter 7 filing fees $15 to pay for
this raise. Currently the filing fee is $130; this would increase it to
$145. However the filing fee was raised $10 last year, so there is some
objection about raising it again so soon.
There are other ways to raise the necessary funds. An attorney
admission fee, or practice fee for attorneys practicing in the
bankruptcy court, could be imposed. I do not see any problem with user
fees for those who use the courts, in this case bankruptcy lawyers.
Chapter 11 maintenance fees could be slightly increased. Xeroxing
charges could be increased, or modest increases in other existing fees
may raise the necessary amount. The judicial conference is authorized
by statute to raise fees to pay for the operation of the bankruptcy
court. So this amendment would direct the judicial conference to use
its discretion in determining how the $15 increase is paid for.
The fact of the matter is, no one has expressed, really, an objection
to increasing the compensation for the panel trustees in no-asset
cases. They just do not know where to get the money. It is my opinion
this increase is so modest, it is necessary, and so long overdue, the
judicial conference should be able to find a way.
I have expressed to the managers of the bill that I will continue to
press, if this amendment is included in the bill, to get the judicial
conference to give us some figures on how we could raise this prior to
the bill coming out of conference. I am advised the chairman, at least,
has agreed they can accept this. I am hopeful my friend from Iowa can
also accept it. Then I will continue to work to try to find the funds
by the time we come out of conference.
I thank the Chair and thank the distinguished Senator from Alabama.
The PRESIDING OFFICER. The Chair recognizes the Senator from Alabama.
Mr. HEFLIN. Mr. President, I originally felt that this was an
amendment that would add to the cost and could possibly be an increase
in filing fees. Congress increased filing fees considerably within
recent time, and I believe we should proceed cautiously in this
situation.
The distinguished Senator from Arizona [Mr. DeConcini] suggested he
will find ways, and has suggested, for example, that this cost could be
paid for by increasing the charges on Xerox copy pages.
There are increased duties that are imposed on trustees under the
provisions in this bill. These increased duties and responsibilities
include attempting to assist the debtor to understand his alternatives
to chapter 7 bankruptcy whereby he would outright bankrupt his debt and
to help the debtor understand that he could seek chapter 13 and pay his
lawful debts.
Senator DeConcini's amendment deals with the nonasset cases, and it
takes a good deal of time for trustees to review and handle these
cases. Trustees handle them on a volume basis, and I think there is
some merit to the amendment, and I have no objection to it.
The PRESIDING OFFICER. The Chair recognizes the Senator from Iowa.
Mr. GRASSLEY. Mr. President, we are going to accept this on this side
of the aisle as well. We probably ought to take some time to compliment
the Senator from Arizona for raising a very valid point, but to say at
the same time that this issue should not come out of conference without
our finding a way to pay for it. Particularly, it seems to me, that
responsibility will be upon the Senator from Arizona, to take that
leadership, to find out how it could be paid for.
That is the only reservation I have about it. Since there has been a
good-faith effort, so stated here on the floor of the Senate, to work
toward that end between now and the product coming out of conference
committee, we will let it go at this point.
The PRESIDING OFFICER. If there be no further debate, the question is
on agreeing to the amendment.
The amendment (No. 1634) was agreed to.
Mr. DeCONCINI. Mr. President, I move to reconsider the vote.
Mr. HEFLIN. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
The PRESIDING OFFICER. Who seeks recognition? The Chair recognizes
the Senator from South Carolina [Mr. Thurmond].
Amendment No. 1635
(Purpose: To amend title 11, United States Code, to clarify that post-
bankrupcy fees payable to a membership association with respect to the
debtor's interest in a dwelling unit that has condominium or
cooperative ownership are nondischargeable debts for the period during
which the debtor occupied the unit or received rental payments for it)
Mr. THURMOND. Mr. President, I send an amendment to the desk for
myself and Senator Helms and ask for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from South Carolina [Mr. Thurmond], for himself
and Mr. Helms, proposes an amendment numbered 1635.
Mr. THURMOND. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
On page 235, between lines 13 and 14 insert the following:
SEC. 311. FAIRNESS TO CONDOMINIUM AND COOPERATIVE OWNERS.
Section 523(a) of title 11, United States Code, as amended
by section 210, is amended--
(1) by striking ``or'' at the end of paragraph (13);
(2) by adding ``or'' at the end of paragraph (14); and
(3) by adding at the end the following new paragraph:
``(15) for a fee that becomes due and payable after the
order for relief to a membership association with respect to
the debtor's interest in a dwelling unit that has condominium
ownership or in a share of a cooperative housing corporation,
if such fee is payable for a period during a substantial
portion of which--
``(A) the debtor physically occupied a dwelling unit in the
condominium or cooperative project; or
``(B) the debtor rented the dwelling unit to a tenant and
received payments from the tenant for such period,
but nothing in this paragraph shall except from discharge the
debt of a debtor for a membership association fee for a
period arising before entry of the order for relief in a
pending or subsequent bankruptcy proceeding.''.
Mr. THURMOND. Mr. President, I rise today to offer an amendment to S.
540 to clarify an ambiguity in the Bankruptcy Code which has led to
confusion, conflicting judicial decisions, and unfair outcomes in many
cases. This amendment relates to bankrupt debtors who own condominium
or cooperative units in a community association. It is necessary to
correct a line of cases in which courts have held that future payments
by the debtor to a community association are discharged in bankruptcy.
This amendment simply makes clear that assessments by community
associations which become due after the bankruptcy order for relief are
not discharged, as long as the debtor receives the benefits.
Mr. President, today there are some 5 million condominium units in
our Nation, in addition to cooperative units and other forms of
community associations. Together, these community associations
represent a significant percentage of this country's housing. These
associations are found throughout the country, with the highest
concentration in Hawaii, where condominiums alone make up over 20
percent of the available housing. In addition, Florida, Connecticut,
California, and Colorado have significant percentages of community
associations, along with many other States.
The owners of units in community associations typically pay monthly
fees to cover a broad range of services provided by the association.
These fees generally pay for maintenance and repair of the condominium
building and common areas. This ensures that the structure itself and
all common areas, including elevators, heating and cooling systems, and
similar elements, remain in satisfactory condition. In addition, the
fees often pay for insurance, for maintenance of driveways and parking
areas, for landscaping and for snow and trash removal. Significantly,
in many cases the associations' assessment also covers the utilities
used by individual units so that separate metering and billing is not
necessary.
With the current ambiguity in the Bankruptcy Code, owners of units in
community associations may be unfairly burdened by increases in their
association fees if their neighbors declare bankruptcy and receive a
discharge of the association fees which are due in the future. Some
courts hold that these future fees are discharged in bankruptcy, so
that the debtors need not pay their share of the expenses of the
association even in the future after their bankruptcy is over and even
though they continue to receive benefits from the association.
Courts which reach this conclusion have sometimes recognized that the
result makes no sense, but feel that it is compelled by the Bankruptcy
Code, which can only be changed by the Congress. The Seventh Circuit
Court of Appeals held in the matter of Rostek that future association
fees were discharged so that the debtor was free from payments to the
condominium association. The seventh circuit stated that the result was
``troubling,'' but believed it was compelled by the language the
Congress used in the Bankruptcy Code. That appellate court went on to
explain correctly that it did not have the ``power to change'' that
language to reach a more ``palatable'' result. However, in the Congress
we do have that power and should exercise it to remedy this problem.
Some judicial decisions suggest that this problem is limited, for in
many cases the condominium unit will be sold and the debtor will
receive a free ride only for the time that it takes to dispose of the
unit. However, in many cases there is no equity in the unit, so the
trustee and the mortgage holder will allow the debtor to retain the
unit indefinitely. While the association may have the right in theory
to foreclose, in practice the mortgage holder will receive all of the
recovery, so that the association will not even cover the attorneys'
fees for its trouble. It is in these cases that the present system is
most unfair and the need for my amendment is greatest.
This amendment would further the goal of the bankruptcy laws, which
is to give debtors a fresh start by discharging their past debts while
holding them responsible for any new obligations or benefits they
obtain. My amendment allows all past debts owed to the community
association to be discharged and simply requires payment of the
assessments which become due after the bankruptcy order for relief, and
only if the debtor actually receives the benefits by occupying the unit
or receiving rental income from it. To further ensure that the purposes
of the bankruptcy law are achieved, express language has been added to
the amendment to clarify that debts to the association are not
discharged if the debtor later files a subsequent bankruptcy
proceeding.
Mr. President, my amendment would make the Bankruptcy Code fairer and
more equitable. The debtor's neighbors who belong to the community
association will be treated much more fairly by avoiding the higher
assessments which result from giving the debtor a free ride. The debtor
will be treated fairly because the amendment does not affect the
dischargeability of fees due prior to the final order of relief in the
bankruptcy. Also, as I stated earlier, the amendment applies only to
situations where the debtor benefits from the dwelling unit by
occupying it or receiving rents from it, and in those instances the
debtor should be required to pay the postbankruptcy assessments to the
association.
For all of these reasons, I urge my colleagues to support this
amendment.
Mr. President, both managers of the bill have agreed to the
amendment. I urge adoption of the amendment, if it meets their
approval.
The PRESIDING OFFICER. The Chair recognizes the Senator from Alabama.
Mr. HEFLIN. Mr. President, before we urge adoption, let me make a
statement on this. I think this is an excellent amendment.
This amendment is designed to make clear that it is not the intention
of Congress that a debtor be absolved of his obligations to continued
payment of his share of common expenses due to his condominium or
cooperative association which come due after he has filed bankruptcy.
It seems that some courts have interpreted section 523 of the code
not only to discharge the debtor from liability for common area
maintenance assessments which have come due prior to his filing
bankruptcy, but for those debts coming due after the date of filing.
This has severely impacted thousands of association members across the
country by increasing their fees to carry the burden of those members
whose obligations have been discharged in bankruptcy proceedings.
The current state of the law on this issue is quite confused. Some
courts treat the obligation to pay future assessments based on a
prepetition obligation as discharged in its entirety upon filing of a
petition. Other courts hold that the postpetition assessments are not
discharged because they have not become due at the time of filing.
Still other courts reason that the post petition obligations cannot be
discharged because they constitute a covenant which runs with the land,
which can be terminated only by terminating ownership interest.
This amendment will clarify the ambiguity that now occurs within the
courts regarding association fees for condominium and cooperatives. It
will make nondischargeable the membership association fees that become
payable after the order for relief if such fee is payable for the
period in which the debtor occupies the dwelling after the order for
relief.
I am aware that presently seven States, and the District of Columbia
have passed lien statutes which are directed at this problem.
For these reasons, I support this amendment.
I congratulate the distinguished Senator from South Carolina for
bringing this to our attention because this is an example of why
bankruptcy reform is an ongoing situation, why we need a National
Bankruptcy Review Commission, and why we ought to be able to address
these issues as they arise, rather than having a great number of
condominium association and cooperative memberships suffer as a result
of it.
So I thank the Senator for bringing it to our attention.
Mr. THURMOND. I wish to thank the majority manager and the minority
manager, too, on this bill.
Mr. GRASSLEY addressed the Chair.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, we accept the amendment on this side of
the aisle. This falls into the category of which I spoke in my opening
remarks on this particular bill and on the work of the National
Bankruptcy Commission, that this is an example of fine tuning that from
time to time a code must go under to recognize the economic realities
of how we do business in this country and the changes from day to day.
The PRESIDING OFFICER (Mr. Lieberman). Is there further debate? If
not, the question is on agreeing to the amendment.
The amendment (No. 1635) was agreed to.
Mr. HEFLIN. Mr. President, I move to reconsider the vote by which the
amendment was agreed to.
Mr. THURMOND. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. THURMOND. I thank the Senator.
Mr. REID addressed the Chair.
The PRESIDING OFFICER. The Chair recognizes the Senator from Nevada
[Mr. Reid].
Mr. REID. Mr. President, I received a fax yesterday in the form of a
letter from an attorney in Reno, NV, by the name of Jeffrey Giles. I
think, Mr. President, this sums up why we are here today.
Dear Senator Reid. I received a fax from the National
Association of Bankruptcy Attorneys asking that I along with
others communicate with you regarding the reform bill. I am
not opposed to a prohibition on repeat filings. It would
probably be a good thing.
I think here is the paragraph of importance.
However, the legislation in some form should be passed
immediately. This reform measure has been in the works for
nearly 2 years and the essence of it needs immediate
enactment.
Good luck. I remain, sincerely yours, Jeffrey Giles.
The reason I mention this to the President and through you to the
manager of the bill, the senior Senator from Alabama, is to
congratulate him on his great work on this legislation.
I have spent time with the Senator's staff. They are well versed in
the law. They are very easy to work with, and as a result of the work
that I have been able to do with Senator Heflin and his staff, I think
the bill is better than it would have been. Perhaps some of the matters
that I suggested be placed in the bill would have eventually gotten in
there anyway.
This bill that is now before the Senate is a good bill. I have a
couple of amendments that I am going to offer, Mr. President, one of
which is entirely relevant; one is not entirely relevant. But the mere
fact that I am offering these amendments does not take away from the
work of the manager of this bill. I think the majority and minority on
this matter have done very good work for the American people.
Amendment No. 1636
(Purpose: Limitation on State taxation of certain pension income)
Mr. REID. Mr. President, I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report the amendment.
The legislative clerk read as follows:
The Senator from Nevada [Mr. Reid], for himself and Mr.
Bryan, proposes an amendment numbered 1636.
Mr. REID. Mr. President, I ask unanimous consent that reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
At the appropriate place, insert:
SEC. . LIMITATION ON STATE TAXATION OF CERTAIN PENSION
INCOME.
(a) In General.--Chapter 4 of title 4 of the United States
Code is amended by adding at the end thereof the following
new section:
``Sec. 114. Limitation on State income taxation of pension income
``(a) No State may impose an income tax (as defined in
section 110(c)) on the qualified pension income of any
individual who is not a resident or domiciliary of such
State.
``(b)(1) For purposes of subsection (a), the term
`qualified pension income' means any payment from a qualified
plan--
``(A) which is part of a series of substantially equal
periodic payments (not less frequently than annually) made
for--
``(i) the life or life expectancy of the recipient or for
the joint lives or joint life expectancies of the recipient
and the recipient's designated beneficiary, or
``(ii) a period of not less than 10 years, or
``(B) which is not described in subparagraph (A) and
which--
``(i) is received in a taxable year for which an election
under this subsection is in effect, and
``(ii) is received on or after the date on which the
recipient has attained the age of 59\1/2\, except that the
aggregate amount of payments to which this subparagraph
may apply for any taxable year shall not exceed $25,000.
``(2) For purposes of paragraph (1), the term `qualified
plan' means--
``(A) an employees' trust described in section 401(a) of
the Internal Revenue Code of 1986 which is exempt from tax
under section 501(a) of such Code,
``(B) a simplified employee pension described in section
408(k) of such Code,
``(C) an annuity plan described in section 403(a) of such
Code,
``(D) an annuity contract described in section 403(b) of
such Code,
``(E) an individual retirement plan described in section
7701(a)(37) of such Code,
``(F) an eligible deferred compensation plan under section
457 of such Code, or
``(G) a governmental plan described in section 414(d) of
such Code, other than a plan established and maintained by a
State or political subdivision of a State, or an agency or
instrumentality of either.
``(3) For purposes of paragraph (1), any retired or
retainer pay of a member or former member of a uniform
service computed under chapter 71 of title 10, United States
Code, shall be treated as a payment from a qualified plan.
``(4)(A) An election under paragraph (1)(B), once made for
a taxable year, may not be made for any other taxable year.
``(B) In calendar years beginning after 1994, the $25,000
amount referred to in paragraph (1)(B) shall be increased by
an amount equal to such dollar amount, multiplied by the
cost-of-living adjustment determined under section 1(f)(3) of
such Code for such calendar year by substituting `calendar
year 1993' for `calendar year 1992' in subparagraph (B)
thereof.
``(c) For purposes of subsection (a), the term `State'
includes any political subdivision of a State, the District
of Columbia, and the possessions of the United States.''
(b) Clerical Amendment.--The table of sections for such
chapter 4 is amended by adding at the end thereof the
following new item:
``114. Limitation on State income taxation of pension income.''
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
Mr. REID. Mr. President, the amendment that I offer has a direct
relationship to bankruptcy. My amendment will save thousands of this
country's senior citizens who live on fixed incomes from filing for
bankruptcy as a result of the very unfair practice of taxation of
pension income of nonresidents by some States.
It works, Mr. President, like this. If someone chooses to retire to a
different State than the one they worked in, some States follow you
with their taxing authorities to tax the pension income you earned
previously. Even though you no longer reside in the State, you no
longer use their highways, their health services, their park services,
any of their recreation facilities, you use nothing in the State from
which you came, they still are collecting taxes.
You cannot even vote in the State, but they are demanding that taxes
be paid. This is clearly, Mr. President, a form of taxation without
representation.
This same amendment on two previous occasions has passed this body
only to die in the House of Representatives. I have been in touch with
the chairman of the Judiciary Committee in the other body. We have
received assurances from him that he would hold a hearing, and he in
fact did hold a hearing. I also received assurances that they will move
this legislation in one form or another. I would certainly hope so.
As I indicated, because of this matter having passed the Senate on
two previous occasions, my colleagues are familiar with this
legislation. An amendment to H.R. 4210 passed by a margin of almost 2
to 1. In addition, this legislation was included in the committee
reported version of H.R. 11 later that same year, which was ultimately
passed by this body.
For a variety of reasons, many people in the country plan to retire
in places other than where they have worked. They want to go to a
colder climate or they may choose, as they do most of the time, to go
to a warmer climate. They would leave one of the Northeastern States or
go to Florida or move to California. There are many reasons people seek
to retire in places other than where they worked originally.
They might want to move back to where they were raised. They might
have a family there, and they want to be near their family. Whatever
the reason for relocating, people spend their working years planning
and saving so that they can retire to a place of their dreams, their
retirement dream homes in their golden years. Imagine the retirees'
shock and then dismay when after moving they receive a notification
they owe back taxes along with interest and penalties not to the State
in which they reside, where they use the highways, the recreation
facilities, where they vote, but, rather, they are asked to pay taxes
from where they came, their old State of residence. The shock is from
owing a tax from which they receive absolutely no benefit or services
or voting rights. The dismay from the inability to pay this sometimes
enormous tax when one lives on a fixed income is very difficult to
comprehend.
I would like to relate one example of the outrageous consequences
that can result from the aggressive collection of the source tax. I
have given this example on another occasion but it is realistic, true,
and a good example of the injustice that can occur.
A retired woman living alone in Fallon, NV, lives on a fixed income
of about $12,000 a year. Now, it goes without saying she is not a rich
woman. But she is surviving. One day this woman from Fallon, NV,
receives a notice in the mail that she owes taxes on her pension income
from another State--not only the initial assessment but also penalties
and interest on those taxes.
Mr. President, this amendment is offered on behalf of Senator Reid
and Senator Bryan. I am offering another amendment to which the Senator
from Colorado, who is now in the Chamber, will be a joint sponsor.
The PRESIDING OFFICER. The record will so note.
Mr. REID. I thank the Chair.
Mr. President, this woman, being honest, wants to find out why she
owes this money. She has claimed she had not had to pay these taxes in
the past. Why now? To make a long story very short, the other State
went back several years and calculated her tax debt to be about $6,000.
Mr. President, this is half of her income for 1 year.
This issue has been addressed in both bodies of Congress as I have
talked about. The Senate bill I have introduced in this session of
Congress has 28 cosponsors. In the House, they have almost 200
cosponsors. The issue is supported by a broad range of interests from
the National Association of Retired Federal Employees [NARFE]; to the
Fund for Assuring an Independent Retirement, which is called FAIR;
Retired Officers Association; the National Association of Police
Organizations; the Retirees to Eliminate State Income Source Tax, which
is called RESIST, chaired by a Nevadan by the name of Bill Hoffman,
from Carson City.
During the House hearing last summer, a member of the board of
directors of the American Association of Retired Persons had this to
say about the issue:
While States no doubt have the authority to exercise taxing
power, a number of legitimate questions arise as to the
wisdom of such action. Should Congress determine that Federal
intervention is necessary action before an even greater
number of States engage in this practice, it would be both
timely and appropriate.
The time has arrived for this Federal intervention. We have received
this from the joint task committee. This has no bearing on revenues. It
is revenue neutral. More and more States are exercising the authority
to tax nonresident pension incomes. This is unfair. This is taxation
without representation. States obviously perceive the source tax as an
easy way to raise revenues; tax someone who cannot vote you out of
office.
I urge my colleagues to save seniors from the embarrassing
frustration of having to file bankruptcy as a result of paying taxes to
the States in which they no longer reside by supporting this amendment.
It is my understanding that the managers of this bill may accept this
amendment without a vote.
Mr. HEFLIN. Mr. President, I agree with the Senator. This amendment
has passed the Senate twice. It is really unrelated to bankruptcy. But
the fact is that it has passed the Senate twice, and has not passed the
House. I say to the distinguished Senator from Nevada that House
Members from Nevada would have a responsibility of getting the House to
agree to this, otherwise we would be in the same situation. But the
fact that the Senator has diligently and doggedly pursued this matter
on behalf of the citizens of Nevada especially is commendable, that
while it is not germane to the bill, we can accept it. We have a
different rule in the Senate than we do in the House in that we can put
nongermane amendments on Senate bills.
But I do say that I hope the Members of the House of Representatives
from Nevada, and other States that are similarly situated, will take on
the responsibility of getting the House to agree to this in conference.
Mr. REID. Mr. President, I say to my friend from Alabama that I
appreciate very much his hope that the other side will accept this
amendment, and indicate that this is not only a Nevada problem. We have
almost 200 cosponsors in the House. I hope they will get more help than
just my two colleagues from Nevada.
Mr. BRYAN. Mr. President, this has been a concern of Senator Reid's
and mine for some years, since coming to the Senate. We are constantly
reminded, as we return each week to Nevada, about the enormous
injustice visited upon our citizens, and that is taxation imposed
primarily from our neighboring State of California to the West, in
which just this past month, I might share with my colleague and Members
of the Senate, 6,300 driver's licenses from out of State were
surrendered in the Las Vegas area alone, indicating the enormous influx
of citizens into our own State.
Many of those citizens come from California, which has been
particularly aggressive in seeking to impose State income tax from
California upon Nevadans. In some instances, it occurs shortly after
they move to Nevada. In other instances, it occurs some years later.
This situation is not confined to Nevada alone, because California
State income tax collectors have been particularly aggressive in moving
other places as well.
It is--as our constituents constantly remind us in Nevada, and in the
refrain heard so frequently during our own revolution--taxation without
representation. Our citizens in Nevada receive none of the benefits,
have no ability to impact policy decisions by reason of their residence
in the State of Nevada, and they are no longer eligible to vote in
California. This is egregious and unfair.
I commend my senior colleague, who has been on point on this for the
last several conferences. I commend the managers of this bill for
accepting the amendment, as has been the case in the past. With him I
pledge a renewed effort to enlighten our colleagues in the other body
as to this manifest injustice. This would be a marvelous year for us to
have this piece of legislation enacted and relief accorded to literally
tens of thousands of my own citizens in Nevada, as well as many across
the country who labor under this manifest unfairness.
I thank my friend from Nevada for allowing me to speak on this. I
commend him for his pursuit and successful efforts in getting this
amendment added.
Mr. REID. Mr. President, I ask unanimous consent that on the source
tax amendment, Senators Akaka and Murkowski be added as original
cosponsors of the amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BRYAN. Mr. President, I rise in strong support of the amendment
offered by my colleague, Senator Reid.
As Senator Reid has already described, this amendment would eliminate
an unfair and discriminatory tax faced by many retirees in Nevada, and
throughout the Nation--the State source income tax.
This pernicious tax places a completely unfair burden on retirees who
move away from the State where they spent their working years. In
Nevada, many of these retirees come from California; in Florida, many
of the retirees come from other States on the Atlantic seaboard; in
every case, however, retirees are finding that their former State of
residence is demanding tax payments from them based solely on their
former residence in the State.
In many instances, the retiree has not lived in the taxing State for
years, if not decades, and in every instance, the retiree is being
forced to pay for government services they derive no benefit from, and
over which they have no control, due to their inability to vote in the
taxing State.
Once a retiree appears on the radar screen of a State's tax
collectors, efforts to collect the tax can be relentless. I think it is
safe to say that very few town hall meetings I hold in my State occur
without some mention of the difficulty caused by the source tax.
The State of Nevada has attempted to resolve this problem on its own.
Under Nevada State law, other States and their collection agencies are
prohibited from seizing property within the State of Nevada for the
nonpayment of source taxes on pension or retirement income. Other
States have passed, or are considering, similar legislation.
The State of Nevada's unilateral solution will not solve the problem,
however. First of all, the Nevada statute is difficult to enforce--I
have heard many accounts of retirees being harassed and threatened by
collection agents working on behalf of out of State tax boards.
Sometimes, these intimidation tactics work--even retirees with
knowledge of the statute may be reluctant to take the chance of placing
their property, or their future pension income, at risk when confronted
by an aggressive tax collector.
This attitude is demonstrated in a letter I received from my
constituents, Mr. and Mrs. David Sperl of Las Vegas. The Sperl's write:
Thank you for your support of the Source Tax Bill . . .
Source taxes are an unfair tax which is very similar to the
British tea tax that caused the Boston Tea Party.
We are personally impacted by the California Source Tax. I
worked for Aero Jet General Corporation in California for
many years. I received a small annuity check from their east
coast office. This annuity and my Social Security check are
our principal source of retirement income. We have lived in
Nevada for several years. We vote in Nevada and not in
California. We have no assets in California. We receive no
service or benefit from California. The California Source Tax
is clearly taxation without representation.
We recently learned that Nevada has a law that protects our
income and assets from attachment by another state. We have
been paying the California tax every year. We do not have any
disposable income and clearly can not afford this cost.
We have established a life long habit of paying our taxes
and obligations. We have a good credit rating and we
certainly do not want it tarnished by the State of California
over this unjust tax.
I hope the Source Tax bill will pass this year. This is an
urgent matter with us.
As you can tell from both the tone and content of this letter, the
Sperl's are not tax evaders, or deadbeats trying to beat the tax
system. Most of the thousands of retirees burdened by the source tax on
heir pensions have put in a lifetime of hard work; their only interest
is to enjoy their well earned retirement years with a certain minimum
level of comfort. The victims of the source tax are not asking for any
special treatment--in fact, what they are asking for is not to be
singled out for unfair taxation by revenue hungry tax boards simply
because of their former affiliation with a State.
I worked for many years in State government. As Governor of Nevada, I
agonized over the State budget, and I understand the need for State
governments to raise revenue. In some peoples' minds, I suppose that
out-of-State retirees are an easy target for revenue raising. After
all, they do not vote. Without a political voice, who will defend them?
This, of course, is the most fundamental unfairness of the source tax.
This, of course, is the reason those of us who are aware of the
injustice of the source tax compare it to the type of taxes that led to
the Boston Tea Party, and, ultimately, the Declaration of Independence.
The many retirees who are the unfortunate victims of this source tax
are not the only ones impacted.
For example, the reach of the source tax into other States infringes
upon each States legitimate right to tax its residents. Often, source
taxes paid to other States can reduce the taxes retirees pay to their
actual States of residence. The State that provides all of the
essential government services to retirees, the State where the retiree
votes to control the way tax revenues are to be spent, must sit back
and watch as their much needed tax revenues are diverted to another
State.
The proliferation and expanding scope of source taxes on retirees
will also place significant burdens on employers. As we all know, a
lifetime of employment with a single firm is becoming an increasingly
rare occurrence. Multiple employers over an individuals career is
becoming the norm, not the exception. The bookkeeping and reporting
required to provide the information needed to collect source taxes on
pensions will result in a huge paperwork burden on employers.
The potential cost to businesses of source taxation is the reason why
the American Payroll Association has endorsed this legislation. In
addition, this legislation is supported by scores of employee,
retirement, and tax fairness groups including such organizations as the
National Association of Retired Federal Employees [NARFE], the National
Association of Letter Carriers, the Retired Officers Association, the
Retired Enlisted Association, the American Association of Foreign
Service Women, the Air Force Sergeants Association, the Marine Corps
League, the National Association of Postal Supervisors, the Naval
Reserve Association, Common Cause, the National Taxpayers Union, the
Federal Managers Association, the Airline Pilots Association, and the
Air Force Association.
This outrageous tax grab by former States of residence is an
unexpected surprise for most retirees. Even those retirees who are
aware of the potential for source taxation of their pensions are
shocked by manner in which States assess the tax. In many instances,
the mechanism of the source tax allows States to collect taxes from
nonresidents on income earned outside of the State's borders. A letter
from one of my constituents, Mr. Joseph Stauffer of Boulder City, NV,
describes in some detail how this works. Quoting from Mr. Stauffer's
letter:
If I calculate the California tax based on the portion of
my pension that was earned while a resident of California,
the tax comes to $119--minus the joint exemption of $128
leaves zero California tax. When I follow California tax
instructions, and use my total Federal tax Form 1040 based
income, I end up paying $459.
Mr. President, there are many reasons why the source tax on pensions
is unfair, and many examples of the type of hardship such aggressive
tax collections are causing among thousands of retirees.
On March 12, 1992, the Senate went on record with a strong showing of
support for this legislation. By a vote of 36-62, the Senate declined
to table an amendment very similar to the amendment before us today. I
urge my colleagues to once again indicate its opposition to the unfair
source tax, and vote in favor of the amendment offered by the senior
Senator from Nevada.
The PRESIDING OFFICER. Is there further debate on the amendment? If
not, the question is on agreeing to the amendment of the Senator from
Nevada.
The amendment (No. 1636) was agreed to.
Mr. REID. Mr. President, I move to reconsider the vote by which the
amendment was agreed to.
Mr. HEFLIN. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Amendment No. 1637
(Purpose: To amend section 109 of title II, United States Code, to
preclude a person from being a debtor under chapter 13 of that title if
the person has previously been such a debtor within 3 years)
Mr. REID. Mr. President, I send an amendment to the desk and ask for
its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The legislative clerk read as follows:
The Senator from Nevada [Mr. Reid], for himself and Mr.
Brown, proposes an amendment numbered 1637.
Mr. REID. Mr. President, I ask unanimous consent that reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
On page 160, between lines 6 and 7 insert the following:
SEC. 116. LIMITATION ON FILING OF CHAPTER 13 BANKRUPTCY
PETITIONS.
Section 109, of title 11, United States Code, is amended by
adding at the end the following new subsection:
``(h) Notwithstanding any other provision of the section,
no individual may be a debtor under chapter 13 who has been a
debtor in a case that was filed under that chapter at any
time in the preceding 3 years.''.
Mr. REID. Mr. President, Congress is currently considering one of the
most comprehensive cases of anticrime legislation, and that is
consistent with what all of us are hearing from our constituents on a
daily basis: Enact tough but fair legislation so that those who commit
acts without regard to their consequences will realize there is a price
to pay for injuring society.
That is why we in this body included tough bankruptcy antifraud
legislation as part of the crime bill. While the other body has chosen
not to include this bankruptcy fraud prevention provision in its crime
bill, it is my hope that we will somehow see to it that these measures
ultimately are passed.
The comprehensive bankruptcy legislation we are today considering is
a solid bill that will result in beneficial reform of a system that all
agree is in need of repair. That is why I am a cosponsor of this bill.
That is why I will vote for its passage, and, as I indicated in my
initial statement, Mr. President, why I congratulate and applaud the
managers of this bill and the Judiciary Committee for moving this
legislation.
The amendment that I am offering today compliments the bankruptcy
bill, and comports with the tough antifraud sentiments expressed by so
many of our constituents. My amendment eliminates the fraud and abuse
caused by serial filings in chapter 13 proceedings by limiting the
number of petitions a debtor may file to once every 3 years.
For those people that are watching this debate, it may seem somewhat
unusual that the present law allows people to file a bankruptcy
petition under chapter 13 every 6 months. And in fact, as my argument
will show the Chair and Members of the Senate, even the 6 months has no
bearing in some areas of jurisdiction. So even though it is difficult
to believe that someone can be in perpetual bankruptcy, that in fact is
the case.
I am attempting by this amendment to limit the number of filings
under chapter 13 to once every 3 years. That does not seem too
burdensome to me, that a person can file only once every 3 years. My
amendment is what we refer to in the law as a ``bright line rule.'' It
provides the courts with crystal clear certainty and is consistent with
this administration's attempt to combat fraud in the bankruptcy
process. Indeed, Mr. President, that is why the administration supports
the passage of my amendment. I state again, the administration supports
this amendment.
Why should an individual be able to file for bankruptcy every 6
months? Why do the courts allow this to take place? Why are the courts
incapable of ensuring that this 6-month prohibition between filing and
refiling is followed?
Since we enacted the code, we have bent over backward to protect the
interests of the debtor, and we should do that. I have no problem with
that, Mr. President. Bankruptcy protection is in the Constitution of
the United States. We passed the law to make sure that the proceedings
are fair and just.
So I say, fine. We have done what we can to protect the interests of
the debtor. Everybody deserves a break when they err. But we now have
reached the point where our laws almost invite people to act in a
fiscally irresponsible manner. You run your credit card up. Do not
worry about it. No problem. Just declare bankruptcy. And tell your
debtors that you are only going to pay them 60 cents on the dollar, or
50 cents on the dollar, or nothing on the dollar.
If that is asking too much, or if you simply decide not to follow
through in your repayment plan, no problem. Just have your case
dismissed and file a new proceeding. This is not sound policy. This is
not sound policy fiscally, Mr. President; and certainly it is not
morally.
The argument that this current system works is that it gives the
debtor a fresh start. The argument that it does not work is that it
gives the debtor a perpetual fresh start. One of the greatest
attributes about this great Nation is that we tend to give the people
the benefit of a second and sometimes even a third chance. However, the
negatives arising out of laws that uniformly give someone another
chance is that they create a disincentive to act in a responsible
manner, whether it be a fiscally responsible manner or a civilly
responsible manner.
One only has to look at the inclusion of the three strikes and you
are out provision in the crime bill to get a better appreciation of how
adamantly people feel about the inequities of our criminal justice
system. The American people are demanding that we enact straightforward
laws so people know the consequences following their actions. It is no
longer acceptable to enact laws benefiting the alleged bad guy at the
expense of the innocent victim.
Let us remember, it is due process, not process ad infinitum. I
believe my amendment recognizes this by doing the exact thing as the
three-strikes provision. It provides a bright-line rule and gives all
parties adequate notice that irresponsible abusive behavior simply will
not be tolerated.
In part, because the Bankruptcy Code provides an enormous amount of
protection to a debtor, it frequently invites abuse by the
unscrupulous. When a debtor files a petition under the act, he
immediately invokes the automatic stay. The stay stops virtually all
action of creditors to protect their interest and their collateral.
And the stay remains in effect until the case is closed, dismissed,
or discharged. If a creditor wishes to proceed against the debtor, he
must seek relief from the stay. If the debtor dismisses his case, the
stay is lifted and creditors are free to commence efforts outside of
bankruptcy to collect from the debtor.
At this point, however, the debtor can file another bankruptcy
petition. This action by the debtor reinvokes the automatic stay, once
again prohibiting the creditors from taking action to ensure payment of
the money they loaned to the debtor. Herein lies the potential for
abuse. A debtor, through a pattern of filings and dismissals can delay
the disposition of his case and prevent creditors from collecting any
money.
My amendment will eliminate the pernicious problem of serial filings
in chapter 13. Under this amendment offered by the Senator from Nevada
and the Senator from Colorado, a debtor who goes into chapter 13 will
know from the outset that he will not be given unlimited swings at the
plate.
Mr. President, if there was ever a time when this body is given an
example of how to help business, especially small business, this is it.
If we want to talk about doing things on the Senate floor and in the
Congress to help businesses, this is it. Who gets jerked around by
these unscrupulous people who know the ways and the vagaries of the
bankruptcy law? The businessmen and businesswomen trying to make an
honest living. These bankruptcies cause delay, delay, delay. There are
examples where they delayed these bankruptcy proceedings ad infinitum.
They file one, they ask for a discharge, and they can file again.
This amendment will eliminate this from happening. Bad faith debtors
should not have unlimited swings at the plate. How many swings do you
get before you are out? This rule will not prevent the honest, good
faith debtor from obtaining a fresh start or a number of fresh starts.
What it will do, however, is to say to all debtors: You are now in the
court of last resort, and because we are granting you the absolute,
unquestioned protection of the automatic stay, you will be given one
opportunity to reorganize your finances for at least every 3 years.
Why is such a rule necessary? There are a number of reasons, Mr.
President.
At this time, in recognizing my friend from Colorado, I will have
some more I would like to say, but I would be happy to yield to the
cosponsor if he wishes to speak now.
Mr. BROWN. I thank the Senator from Nevada. I would like to praise
the Senator's hard work in this area. This is a very basic amendment.
Right now, the Bankruptcy Code allows a debtor to make a chapter 13
filing every 6 months. This amendment would change that 6-month
limitation to limit debtors to one filing every 3 years. We must keep
in mind that there is a safety provision. The Bankruptcy Code, in
conjunction with the rules of civil procedure, allows additional
filings in the interest of justice. In other words, some discretion is
left with the judges.
This modest step of moving from a 6-month limitation of filing to 3
years will be helpful. It will help deter the people who abuse the
code; it will help deter the debtors who use chapter 13 not as a
mechanism to get back on their feet, but as a way to defraud their
creditors. It is a responsible and modest step, it is a thoughtful
amendment aimed at deterring serial filings.
I am delighted to join the distinguished Senator from Nevada in
offering this for the consideration of the body.
I yield to the distinguished Senator from Nevada, [Mr. Reid].
Mr. REID. Why is this rule necessary? Many reasons. For example, the
debtor subsequently filing a chapter 13 plan will not attempt to make a
single payment to his creditors. Without the bankruptcy court's
confirmation of a plan, the creditor is unable to exercise any of his
rights against the collateral.
A case in the eighth circuit accurately highlights this problem. In
that case, the debtors were frustrating the bank's efforts to foreclose
on real property. As each foreclosure sale became imminent, the debtors
would file a chapter 13 petition, which they would later have
dismissed. They did this on three separate occasions. Each of the prior
petitions was filed within 2 or 3 days of a scheduled foreclosure sale.
In each case the creditors filed a motion for relief from automatic
stay and each filing was within 6 months of the previous dismissal.
Finally, after the court dismissed the third petition, the bank
rescheduled the foreclosure proceedings as necessary for repayment.
Incredibly, within 2 hours of the foreclosure sale the debtors filed a
fourth petition under chapter 13.
What happens, Mr. President, in situations like this: Let us assume
that that property is badly needed to keep a business afloat or to keep
someone's life afloat. Normally what they will do is cave in to the
unscrupulous bankruptcy filer and take a ridiculously small offer to
settle the case. That is unfair and simply should not happen.
Most creditors file motions with the bankruptcy court seeking lifting
of automatic stay. The debtor, realizing time is running out and the
bankruptcy court will not likely confirm the plan, can always move to
dismiss the case. Consent to dismissing the first petition for
bankruptcy, the debtor can turn around and file a new petition for
chapter 13, everything else the same except the date of filing, thus
again triggering the immediate imposition of the automatic stay.
It is an endless and vicious cycle circumventing the congressional
intent of preventing serial filings. The court recognized this abuse
and asked Congress to clarify the rules. We should clarify the rules.
That is what this amendment is about.
I am sure that a number of people in offices, or watching this on C-
SPAN, are wondering what all this bankruptcy terminology means.
I would be willing to bet that there are many interested in knowing
what the so-called automatic stay is all about. In theory, the
automatic stay is supposed to act as a shield that provides the debtor
with temporary protection from the creditors until he can work out a
reorganization plan. In practice, however, the automatic stay has
become a weapon used as a very blunt instrument to thwart the
legitimate interests of a creditor.
It automatically stops almost any legal proceedings against the
debtor to collect the debt. The automatic stay is triggered
automatically. No questions asked, no proof necessary, simply pay the
court the $90 application fee, and abracadabra, walk out of the court
with the ability to ignore legitimate requests for payment.
The real tragedy, however, is that the debtor does not have to offer
a shred of evidence that proves he needs protection. Credit card bills,
car payments, mortgage payments, phone bills, cable bill statements,
any other financial obligations are all stayed merely by filing this
petition in bankruptcy--not a bad deal.
And remember, the point of this amendment is to prevent them from
doing it within the 3-year time period over and over again, as they are
now doing it.
I believe that the bankruptcy court in the northern district of
Illinois best described the application of automatic stay when it held:
The automatic stay is one of the most powerful weapons
known in law. It arises not from an order of the court after
a hearing on the merits, but upon the mere filing of a case.
Mr. President, the arguments necessitating my amendment I believe are
compelling. One only has to look at the number of chapter 13 plans that
are dismissed. Listen to this, Mr. President:
Status of chapter 13 cases. In 1982, 12,628 were filed; half of them
were dismissed.
In 1983, almost 100,000 were filed; over half of them dismissed.
In 1984, 92,000; over half of them dismissed.
In 1985, almost 108,000 cases filed; half of them dismissed.
In 1986, 130,000; 47 percent of them dismissed.
Now, starting with 1987 some of the cases are still pending, so it is
difficult to get a totally accurate account. But in 1987 we had 142,000
cases filed, and there are still 6.2 percent of them pending. And even
with that, there is almost 50 percent of them that have been dismissed.
In 1988, 156,000 cases filed; while 15 percent of them remain open,
48 percent of them have been dismissed.
I am making the point, Mr. President, if you look at the number of
chapter 13 plans dismissed, you get the idea that serial filing is part
of the game.
According to the Administrative Office of the United States Courts,
of hundreds of thousands of chapter 13 cases filed, about half of them
ended in dismissal. Keep in mind, Mr. President, that the most the law
can do with respect to preventing dismissals is to require the debtor
to wait 180 days before filing a new petition, and even the application
of the 180-day wait rule is subject to legal dispute. No wonder the
courts are inviting us to legislatively intervene.
We in Congress have taken steps in the past to address the problems
of serial filings. Unfortunately, Mr. President, these measures have
proven to be largely ineffective. In fact, the one section, Bankruptcy
Code section 109, added in 1984--the intent was real good--was to deal
with the problem of serial filings. It simply is not strong enough. It
caused confusion.
Opponents of my amendment will probably argue section 109 of the
Bankruptcy Code is a sufficient deterrent to abusive bad faith serial
filings. All I can say, Mr. President, if you look at the status of
chapter 13 cases you will find they are filing for and dismissing more
after the 1984 amendment.
It simply is not strong enough. The section attempts to restrict
serial filings by providing as follows:
* * * that notwithstanding any other provision of this
section, no person may be a debtor if within 180 days before
filing petition for bankruptcy the case was dismissed for
willful failure of debtor to abide by court order, or the
debtor has dismissed the petition after creditor filed the
motion to lift the automatic stay.
This is the only section of the Bankruptcy Code I am aware of that
restricts serial filings. I suggest it does not protect against abusive
repetitive filings, and the history agrees with me. Look at the numbers
and you will find that section 109 may help, but it does not work.
Some courts have held that the application of this provision may be
discretionary. Many courts have struggled with what constitutes willful
failure on the part of the debtor. We get into a lawyer's dream with
section 109.
My amendment is straightforward. There is no confusion. It deals with
from the date of filing so you could do it within a 3-year period. It
is very simple. It is to the point and leaves the court very little
discretion. That is the way it should be.
The bankruptcy court for the middle district of Florida ruled in one
case that the debtor's dismissal of a third chapter 13 does not
constitute willful failure of the debtor to abide by the court order.
Thus, the debtor's fourth bankruptcy petition filed again within 6
months of debtor's dismissal of third case is not barred by section
109(g)(1).
The second part of the section, section 109, also does little in way
of preventing abusive serial filings. It simply prohibits a bankruptcy
refiling in those cases, where following the creditors request for the
relief from the automatic stay, the debtor dismisses his case. And keep
in mind, Mr. President, the debtor may always dismiss his case at any
time for whatever reason. He may wake up in the morning and say, ``I do
not feel well today,'' and dismiss the case. He or she may stand and
say, ``I just think I want to do something different today; I am going
to dismiss my case.'' The point is there does not have to be any
reason.
My amendment eliminates the need for courts to waste all their time
deciding what does or does not constitute willful failure.
Mr. President, if you read this section, section 109(g)(2), you will
wonder why laws like that are even on the books. The kind of bad faith
filing it attempts to prohibit ought to be considered so presumptively
wrong and prohibitive, the courts should not waste time allowing it to
be litigated.
My amendment eliminates the need for the court to waste all their
time deciding what constitutes willful failure where the debtor
dismisses the case following filing of the motion for relief for
automatic stay.
The rule embodied in this amendment is in the best interest of
judicial economy and will unquestionably eliminate the inconsistencies
caused by judicial interpretation of section 109. In so doing, it will
prohibit the deleterious action of serial filings and thus allow the
bankruptcy courts to devote their already limited resources to
disposition of genuinely legitimate cases.
There may be some who oppose this amendment, Mr. President, who would
argue that its application in some rare circumstance could be harsh and
may result in injuring some honest good faith debtor. I do not believe
that to be the case because there is a safety valve.
Mr. President, I practiced law for many years in the Federal system
and in the State court system in Nevada and other State courts. There
is a safety valve provision incorporated in all Federal rulings of
procedure and that is rule 60(b) of the Federal Rules of Civil
Procedure.
Rule 60(b) of the Federal Rules of Civil Procedure, I have used on
many occasions as most attorneys who have a trial practice do. In
effect, what it does is allow for an attorney to file on behalf of his
or her client a motion for relief from a judgment or an order. In fact,
rule 60(b) allows courts to exercize discretion in relieving a party
from his legal obligation, or from a final order in cases of mistakes,
inadvertence, excusable neglect, newly discovered evidence, fraud, et
cetera.
Rule 60(b)6 states, amongst other things, on a motion upon such terms
that are just, a court may relieve a party or its legal representative
from a final judgment order of proceedings for the following reasons,
and number six is, any other reason justifying relief from the
operation of the judgment.
Mr. President, this is certainly fair. It would cover those rare
instances when somebody may need to file within a 6-month period. I
insist that should be rare. This safety valve provision incorporated in
the Federal Rules of Procedure grants courts discretionary relief of
parties of the legal obligation in the interest of justice. It will
clearly mitigate any harsh effects caused by this amendment.
I ask those who oppose this amendment to consider the parties who
stand to gain the most by the defeat of my amendment--attorneys
involved in bankruptcy practices; people who, in many instances, do not
want to pay their legal obligations; unscrupulous debtors generally
intent on ripping off a rip-offable system--I am sorry to call it
that--and those who stand to lose the most from its defeat.
Well, aside from the courts and the taxpayers, the real losers are
business people. I have mentioned that earlier. Everyone within the
sound of my voice should understand that this is a real opportunity not
to talk about helping small business, but to do something to help small
business.
Mr. President, I vividly recall the days when I first used to go to
bankruptcy court and we had the first meeting of the creditors. The
creditors would come and there was a proceeding where you would follow
the statute and you would go in a room and sometimes the room was full
of creditors. Not anymore. Rarely do you find anyone who shows up at
the first meeting of creditors because they have given up on the system
because they do not collect money in bankruptcy.
Bankruptcy has become a way to avoid debt. I am sorry, but that is
true. People used to come to me and apologize for having to file
bankruptcy. It is not that way anymore.
They have the little quickie. In Nevada, we were the divorce capital
of America, and there were people who used to advertise for a quickie
divorce. Now they advertise for quickie bankruptcy proceedings.
Well, the people that would benefit from the adoption of this
amendment more than anyone else would be business people of America,
particularly small businesses. I believe a vote against this amendment
is a vote against small business and a vote against those who play by
the rules.
I think we should send a message to the American people that we are
willing to enact tough, meaningful legislation that will put an end to
fraud and abuse in the bankruptcy process, at least in this instance.
I ask my colleagues to join me and the Senator from Colorado [Mr.
Brown] and this administration in supporting the adoption of my
amendment.
The PRESIDING OFFICER. Is there further debate?
Mr. GRASSLEY addressed the Chair.
The PRESIDING OFFICER. The Senator from Iowa [Mr. Grassley].
Mr. GRASSLEY. Mr. President, I rise in opposition to this amendment
by the distinguished Senator from Nevada. Perhaps there is some problem
here and perhaps that needs to be dealt with, but we feel it can be
dealt with in a little different manner.
I think that his approach could be characterized as using a cannon to
go after a fly. I think there are some ways, if there is a problem
here, to deal with it, but not this way. And I will suggest some
alternatives.
But let me say, if you remember what I said in my opening comments,
that part of the purpose of this legislation was to encourage the use
of chapter 13 and promote reorganization as opposed to the alternative
that is often used now, the liquidation that comes out of chapter 7 for
individual consumer debtors.
Let me say, as a matter of fact, that most chapter 13 plans now only
last 3 years. A 3-year bar would very harshly single out chapter 13 for
treatment not found anywhere else in the code, I think, contrary to the
intent of our legislation, which is to encourage chapter 13.
And it would be discouraged, even though this chapter is widely
regarded to be favored by creditors, who receive, as a result thereof,
a greater percentage of repayment, and by the debtors who sincerely
wish to repay their obligations.
So considering the motivation of this portion of the bill before us,
it seems to me that this amendment by the Senator from Nevada just
detracts to too great of an extent from what we are trying to
accomplish.
The proposed amendment is not proportional to the perceived need.
The bankruptcy courts already have broad authority to act to dismiss
repetitive, bad-faith filings by consumer debtors. Courts are using
this authority already.
There are already remedies in the current section 109, because one
subsection bars refiling within 180 days where the case was dismissed
by the court for the debtor's willful failure to abide by orders of the
court, or to appear before the court in proper prosecution of the case.
And then another subsection bars refiling for 180 days where the debtor
requested a dismissal following a creditor's filing of a motion to lift
the automatic stay. It seems to us that these provisions are adequate
to deal with abuses.
To the extent that section 109(g) is believed to be too narrow, or
otherwise inadequate, there are alternatives barring refiling any time
a case was dismissed ``for cause'' rather than for ``willful failure of
the debtor.'' That would better focus on abusive cases, we feel.
And yet another alternative, focusing on situations where the debtor
is abusing the system, would be to add a new subsection (3) to section
109. I will not go into exactly how I would phrase that, but we think
that these are better alternatives.
The proposed amendment would impose a hardship on honest debtors.
The amendment, in my view, is inflexible. In my view, it fails to
take into account the personal situation of consumer debtors.
As an example, a debtor who lost a job after filing and confirming a
chapter 13 plan typically has the case dismissed for failing to make
payments. Under this proposed amendment, that debtor would not be able
to refile and make renewed payments under a plan if he later gained new
employment.
Similarly, a debtor who, post confirmation, suffered an unanticipated
family expense--let us say, for instance, a child or a family member
became seriously ill without adequate insurance--may not be able to
service the plan payments and have the case dismissed. Now, the case
can be retried and payment resumed when the financial picture improves.
Under the proposed amendment, this is not an option.
The proposed amendment would not help creditors obtain repayment.
In these very situations that I just described, creditors would not
be able to receive repayment pursuant to the plan, even when the debtor
is willing and able to repay.
But, the bottom line, Mr. President, it seems to me, is that for a
lot of reasons chapter 13 is used less now than it was originally
intended when it was established. A lot of those cases are finding
their way into chapter 7. We ought to encourage them, both for the
benefit of the debtor as well as the benefit of the creditor to use
chapter 13, and that is one of the underlying, basic principles of this
legislation before us.
I feel the amendment proposed before us now will detract from that
original goal.
The PRESIDING OFFICER. Is there further debate?
The Senator from Nevada [Mr. Reid].
Mr. REID. Mr. President, I know the manager of the bill, the Senator
from Alabama, wishes to speak. But so there will be some degree of
ability to follow the debate, I would like to respond to my friend from
Iowa.
If, in fact, one of the reasons for this bill is to encourage more
chapter 13 filings, I think that is really not a reason to do it. We
are getting plenty of that.
As I indicated, the chapter 13 filings are going sky high. I
mentioned that the number of filing--the first year I gave was 1983,
there were 92,000 filings.
In 1992, we had 266,000 chapter 13 filings.
Mr. GRASSLEY. Mr. President, will the Senator yield?
Mr. REID. Yes.
Mr. GRASSLEY. I probably did not make the point as forcefully as I
should have. So consequently I think the Senator, maybe, misunderstood.
I am not saying there should be more, we should encourage any sort of
bankruptcy filings. But we are finding so many of these cases that
should be in chapter 13 are in chapter 7.
The point of the legislation is to encourage the use of chapter 13,
if it is necessary to file for bankruptcy, instead of chapter 7.
Mr. REID. I appreciate the clarification.
Mr. President, when my friend from Iowa stated he was not aware--I am
paraphrasing--of other areas in the Bankruptcy Code where they have
such a harsh time limit, that is really not factual either, I
respectfully submit, because chapter 7 filings have a time limit double
that suggested by my amendment.
So my point is that I think the section 109, for the reasons I have
mentioned and I will repeat them very briefly, does not adequately
prevent serial filings.
We have had courts that have told us, ``Please, Congress, do
something.'' I gave an example in my opening statement where one judge
said they could even file within the 6-month period, if they want, more
than one petition for bankruptcy under chapter 13. I think that is
wrong.
My friend from Iowa also said under section 109 there is broad
authority to act. The remedies in section 109 simply do not work. My
friend from Iowa gave the example of willful failure. I respectfully
submit again, Mr. President, if you go before a court and/or a jury and
you have a burden of proof to show ``willful,'' under the term
``willful failure,'' that is an extremely high burden that very few
factual cases can establish.
So the fact that the section 109 says ``willful failure,'' that does
not mean that many people will be able to meet that extremely high
burden. The examples mentioned by my friend from Iowa, if someone has
inadequate insurance because they lose their job--I know the bankruptcy
judges in Nevada. They are very kind people. If there was a tearjerker,
somebody's heartstrings were pulled, something happened such as
indicated by the Senator from Iowa, rule 60(b) is incorporated into
bankruptcy rule 9024. Thus, it is clear it applies, and Congress deemed
it to be used to prevent undue hardship.
In section 109, the issue is whether it is sufficient to deter serial
filings. The answer is no. The section was enacted in order to prevent
serial filings. The case law evidences it does not effectively achieve,
in any manner, the stoppage of the consistent filings of bankruptcy
petitions under this chapter. And it has led, as indicated by a few of
the court cases I have mentioned, to some very, very serious inequities
to small business people in particular.
This issue is--this is my wording; I think my friend from Iowa said
it was too harsh--too draconian is my word. I say that is not true.
Debtors will still be allowed to file bankruptcy. There will still be
available the enormous protection of the automatic stay. My amendment
provides they can only receive the benefits of chapter 13 once every 3
years. That seems fair. And that is what we are trying to do, is
present something to the courts that will work fairly, be fair to the
persons seeking protection of the bankruptcy laws and also fair to the
business people of America.
Chapter 13 works. We ought to be encouraging debtors to use it, is
what my friend from Iowa said.
If it works so well, how come over 50 percent of the chapter 13 cases
filed between 1982 and 1986 ended in dismissal? I do not know what they
will be in 1993. In 1992 they are up to 266,000 cases, and I am sure we
will have well over half of them dismissed.
If Congress passed section 109 to prevent abusive serial filings and
these filings are still occurring, how can we argue that the chapter
works? We ought not to be encouraging anyone to declare bankruptcy.
This is fundamentally bad policy.
The PRESIDING OFFICER. Is there further debate?
The Senator from Alabama [Mr. Heflin] is recognized.
Mr. HEFLIN. Mr. President, I think this is a well-intended amendment,
but as the distinguished Senator from Iowa said, it is a cannon to kill
a gnat. As I recall, in physics--I believe it was Newton--that for
every action there is an equal and opposite reaction. I really believe
in the overall situation, that this amendment is really self-defeating
for the intent toward which it is directed. The intent is that a debtor
ought to rarely use bankruptcy, and that if there is a way for him to
pay debts, that he ought to pay his debts.
I believe that people ought to pay their debts, and the concept of
creating chapter 13 was to provide a way to pay your debts.
In order to understand this situation, you have to understand the
difference between chapter 7 and chapter 13.
Chapter 7 is just outright bankrupting your debts. You say, ``Here
are my assets.'' In most instances there are none. And ``Here are my
liabilities,'' and the blackboard is erased completely. A debtor comes
out, and his creditors cannot go to court. They cannot execute on you.
They cannot garnish.
So chapter 7 is a procedure by which a debtor gets rid of his debts.
The intent of this bill is to say that a debtor ought to pay his
debts and, therefore, there are procedures in the Bankruptcy Code under
chapter 13 that will allow time to pay one's debts.
What we are talking about here with the pending amendment is, really,
to put an impediment into the process by which debts can be paid in
bankruptcy proceedings. The amendment is an impediment, because
normally a person who goes into bankruptcy goes to an attorney, not
knowing the difference between chapter 13 and chapter 7.
A debtor has never heard of chapter 13, and he has never heard of
chapter 7. He goes to a lawyer and, in most instances, the lawyer says,
``All right, there is chapter 7. We will put you in straight
bankruptcy, and you will not have to worry paying for your debts.''
We had testimony in the hearings from judges who said they had
inquired of people going into bankruptcy, and they had said that at
least 90 percent of those who went into bankruptcy, if they had known
they had an opportunity and a procedure by which they would have paid
their debts, they would have exercised that right, gone under that
procedure, and paid their debts. It is a matter of course sometimes in
order to arrange for them to pay it. That is the purpose, of giving
some protection to them during that time, but the ultimate goal is that
they pay their debts.
How does what I have said thus far apply to this amendment? What this
means is that those individuals who have gone under chapter 13 and
circumstances arise where they have to dismiss, if there is a 3-year
statutory bar where they cannot go back into chapter 13, what are they
going to do? Instead of dismissing, they are going to transfer to
chapter 7 by which they do not pay their debts.
This bill provides for a national bankruptcy review commission. The
problems that are present in this issue pertaining to the 6 months
under sections 109 (g)(1) and (g)(2) ought to be looked at by the
bankruptcy commission.
We dealt with trying to find some substitutes for some of the
problems, but we could not come up with what we thought was a studied,
carefully reviewed approach as to how to handle this without causing
the reactions that could occur.
To give some examples, and I think Senator Grassley gave some
examples in regard to this: A person goes in to a lawyer. He says they
are after me on my debts. They are fixing to take my automobile; they
are garnishing my salary; therefore, what do I do? The lawyer tells a
debtor there is bankruptcy. He tells him about chapter 7 and he tells
him about chapter 13. The debtor, if he goes with 13, in 90 percent of
the cases will select a procedure by which he pays his debts. He is
given some period of time to work out an arrangement by which he can
live.
For example, what he would normally do is take his salary and the
court will approve a plan by which 40 percent of his salary each payday
goes into a fund to pay his debts, and they allow him 60 percent to
live on; that is if he is a fairly low wager. If it is higher, it would
be on a different percentage basis.
If he goes into it and then he loses his job, he has no way of making
those payments. So what does he do? He may have to dismiss his case, or
the court may dismiss his case for the failure to pay according to the
plan. If he gets his job back, he is then hounded by his creditors.
Garnishment attempts start again; he has no protection, which he had
under chapter 13, since he was either voluntarily or involuntarily
dismissed from chapter 13. He, therefore, has the attachment that is
fixed and takes place.
What happens then? Under this, he cannot go back into chapter 13 and
pay his debts. So what does he do? He files chapter 7 and he outright
bankrupts his debts.
So the end result of what we are trying to achieve is a situation
where debts are paid and not avoided. What this amendment would achieve
is a situation in which chapter 7 filings will be increased.
Senator Grassley used, also, I believe, the illustration about a
situation where a catastrophic event occurs to a family where, for
example, a child or a family member becomes seriously ill without
adequate insurance and, therefore, the family has to give priority to
the treatment of their child. There are many instances such as this.
But the end result on all of this is that the opposite reaction that
takes place from this action, which is well-intended, is that it is
going to increase outright bankruptcies and not the procedures by which
a debtor pays his debts.
There is a statute prohibiting refilings under chapter 7 for a 6-year
period which addresses the question of abusive filings. But there may
be legitimate circumstances in a chapter 13 case such as loss of a job,
loss of salary, or a catastrophic event that occurs, which may warrant
a refiling to allow a debtor to pay his debts.
With that in mind, I feel like we must object to this amendment. But
I realize that what the Senator from Nevada is doing is a legitimate
concern. But how this is addressed where it does not create increased
filings of outright bankruptcy under chapter 7 has to be carefully
considered and carefully crafted in language. To me, this is something
that the national bankruptcy review commission ought to consider.
This has just come to our attention in the last 2 or 3 days, and we
have not held any hearings nor investigated it.
Therefore, under those circumstances, I say we must oppose this
amendment. I think the intent of the Senator from Nevada is good, but
the complexities of this matter are such that it may have an adverse
reaction rather than a positive action of what we want to obtain.
Mr. REID addressed the Chair.
The PRESIDING OFFICER (Mrs. Feinstein). The Senator from Nevada.
Mr. REID. Madam President, I appreciate the kind words of the Senator
from Alabama, but I respectfully submit that we should look at a judge
and his statement from the northern district of Illinois in a 1989
case.
Section 109 was in effect at that time. The judge said, among other
things, when pointing out the vastness of the problems with section
109: ``This is just the tip of the `abuseberg.''' A-b-u-s-e-b-e-r-g,
abuseberg. That is the word of a judge, not mine.
The fact is, Madam President, that we do not have the luxury of
waiting, with all due respect, for a review commission. Whenever
something is difficult here, we tend to turn it over to a committee and
have them study or hold hearings on it. There are times when that is
necessary. But here we have over a quarter of a million filings in
chapter 13, half of which have been dismissed--a quarter of a million
in 1 year, millions over a period of years.
I say the time is now to stop the serial filings, to stop the abuses.
We need to get rid of this ``abuseberg,'' as referred to by the judge
from the State of Illinois.
Madam President, everyone should understand, everyone from the State
of California, the State of Illinois, Alabama, Iowa, Nevada, and all
the other States, that when we go home and talk to our small business
people in townhall meetings, Chamber of Commerce, the Rotary clubs,
wherever we will run into them, we will have had the opportunity to
help business people in America because we are stopping abuses that
take place on a daily basis if we pass this amendment.
Remember what we are doing. We, with this amendment, are saying you
can only file bankruptcy petitions under chapter 13 within a 3-year
period. That is not very draconian. And I say to my friend from
Alabama, we will probably stop some chapter 13 filings, but that is
good because half of them are dismissed anyway.
Remember, when somebody files a chapter 13, there is an automatic
stay. They pay nothing. And they do not have to pay anything. There can
be an order entered that they pay 50 cents on a dollar. That person who
files a bankruptcy can thumb his or her nose at the judge and everybody
else and not pay a penny. There are no recriminations. Nothing can be
done. They can ignore the plan that is submitted, the plan that is
agreed to, and voluntarily dismiss the petition, turn right around
again and file and get another automatic stay. That is not fair.
Not only will we perhaps stop some chapter 13 filings, people will
find they cannot abuse the system as much, but we will stop bankruptcy
filings in general because people will find they cannot game the
system. We will stop, if this amendment passes, many more filings.
Now, let us talk about chapter 7. Chapter 7 proceedings are not all
that bad if you are somebody that is owed money and you have
collateral. It is better than a 13 because under chapter 13, if this
amendment does not pass, it can just keep going and going, and they, as
I indicated in my statement earlier, Madam President, keep filing these
petitions and you cannot get your collateral back. Whether it is a
piece of real estate, a washing machine, a house, whatever it is, you
cannot get it back. They can just continually file these petitions. At
least with a chapter 7 there is a discharge, and if you have collateral
you get to keep that. You are going to get your collateral back.
So there is nothing really bad about chapter 7 if you are
collateralized. So let us not make this amendment a battle of lawyers'
terminology. What does this amendment do? Under the present bankruptcy
law, a person can file a chapter 13 proceeding any time they want. We
have had one court here that said the 6-month provision which is
written in law, that is not even any good. So you can file a proceeding
tomorrow, 2 months from now, 2 months from then.
What I am saying and what this amendment is saying is that you should
only be able to file every 3 years. That is not draconian. As I have
indicated, there is provision within the law, if there is some personal
tragedy in the life of the person who is under chapter 13--death of a
spouse, house burning down--there is provision in the law now under
60(b) as incorporated under the Federal Bankruptcy Act that you can ask
for special relief. That is fair. That is reasonable.
If there were ever a probusiness amendment in the 200-plus years this
Senate has been part of this great Government, if there were ever an
opportunity to protect business, this is it. I repeat, anyone going
home and meeting with small business people, I respectfully suggest,
who does not vote for this amendment is voting against small business
people's ability to have their bills collected.
Now, I also believe that we have lost sight of one thing, and that is
when you incur a debt you should pay it. I wish to give all the relief
I can to people who find themselves--and I mentioned that in my opening
statement--with a problem, and that is why we have bankruptcy laws. But
how much do we have to bend over backwards to protect those people who
are willing to abuse the system?
Can we not look out for people who are willing to put their sweat and
their blood into a business and they extend credit to someone, they
sell them something, and that is collateralized and they cannot get it
back. Should we not be concerned about them a little bit? I am saying
my amendment will help. It will stop serial filings. It will stop
people who want to abuse the system, and those who find themselves in a
real emergency--and it will be extremely rare; last year, 1992, the
last year for which we have records, 265,601 people filed under chapter
13. There will be a few people under that who might need to comply with
rule 9024 of the bankruptcy code and they can have relief if in fact
something goes wrong--as I indicated, a home burns down or something
happens.
This is a probusiness amendment. This amendment is bipartisan.
Republicans support it, and Democrats. The administration supports the
amendment. So I think we should just buy down on this and protect the
business community of America for a change.
I ask for the yeas and nays on this amendment.
It is my understanding, I say to my friend from Alabama, that
leadership does not want to vote right away, and so I ask for the yeas
and nays and it can be set at whatever time the managers or the
leadership would decide. But I would ask for the yeas and nays on this
amendment.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be.
The yeas and nays were ordered.
Mr. HEFLIN addressed the Chair.
The PRESIDING OFFICER. The Senator from Alabama.
Mr. HEFLIN. Madam President, I want to spend a moment to comment on
Senator Reid's amendment to section 109 to bar refiling of any chapter
13 within 3 years.
Most chapter 13 plans now only last 3 years. A 3-year bar would
harshly single out chapter 13 for treatment not found anywhere else in
the code. The result of this amendment is that chapter 13's will be
discouraged, even though this is widely regarded to be favored by
creditors, who receive a greater percentage of repayment, and by
debtors who sincerely wish to repay obligations. This proposal is
inconsistent with Congress' stated policy to promote chapter 13 as an
alternative to chapter 7 for individual consumer debtors.
The proposed amendment is not proportional to the perceived need, in
that the bankruptcy courts already have broad authority to act to
dismiss repetitive, bad faith filings by consumer debtors; courts are
using this authority already. In addition, there are already remedies
in current section 109--109(g)(1) bars refiling within 180 days where
the case was dismissed by the court for the debtor's willful failure to
abide by orders of the court, or to appear before the court in proper
prosecution of the case. Section 109(g)(2) bars refiling for 180 days
where the debtor requested a dismissal following a creditor's filing of
motion to lift the automatic stay. These provisions appear to be
adequate to deal with abuses.
This amendment would also propose a hardship on honest debtors
because it is inflexible, and fails to take into account the personal
situations of consumer debtors. For example, a debtor who lost a job
after filing and confirming a chapter 13 plan typically has the case
dismissed for failure to make payments. Under this proposed amendment,
the debtor would not be able to refile and make renewed payments under
a plan if he later gained new employment.
Similarly, a debtor who, post confirmation, suffered unanticipated
family expenses, for example, a child or family member becomes
seriously ill without adequate insurance, may not be able to service
the plan payments and have the case dismissed. Now, the case can be
refiled and payments resumed when the financial picture improves. Under
the proposed amendment, this is not an option.
Finally, the proposed amendment would not help creditors obtain
repayment because in the situations described above, creditors would
not be able to receive payment pursuant to the plan, even when the
debtor is willing and able to repay.
For these reasons, I am opposed to this amendment.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Chapter 13 Refiling
We are advised that Senator Harry Reid of Nevada may offer
an amendment to the Omnibus Bankruptcy Bill which would amend
section 109 of the Bankruptcy Code to add the following new
subsection:
(h) Notwithstanding any other provision of the section, no
individual may be a debtor under chapter 13 who has been a
debtor in a case pending under that chapter at any time in
the preceding three years.
The following points should be considered in weighing the
amendment:
Although creditors receive an estimated $1.5 billion a year
in payments through chapter 13 plans, the proposed amendment
would discourage chapter 13 filings. Former chapter 13
debtors could still file chapter 7 liquidation cases within
the three-year period. Unsecured creditors generally receive
little or nothing in consumer chapter 7 cases.
The proposed amendment does not distinguish between former
chapter 13 debtors who completed their plan payments, those
who made some payments, and those who did not make any
payments.
The period during which former chapter 13 debtors would be
barred from refiling under that chapter is six times longer
than the 180-day prohibition on refiling set out in existing
subsection 109(g). Furthermore, the proposed amendment covers
all former chapter 13 debtors, not just the potentially
abusive former debtors targeted by the existing statute.
Section 109(g) is limited to dismissals by the court for
willful failure to abide by court orders or to appear for
hearings, and to voluntary dismissals after a creditor has
filed a motion for relief from the automatic stay.
Let me just briefly say, and I will bring this to a close since
Senator Moseley-Braun has been a good while waiting here to do some
other things, the matter of repetitive filings is an issue, and I think
in order to handle it a national Bankruptcy Review Commission is the
proper forum to give that consideration.
This amendment has come up recently, and we have not had time to
consider all of the ramifications that might take place, and it is a
complex issue.
I quoted awhile ago about the law of physics, and now I have had
given to me by very able staff people the exact quote, that Isaac's
third law of motion is that ``force always comes in pairs. For every
force there corresponds an equal force in the opposite direction. This
is sometimes called the law of action and reaction.'' And the source
for that is the Encyclopedia Americana, so I wanted to be able to
correct what I said before. It is really Newton's third law of motion.
Madam President, I ask unanimous consent that the Reid amendment 1637
be laid aside until 5:30 p.m. today, and that at 5:30 p.m., without
intervening action, the Senate proceed to vote on or in relation to the
amendment, with no second degree amendments in order to the Reid
amendment 1637.
The PRESIDING OFFICER. Is there objection? The Chair hears none, and
it is so ordered.
Mr. REID addressed the Chair.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Madam President, I have just a minute or two, and then and
I will go back to my office until 5:30.
I would say again, in reply to my friend from Alabama, for whom we
all have the greatest respect--there is no one in this Chamber to whom
we look more for leadership on matters relating to judicial affairs
than we do Judge Heflin.
So I have the greatest respect for him. However, I would say let us
switch the burden. If in fact there is something wrong with this
amendment--which I do not think there is; I think it has been clearly
illustrated why it would help the business community of America and not
help any one person that wants to file bankruptcy--let the Bankruptcy
Review Commission look at this amendment after it passes rather than
reversing it, and saying let us see if there is a better way can we do
it. This is the best way to stop serial filings. Right now there is no
way to stop serial filings. This would stop it.
Mr. GRAHAM. Section 214 of this bill addresses cases that turn upon
issues involving guarantees and who may be considered an ``insider''
under the Bankruptcy Code. It is my understanding that the Deprizio
decision, which changed the understanding of bankruptcy law by
expanding the definition of ``insider'', has been applied to lenders
retroactively, even though the challenged transactions were made before
Deprizio was decided. In fact, it is my understanding that the
interpretation of the Bankruptcy Code by those courts which follow
Deprizio permits a Trustee in Bankruptcy to recover from a lender who
is innocent of wrongdoing and deserving of protection, merely because
he sought a guarantee for the debt.
Mr. HEFLIN. The Senator is correct in his understanding. Section 214
of the bill is intended to legislatively overturn Deprizio. We do not
believe that the Deprizio decision correctly interprets what the
congressional intent was when the Bankruptcy Code was enacted in 1978.
Section 214 of this bill is intended to return the status and
understanding of law to that which predated the Deprizio decision.
Mr. GRAHAM. Section 602 of this bill states that the change in the
Bankruptcy Code shall only apply to cases which are filed after the
date of enactment, thereby eliminating the Deprizio issue from future
cases. Could this bill also eliminate the Deprizio issue from pending
cases, if courts considering Deprizio questions chose to follow the
lead of Congress when interpreting the application of Section 550 of
the Bankruptcy Code?
Mr. HEFLIN. Merely because this bill is otherwise to be applied
prospectively does not reflect continued viability of the Deprizio
decision. Again, it must be emphasized that the Deprizio decision was
and is not an accurate reflection of congressional intent.
Mr. MURKOWSKI: Madam President, I intended to offer an amendment that
would have addressed a problem that many financial institutions
currently face in dealing with bankrupt customers.
Under last year's budget reconciliation bill, Congress required all
financial institutions to report to IRS discharges of indebtness in
excess of $600. This information reporting requirement applies even if
the debtor is not subject to tax on the discharged debt. This
information reporting requirement places a very high on cost on
financial institutions and will most likely result in a flood of
useless information being reported to the IRS.
IRS has interpreted the law to require financial institutions to file
such information returns when debts are discharged in bankruptcy even
though it is the bankruptcy court, not the financial institution, that
actually discharges the debt. Unlike other forgiven debts that must be
included in the debtor's income, debts discharged in bankruptcy in
almost all cases are not deemed income to the debtor under the tax
code.
Madam President, I believe that the appropriate filer on the
information should be the bankruptcy court system. The courts have all
the required information concerning the discharge of such debts and
they have the capacity to consolidate such information into a single
filing.
My amendment would have shifted the reporting requirement in
bankruptcy cases from the financial institutions to the bankruptcy
courts. However, I have been informed that the House of Representatives
deems my amendment to be a revenue measure and, as such, cannot
constitutionally be included in this Senate bill. I will therefore not
offer my amendment on this time. But I hope that when the House adopts
a bankruptcy reform bill it will include a provision addressing this
problem.
Mr. HEFLIN. Madam President, I am sympathetic to the issue that the
distinguished Senator from Alaska has raised. Many financial
institutions in my State have expressed concern about these reporting
requirements. And the Senator is correct that in nearly all consumer
bankruptcies the discharged debt will not be deemed income for tax
purposes.
I believe the Senator's proposal to require the bankruptcy trustee to
report this information would be an appropriate solution to this
problem. And I appreciate the Senator's decision to withdraw his
amendment. If the House includes such a measure in its bankruptcy bill,
I would certainly support the measure.
Mr. MURKOWSKI. I thank the distinguished chairman of the Judiciary
Committee for his assistance on this important issue.
Mr. SASSER. Madam President, I would like to engage my distinguished
colleague, the chairman of the Subcommittee on Courts and
Administrative Practice in a brief colloquy concerning State laws on
the timing and perfection of purchase money security interests and how
they relate to the enabling loan preferential transfer exception found
in section 547 of the Federal Bankruptcy Code.
Mr. HEFLIN. Yes, Madam President, I would be happy to do so. First,
let me point out that under current Federal law a trustee may not avoid
a transfer that creates a purchase money security interest in property
acquired by a debtor that is perfected on or before 10 days of the
debtor receiving possession of the property. The Judiciary Committee
approved language to extend the Federal time period from 10 to 20 days.
Mr. SASSER. Yes, Madam President. The changes made by the committee
will be a significant improvement to Federal bankruptcy law, and will
provide creditors with sufficient time to perfect their security
interest. Since the Senate is addressing the purchase money security
issue, I thought it would be advisable to clarify a related issue that
has caused unnecessary litigation throughout the country and in my home
State of Tennessee.
The issue is whether State laws that allow a longer period of time to
perfect a lien by allowing the creation of the lien to ``relate back''
to an earlier date contravene the Federal Bankruptcy Act. While Federal
bankruptcy courts have long recognized that State law defines and
governs the manner and timing of motor vehicle lien perfection, there
has still been some dispute in the lower courts regarding State
``relation back'' statutes.
Under most state motor vehicle title perfection laws, if the
requisite steps necessary for perfection are completed on a timely
basis, the date of perfection ``relates back'' to the date the security
interest was created or attached. These are commonly known as
``relation back'' laws. For example, Tennessee has a ``relation back''
State titling law that allows creditors of motor vehicles 20 days to
perfect the lien to protect their security interest.
Although the new change in Federal law to 20 days would protect
States like Tennessee, there are States that allow longer than 20 days
to perfect the lien and have ``relation back'' laws that take into
account each State's consideration of what is commercially reasonable
and necessary to perfect a motor vehicle lien. For example, the
documents necessary to perfect used car titles subject to payoff held
by out-of-state institutions are not readily available. This causes a
delay in the perfection process.
These ``relation back'' statutes protect the lien holder since the
lien holder usually is not responsible for the delay. In addition, a 30
day ``relation back'' law is the model set out by the Uniform Vehicle
Code and Model Traffic Ordinance.
Mr. HEFLIN. The Committee's decision to increase the time period to
20 days was proposed to conform bankruptcy law practices to most
State's practices.
I would like to clarify just one point with the Senator from
Tennessee, however. That is that while the date of perfection
is determined by State law, including these ``relation back'' statutes,
they do not affect the time of transfer pursuant to section 547. Would
the Senator from Tennessee agree on that point.
Mr. SASSER. Yes indeed, Madam President. That would be my view also.
The ``relation back'' provision merely relates to determining when a
security interest in a motor vehicle is perfected in accordance with
State law. Clarifying that ``relation back'' statutes are consistent
with the Federal law does not change the uniformity of the Federal law.
As the Chairman knows, Federal uniformity is keyed to the date on which
the debtor receives possession of such property which then activates
the running of the 20 day-period under section 547.
Mr. HEFLIN. On this point, I wonder whether the Senator from
Tennessee could cite any Federal court decisions as persuasive
authority on this matter.
Mr. SASSER. It is my understanding, that every appellate circuit that
has examined this issue has held that State laws that allow the timing
of perfection to ``relate back'' to an earlier date are consistent with
and not in conflict with Federal bankruptcy law in general, and section
547 in particular. I would note for the chairman In Re Basenlehner, 918
F.2nd 928 (11th Cir. 1990); In Re Hesser, 984 F.2nd 345 (10th Cir.
1993). The eleventh circuit came to a similar conclusion in the case of
In Re Howard, 920 F.2nd 887 (11th Cir. 1991).
I would say to the chairman that my purpose in this discussion is to
establish that, although there is no statutory language to codify these
court cases, they are consistent with Federal bankruptcy law.
Mr. HEFLIN. I would say to my colleague that it is appropriate at
this time for the Senate to state its intent to confirm the
interpretations of these circuits.
Mr. SASSER. I thank the chairman for his courtesy in engaging in this
discussion and for clarifying this point.
Mr. GORTON. Madam President, I am pleased to be a cosponsor of the
bankruptcy reform bill which is before the Senate today. I wanted to
acknowledge and compliment the chairman of the committee in particular
for including one provision which is especially important to the
largest employer in my State, the Boeing Co. This provision is a
clarification of section 1110 of the Bankruptcy Code.
Section 1110 of the Bankruptcy Code provides special protections to
those who finance or lease aircraft. Under these provisions, in the
event of a bankruptcy, a debtor must within 60 days either agree to
perform its obligations under the terms of the lease or must allow the
lendor or lessor to retrieve the aircraft. In other words, if an
airline goes into bankruptcy, the company that has financed the sale of
the airlines' leased planes will be able to get the plane back after 60
days. This is extremely important to both the manufacturers of aircraft
and the airlines.
As a member of the National Commission to Ensure a Strong Competitive
Airline Industry, I strongly supported the clarification of section
1110. The language included in this bill today will encourage
traditional aircraft lenders to get back into the marketplace. It will
result in lower charges to the airlines for financing aircraft as the
additional risk of the present uncertain situation will be removed.
Aircraft are great collateral; their value is high and their
depreciation low. But, in the present situation, airlines are being
charged a premium only because the financier must cover the unlikely
situation of a bankruptcy situation where assets, including aircraft,
are frozen. This provision removes that risk. The result will be lower
costs to the airlines. Instead of using their cash to pay extra premium
costs, their funds will be freed up to get on with the purchase of new
aircraft. This provision is good for the airlines, good for Boeing, and
most especially good for many thousands of workers and their families
in Puget Sound.
sbic bankruptcy reform provision
Mr. BUMPERS. Madam President, I rise in support of S. 540, the
Bankruptcy Reform bill, and ask that the following remarks pertaining
to section 208 of the bill be included in the Record.
A few years ago, some failing SBIC's discovered they could thwart the
Small Business Administration's [SBA] efforts at recovery by using the
bankruptcy code and filing under chapter 11 as a debtor in possession.
This allowed the failed or failing SBIC management to continue to run
the company and receive salaries, often at levels well above the amount
the SBA would have approved, and to pay significant amounts for
attorneys, accountants and other services.
In an infamous case in 1989 called River Capital Corp., the
Bankruptcy Court for the Eastern District of Virginia discharged the
SBIC debtor from paying $35 million in principal and interest to the
Government. Several other large bankruptcy filings soon followed. Under
an SBA receivership, which was the traditional method of liquidating
failed SBIC's, millions of dollars lost in bankruptcy could have been
used instead to repay SBA and taxpayers. River Capital and other
outrageous cases were among the issues examined in a series of hearings
held by the Senate Small Business Committee beginning May 9, 1990.
Fifteen SBIC's have obtained protection under chapter 11 of the
Bankruptcy Code over the last 4 years. SBA had provided over $125
million in leverage to these SBIC's. If SBA had been appointed receiver
or obtained an alternative liquidation in such cases, it would have had
an infinitely better chance to recover at least part of these funds.
An SBIC's ability to avail itself of the use of the Bankruptcy Code
has proven extremely detrimental to the liquidation and collection
efforts of the Small Business Administration.
As a subordinated and unsecured creditor, SBA's ability to recover on
a failed SBIC's indebtedness is compromised when an SBIC avails itself
of the bankruptcy provisions of the Bankruptcy Code; the indebtedness
to SBA is paid only if funds are left over after other, secured
creditors are paid and fees are paid to management.
Prohibiting SBIC's from seeking bankruptcy protection, as this bill
does, would result in greater savings for the SBA and the taxpayer
because administrative costs associated with bankruptcy proceedings are
higher than the costs associated with SBA receivership proceedings.
As receiver, the SBA is able to investigate thoroughly the SBIC
operation and remove management if they are incompetent, self-
interested or dishonest. Bankruptcy proceedings allow failed SBIC's to
continue to pay their managers handsomely and to speculate with
Government money.
There is precedent for this proposal: Congress has seen fit to deny
the use of the bankruptcy code to other entities which have Government
backing or for which there exists a sufficient public policy reason,
including railroads, banks, savings and loan associations, credit
unions, and insurance companies. SBIC's are closely regulated entities
which would not exist without the support provided by SBA.
Companies like SBIC's and those listed above--railroads, savings and
loan associations, credit unions, and insurance companies--which
receive Federal financial assistance, should forgo the ability to seek
bankruptcy in return for receiving Federal financial assistance.
This provision is strongly supported by SBA Administrator Erskine
Bowles and by the Clinton administration, just as it was by the Bush
administration when this bill was last considered by the Senate. I
strongly commend Senator Heflin and the Judiciary Committee for
including this provision in this Bankruptcy Reform bill and I urge my
colleagues to support it.
I ask unanimous consent that the attached articles from the Wall
Street Journal February 22, 1994, be printed in the Record.
There being no objection, the material was ordered to be
printed in the Record, as follows:
[From the Wall Street Journal, Feb. 22, 1994]
Agency Demands Restrictions on SBIC Bankruptices--Quick Chapter 11
Filings Now Force Government To Swallow Big Debts
(By Jeanne Saddler)
Washington--The Small Business Administration is moving to
curb abuses in its venture-capital program. But it wants more
help from Congress.
SBA officials say they will press lawmakers to pass
legislation to bar failing small business investment
companies, or SBICs, from escaping debts owed to the
government by declaring bankruptcy. ``We want Congress to act
because we've found ourselves waiting at the gate too many
times when licensees rushed to bankruptcy court,'' Robert
Stillman, the SBA's new associate administrator for
investment, said in an interview.
The Senate plans to consider legislation this year to close
the bankruptcy loophole, but so far there isn't any matching
bill in the House. Meanwhile, SBA officials say, the agency
plans to begin a revamped SBIC program, including closer
scrutiny of applicants, under reforms passed by Congress in
1992. The reforms had been delayed because of the impasse
over the bankruptcy legislation.
Under the SBIC program, privately owned firms use a
combination of federally guaranteed debt and private capital
to help finance small businesses. Problems arose in the
program in the late 1980s when scores of SBICs failed because
of the recession and poor management. Although the SBA sold
companies' remaining assets, taxpayers were left holding the
bag for hundreds of millions of dollars of failed SBIC
investment, leading Congress to pass a program reform law in
1992.
But in 14 of the cases, fast-moving entrepreneurs filed for
bankruptcy before the SBA could claim any assets. Because the
government is a subordinate debtor according to the law that
established the program, more than $70 million of federal
debt owed by the investment firms is likely to be wiped out.
In one of the most serious cases, River Capital Corp. of
Springfield, Va., spent $28 million in government funds on
bad investments and filed for reorganization under Chapter 11
of the Bankruptcy Code. The court eliminated its debt.
The Senate passed legislation last year to bar SBICs from
seeking bankruptcy protection from government debts, but a
companion measure died in the House. Sen. Dale Bumpers, the
Arkansas Democrat who heads the Small Business Committee,
says he plans to try again to pass the bill. But the outlook
is uncertain in the House, where legislation last year failed
to win the backing of Rep. Jack Brooks, the House Judiciary
Committee chairman.
Congressional aides won't speculate on why the provision
didn't pass muster with Mr. Brooks or whether he will back a
measure this year. But other industry and government
officials believe the Texas Democrat may propose and back the
bankruptcy ban this year because the ban would technically
add a bit of revenue to the federal budget.
Regardless of how the legislative differences are worked
out, the SBA is now preparing to upgrade standards for
licensing SBIC applicants. ``We're going to license very
hard,'' SBA Administrator Erskine Bowles said in an
interview. ``We'll only license highly experienced venture
capitalists, and we'll make sure those people bring enough
private capital into the companies.''
A new licensing unit in the SBA's investment division will
be responsible for the more intense scrutiny of applicants.
The agency already has received preliminary applications for
the reformed SBIC program, but Mr. Stillman said he is
returning them until the final regulations are published so
applicants can carefully scrutinize the new rules.
In a speech to a group of SBIC executives earlier this
month, Mr. Stillman, who spent more than 30 years as a
principal with Wall Street investment firms, said that
quality of management will be a key to an SBIC's future
success. ``I like to say I've only made one mistake in my
entire career, and that was the serious one of sometimes
investing in the wrong people,'' he added in the interview.
Under the reforms passed by Congress in 1992, the SBIC
program is now attracting increased interest because of a
change in how the federal support is structured. In the
original program, created in 1958 to encourage financial
backing for high-risk ventures, investment companies got
government funds through debentures which, like loans,
require regular interest payments. Thus, the licensees often
borrowed additional money to make interest payments while
waiting for their basic investments to mature. Venture-
capital investments typically take years to produce dividends
or profits for their financial backers.
The new program will allow investors to use a new debt
instrument called a participating security that some believe
is better suited to long-term investments. The government,
through the SBA, will hold a participating-security interest
in the SBICs. That means the government won't be repaid until
the investment company has retained earnings from its
investments and is paying dividends to all its investors.
Uncle Sam will also get a small share of profits from the
SBIC's investments.
Fixing the SBIC program's remaining problems has taken on
new importance. As reported, the Clinton administration's
proposed budget for fiscal year 1995, which begins next Oct.
1, would more than double the loan funds available to the
investment firms.
The SBA expects to license about 200 new SBICs, raising the
total to 480 from 280 currently, with a combined total of
private investment capital of $2.3 billion. Because those
companies can gain double their private capital in government
investment funds, Mr. Stillman said the companies will have
access to about $4.5 billion in government investment
dollars.
That nearly $7 billion in new venture-capital money
available in fiscal 1995 would be in addition to the $3
billion now in the program, meaning the total capital
available through the program would jump to $10 billion from
$3 billion.
____
[From the Wall Street Journal, Feb. 15, 1994]
How To Lose Federal Millions and Owe Nothing
(By John R. Emshwiller)
A loophole in a federal small-business lending program
helped an entrepreneur named Peter Van Oosterhout to charge
American taxpayers $28 million for his own bad investments,
regulators say.
Mr. Van Oosterhout, 62 years old, was also able to use some
of this money to invest in a tiny Salt Lake City company
whose stock price has soared, even as it has been losing
money.
Mr. Van Oosterhout got the major part of his investment
funds from the Small Business Investment Company program, in
which privately owned firms, known as SBICs, use a
combination of federally guaranteed debt and private capital
to help finance small businesses. Currently, some 280 SBICs
have about $850 million in government-backed debt--as well as
$2.3 billion in private funds.
The SBIC program was created by Congress in 1958 as a way
to help promote the growth of small businesses. To get SBIC
status, investment firms have to apply to the Small Business
Administration, which oversees the program. SBICs have helped
hundreds of small businesses grow and prosper, including
Apple Computer Inc. and Federal Express Corp.
The problem is that during the 1980s, when making risky
investments was commonplace, hundreds of investments went
sour, dozens of SBICs sank and taxpayers were left footing a
bill that has been estimated at several hundred million
dollars. The SBA has had to go to court in recent years to
seize control of some six dozen failing SBICs in order to
sell assets and try to recover at least some of the
taxpayers' money.
Probably no single case better exemplifies the abuses in
the program, say SBA officials, than that of Mr. Van
Oosterhout and his SBIC, River Capital Corp., of which he is
president and has been a major owner, regulators say.
Mr. Van Oosterhout had been a leading figure in the SBIC
industry even before he became president and part owner of
River Capital. In 1983, he was chairman of the National
Association of Small Business Investment Companies. He helped
establish River Capital, based in Springfield, Va., a few
years later, and with about $7 million in private funds and
$28 million from the government, he developed it into one of
the country's biggest SBICs, financing dozens of companies.
The SBA wasn't able to recover any taxpayer dollars in the
case of River Capital. Before it could seize control of the
foundering firm, River Capital filed for protection under
Chapter 11 of the federal Bankruptcy Code in 1989.
And there, regulators say, is the loophole. Congress
designed the SBIC program to make the government a
subordinate debtor. So in bankruptcy reorganization
proceedings, the debts owed to the government can be canceled
if the court finds there isn't enough money to pay off all
the creditors.
The availability of bankruptcy offers a ``sweet situation
for the SBIC owner'' in which the ``government becomes the
convenient fall guy,'' says Martin Teckler, deputy general
counsel for the SBA. ``It is a big problem.''
Bankruptcy court eliminated River Capital's $28 million
federal debt. Fourteen other SBICs have also filed for
bankruptcy in the past several years, SBA officials say.
Including River Capital, more than $70 million of federal
obligations have been or are expected to be wiped out, says
Mr. Teckler.
Federal officials say they believe fraud kept them from
seeing the SBIC's problems sooner. Mr. Van Oosterhout is
facing criminal charges in a Cleveland federal court on
fraud, conspiracy and extortion charges stemming from his
operation of River Capital. His trial is expected to begin
sometime this year.
Mr. Van Oosterhout has pleaded not guilty to the charges.
Neither he nor his attorney returned phone calls seeking
comment.
The indictment charges him with being part of a ``scheme to
misrepresent'' the financial health of River Capital and its
investment portfolio in order to keep federal money flowing.
For instance, two of the portfolio companies allegedly
claimed equipment that they didn't actually own.
Along with three others, Mr. Van Oosterhout also allegedly
tried to extort money from a businessman who supposedly was
in debt to one of them. The four are charged with setting
fire to the businessman's car and threatening his wife,
according to the indictment.
River Capital is still in business, though it is no longer
in the SBIC program. The company emerged from bankruptcy in
1991, still in possession of some of its federally backed
investments.
One of those investments has turned into a winner. For a $1
million investment, starting in the early 1980s, River
Capital's predecessor, which Mr. Van Oosterhout helped
operate, picked up about 1.7 million shares of Alanco
Environmental Resources Corp., a Salt Lake City company that
owns some dormant mines and manufactures pollution-control
equipment. Mr. Van Oosterhout has been an Alanco director
since 1983.
Over the past 20 months, River Capital has sold more than
one million Alanco shares, according to Alanco filings with
the Securities and Exchange Commission. The filings didn't
reveal what prices River Capital received for its stock, but
it paid about 63 cents a share. In that period, Alanco traded
in a range of about 63 cents a share to about $6. Recently,
the stock has hovered around $5.
A woman who answered the phone at River Capital's office
said all questions would have to be directed to Mr. Van
Oosterhout.
Alanco's stock-market performance contracts sharply with
its financial performance. With 19.4 million shares
outstanding, its market value has surged to about $90
million, more than a threefold increase in the past year.
Yet, in the past four years, the company has reported
accumulated losses of $8 million, including a $4.1 million
loss for fiscal 1993, ended June 30. Revenues for that year
were just $10,987.
Alanco, however, has produced a steady stream of upbeat
press releases--particularly concerning various pollution-
control deals in China, including one ``potential
multibillion dollar'' contract.
Alanco has also announced a series of financing
arrangements over recent years, many of which never came to
pass. And one that did-- a $72 million credit line--was
arranged by one Mario Renda through a New York City firm
called Financial Security Corp.
In the early 1980s, Mr. Renda was a deposit broker who
placed billions of dollars of deposits in thrifts and banks
around the U.S. He was convicted or pleaded guilty in 1987 in
three different courts to crimes ranging from bank fraud to
racketeering to tax evasion. Prosecutors and investigators
contended that Mr. Renda's crimes contributed to the demise
of several dozen thrifts and banks, partly by arranging for
fraudulent loans.
Brent Dyer, Financial Security's president, didn't return
repeated phone calls. A woman answering the phone at
Financial Security identified Mr. Renda as a vice president
of the company. Mr. Renda denies the title but admits he was,
for a time in 1992, Alanco's marketing director. An Alanco
spokesman says the SEC has been investigating the company's
announcements but that the company has done nothing wrong.
SEC officials decline to comment.
The SBA has been urging Congress to bar SBICs from seeking
bankruptcy protection. A bankruptcy reform bill containing
such a measure, passed the Senate last year but died in the
House of Representatives.
Though the SBA has charged its SBIC regulations to give it
more protection against bankruptcy losses, the agency still
believes congressional action is necessary, says Mr. Teckler,
the SBA's deputy general counsel. Otherwise, SBICs could
continue to ``stick it to the government,'' Mr. Teckler says.
Bankruptcy filings--selected small business investment company
filings--SBA leverage at filing
Millions
River Capital....................................................$28.50
First Connecting SBIC.............................................27.95
Capital Marketing.................................................24.35
Questech Capital..................................................12.00
Unicorn Ventures II................................................6.70
Unicorn Ventures...................................................6.00
Continental Investors..............................................5,00
Diamond Capital....................................................4.00
Washington Ventures................................................3.25
Avdon Capital......................................................3.00
Source: Small Business Administration.
Mr. GORTON. Madam President, I am pleased to rise today to express my
support for the Bankruptcy Amendments Act of 1993. I am a cosponsor of
this legislation, which serves as a long awaited reform of the Nation's
outdated bankruptcy law. It is an attempt to streamline the prevailing
system and to enhance the effectiveness of the Bankruptcy Code adopted
in 1978.
The compelling need for bankruptcy reform was highlighted last year
in hearings held by the Judiciary Committee. These hearings brought to
light the fact that in 1992 alone, over 1 million bankruptcy cases were
filed, a new record. Even as the economy improves, there are likely to
be increasing numbers of bankruptcies for the foreseeable future,
because individual debt loads continue to remain at high levels.
With this significant rise in the number of bankruptcies being filed,
cases are backing up in our Nations courts, increasing the time
necessary for individuals and firms to get back on their feet and again
contribute to the Nation's economy. It is precisely this slowing effect
on our economy that S. 540 is designed to correct.
I commend the chairman of the committee and the Senators who worked
on this legislation for drafting this bill and its encompassing
provisions which, I believe, will improve the current laws governing
bankruptcy and help get the economy moving again. A streamlining of the
Nation's bankruptcy system is long overdue and, if enacted, will be of
benefit to every American.
The major provisions of this bill, together serve to improve the
bankruptcy system which has been in place for 16 years. One of the most
important sections of S. 540 would establish a new National Bankruptcy
Review Commission to study the effectiveness of the current bankruptcy
procedure and report on policy improvements. The bill also contains a
number of specific measures directed at problems in the existing code
and new ideas which will serve to expedite the bankruptcy process.
I urge my colleagues to join me today in support of the Bankruptcy
Amendments Act of 1993. All Americans have an important stake in
ensuring that our Nation's bankruptcy procedures operate efficiently
and fairly so that individuals and corporations seeking bankruptcy
protection may complete the process sooner and continue to contribute
to our Nation's economic vitality. I believe that S. 540 is an
important step in that direction.
Ms. MOSELEY-BRAUN addressed the Chair.
The PRESIDING OFFICER. The Senator from Illinois.
ORDER OF PROCEDURE
Ms. MOSELEY-BRAUN. Madam President, I ask unanimous consent to
proceed as if in morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
Ms. MOSELEY-BRAUN. Thank you, Madam President.
____________________