[Congressional Record Volume 140, Number 86 (Thursday, June 30, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: June 30, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
      SUPPORT THE SPOUSAL EQUITY IN BANKRUPTCY AMENDMENTS OF 1994

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                     HON. LOUISE McINTOSH SLAUGHTER

                              of new york

                    in the house of representatives

                        Thursday, June 30, 1994

  Ms. SLAUGHTER. Mr. Speaker, today I am introducing the Spousal Equity 
in Bankruptcy Amendments of 1994, legislation to give high priority to 
child support and alimony payments in the event of bankruptcy.
  The 1978 overhaul of the Bankruptcy Code was necessary to reexamine 
bankruptcy procedure and strike a careful balance between the rights of 
creditors and debtors. This year, the Code should again be revisited. 
The passage of time has rendered a number of provisions obsolete and 
current problems not originally envisioned must be addressed.
  One such problem concerns alimony and child support payments. While 
the current Code does not allow courts to forgive outstanding debts 
``in the nature of support,'' child support and alimony are given no 
priority when a debtor has assets and the proceeds are distributed. 
Thus, even while creditors can be paid, spouses and children who are 
entitled to support are not likely to be the beneficiaries. My 
legislation would elevate child support and alimony from their current 
status as general unsecured debts to formally prioritized debts, 
thereby ensuring that a spouse with dependent children will receive 
support payments without waiting for years.
  In addition, my legislation establishes a Bankruptcy Commission to 
study the impact of bankruptcy laws on the family, and it protects 
child support and alimony payments from judicial liens and trustee 
avoidance proceedings.
  The Spousal Equity in Bankruptcy Amendments also takes into account a 
little-known but potentially devastating loophole in bankruptcy and 
divorce proceedings. In the midst of a divorce or separation agreement, 
it is not uncommon for the custodial parent to accept a lower level of 
child support and/or alimony payments in exchange for the other 
parent's agreement to assume the couple's marital debts; these could be 
any debts which have been incurred over the marriage, such as auto 
loans, mortgage payments, and credit card bills. If the noncustodial 
parent declares bankruptcy following this agreement, however, the 
marital debts would then fall to the custodial nonbankrupt spouse. 
Since child support and alimony was negotiated down earlier, the 
custodial parent faces a bleak future: little to no support payments, 
the heavy responsibilities of the couple's debts while married, and the 
normal expenses that come with rearing children alone. This unfortunate 
situation does, indeed, occur and is the subject of current court 
proceedings within my home State of New York.
  My legislation would expand current law to include these marital 
debts among those which are not discharged by a bankruptcy filing. I 
think it is outrageous that wives and dependent children would have to 
answer to all the couple's creditors for debts the husband agreed to 
pay in return for lower support and alimony. This relatively small--but 
vital--change in the Bankruptcy Code proposed by my legislation would 
prevent this, and ensure a more equitable treatment of all parties in 
the event of bankruptcy.
  The spousal equity in bankruptcy amendments will also contribute to 
ending the cycle of poverty and welfare for custodial parents. 
Delinquent support payments and marital debts can be overwhelming for 
single-parent families to endure. The burden is further shifted on the 
Federal Government when these families face no other choice but welfare 
to provide the support the absent parent ought to be providing. 
Prioritizing support payments and shielding single parents against the 
shifting of spousal debts can help break this tragic welfare cycle.
  Mr. Speaker, the President has said that ending prolonged dependence 
on welfare is a priority. Many of our colleagues have also recognized 
the urgent need to amend the current Bankruptcy Code. My legislation 
speaks to both important tasks. I urge my colleagues to support the 
Spousal Equity in Bankruptcy Amendments of 1994.

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