[Congressional Record Volume 143, Number 128 (Tuesday, September 23, 1997)]
[Extensions of Remarks]
[Page E1824]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


           THE RESPONSIBLE BORROWER PROTECTION BANKRUPTCY ACT

                                 ______
                                 

                           HON. RICK BOUCHER

                              of virginia

                    in the house of representatives

                      Tuesday, September 23, 1997

  Mr. BOUCHER. Mr. Speaker, I am pleased to join with my friend, Bill 
McCollum, in introducing the Responsible Borrower Protection Bankruptcy 
Act. This legislation is intended to ensure that our personal 
bankruptcy laws operate fairly, efficiently, and free of abuse.
  Today's consumer bankruptcy system is fundamentally flawed. The 
Bankruptcy Code makes virtually no attempt to calibrate the level of 
bankruptcy protection to the level of each debtor's need. Rather, it 
allows a debtor to discharge debts even if the debtor can repay those 
debts. Currently, about 70 percent of bankruptcy filers use chapter 7, 
which has no provision for debt repayment even if the filer can repay. 
Only 30 percent use chapter 13, which sets up repayment plans. At 
present, individuals with significant income and the ability to repay 
some of their debts can obtain the same full discharge of debts as 
individuals with little or no income and assets.
  Our legislation addresses this problem by requiring that a debtor 
demonstrate that he or she actually needs bankruptcy relief and, if so, 
provides only the amount of relief that is needed. This needs-based 
system would create a simple formula, based on a debtor's income and 
obligations, to determine exactly how much relief the debtor needs. 
Individuals with no means to repay their debts could file for 
bankruptcy under chapter 7, thereby obtaining complete debt relief and 
a fresh start. Individuals who can repay a portion of their debts would 
file under chapter 13 and begin a repayment plan based on what they can 
afford. Recognizing that an individual's circumstances can change, the 
legislation also requires a periodic review of a debtor's financial 
situation so the repayment can be adjusted if necessary.
  The legislation also imposes a number of procedural reforms to 
improve the bankruptcy process. It streamlines bankruptcy proceedings 
so that they are more efficient for all parties involved. It requires 
that debtors receive information about alternatives to bankruptcy, 
including credit counseling. Educating consumers about their options 
should help to spare many consumers from the bankruptcy process, since 
many creditors are willing to create alternative repayment programs 
with people in financial distress.
  With this change in the Bankruptcy Code, the bankruptcy system would 
protect consumers in financial difficulty without unfairly imposing 
inappropriate additional costs and burdens on consumers who continue to 
pay their debts. The Responsible Borrower Protection Bankruptcy Act 
recognizes that individuals who file for bankruptcy should receive the 
amount of debt relief they truly need--no more and no less.
  All consumers should benefit from this legislation--every consumer 
pays higher prices for goods and services and higher interest rates as 
a result of bankruptcy losses. Enactment of the Responsible Borrower 
Protection Bankruptcy Act will reduce the level of those bankruptcy 
losses, thereby reducing the cost of credit for all consumers.
  Also benefiting from this reform will be borrowers who pose some risk 
for lenders. The ease of filing for chapter 7 relief today discourages 
the making of loans to these creditworthy but somewhat marginal 
borrowers. Honest, well-intentioned low-income consumers will find 
greater opportunities to obtain credit when our legislation is enacted.
  I am pleased to be an original cosponsor of this legislation and will 
work closely with my colleague, Mr. McCollum, to ensure its passage.

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