[Congressional Record Volume 144, Number 74 (Wednesday, June 10, 1998)]
[House]
[Pages H4343-H4402]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PERSONAL EXPLANATION
Mr. GILMAN. Mr. Speaker, During Rollcall Number 216 I was unavoidably
detained and missed the vote. If I had been present I would have voted
``aye.''
The SPEAKER pro tempore. The gentleman from Colorado (Mr. McInnis) is
recognized for 1 hour.
Mr. McINNIS. Mr. Speaker, for the purpose of debate only, I yield the
customary 30 minutes to the gentlewoman from New York (Ms. Slaughter),
pending which I yield myself such time as I may consume. During
consideration of this resolution, all time yielded is for the purpose
of debate only.
Mr. Speaker, House Resolution 462 is a structured rule providing for
consideration of H.R. 3150, the Bankruptcy Reform Act of 1998, a bill
that will improve bankruptcy practices and restore personal
responsibility and integrity to the bankruptcy system.
House Resolution 462 provides for 1 hour of general debate, equally
divided between the chairman and ranking member of the Committee on the
Judiciary. The rule also waives section 303(a) of the Congressional
Budget Act against consideration of the bill.
Mr. Speaker, the rule provides that the amendment in the nature of a
substitute recommended by the Committee on the Judiciary now printed in
the bill be considered as an original bill for the purpose of
amendment.
House Resolution 462 provides that the committee amendment in the
nature of a substitute shall be considered by title and that each title
shall be considered as read. The rule also waives all points of order
against the committee amendment in the nature of a substitute. The rule
provides that no amendment to the committee amendment in the nature of
a substitute shall be in order except those printed in the Committee on
Rules report.
Each amendment may only be offered in the order printed in the
report, may be offered only by a Member designated in the report, shall
be considered as read, shall be debatable for the time specified in the
report, equally divided and controlled by the proponent and an
opponent, shall not be subject to amendment.
The rules also waives all points of order against amendments printed
in the report.
This rule also allows the Chairman of the Committee of the Whole to
postpone recorded votes and to reduce to 5 minutes the voting time
after the first of a series of votes, provided that the first vote is
not less than 15 minutes.
This provision will provide a more definite voting schedule and will
help guarantee the timely completion of this important legislation.
House Resolution 462 also provides for one motion to recommit with or
without instructions, as is the right of the minority.
Mr. Speaker, we face a bankruptcy crisis in America today in which
the needs of the debtor and the rights of the creditor are no longer in
any kind of equilibrium. The balance between the debtor and the
creditor has been lost and reform is clearly necessary. Basically we
are asking that people assume personal responsibility, that they pay
their bills when their bills are due, that they not give their word
when they do not intend to keep their word.
We need to reestablish and preserve the original balance of the
bankruptcy code in areas of which it has lost its fairness and
modernize the sections of the code which have become outdated. H.R.
3150 achieves these goals.
When we consider the need for bankruptcy reform, it strikes me that
we should simply look at some of the more startling statistics. The
number of bankruptcies has increased more than 400 percent since 1980,
more than 400 percent since 1980. This year there are expected to be
more than 1.4 million bankruptcies, more than one bankruptcy in every
100 American households.
This extraordinary increase comes during a time of economic
prosperity, not a period of recession that usually would bring more
people into the bankruptcy court. Instead the increase is largely due
to bankruptcies of convenience. Let me repeat that, bankruptcies of
convenience.
We have the healthiest economy we have ever faced in the history of
this country, yet our bankruptcies are exploding. Why? Because it is
the convenient thing to do. It is the easy street. It is the easy way
out.
This increase of bankruptcies of convenience is simply a ploy that is
used by some people that owe money and
[[Page H4344]]
their bankruptcy attorneys to avoid paying all or most of their debts,
even though they are financially capable and able to do so.
Bankruptcy was always intended to be for a person who ran into
unintended consequences who could not pay their bills to give them a
new chance on life. Now what we have seen is we have seen that
overwhelmed by the bankruptcy of convenience. These bankruptcies of
convenience, initiated, by the way, from abusers of our bankruptcy
laws, are having a very harmful impact on our Nation's competitiveness.
The current system is unfair to all people who are fiscally
responsible, who are penalized in the form of higher prices, credit
card rates, interest rate increases. In other words, the people who do
pay their bills have to carry the load for those who do not pay their
bills.
To reduce these costs, we must end the widespread abuses of the
system. This bill is sensitive to the fact that people may lose their
job, have a medical crisis or they may come upon hard times, real hard
times, realistic hard times, not artificial hard times. However, what
we are finding in many cases is that a growing number of people who
file for bankruptcy relief under Chapter 7 actually have the capability
to pay at least some of their debts. In fact, a study by Ernst and
Young showed that 15 percent of the people who filed under Chapter 7
could have repaid 64 percent of their unsecured debts.
This bill repairs a system that rewards abuse of the system. In other
words, the current system rewards one to abuse the system. This bill
changes that. This bill makes bankruptcy really applicable to those
people that need it and takes it out of the reach of those people who
abuse it or use it as convenience.
At the heart of these reforms is implementation of a needs-based
mechanism that ensures that those debtors who can afford to repay some
of their debts simply repay what they can afford to repay. At the same
time, H.R. 3150 preserves the right of bankruptcy relief for those in
true financial straits by targeting only those who have the ability to
repay. Contrary to what we will hear certainly and what I would expect
today in the floor debate, this bill provides that none of the reforms
will adversely impact the priority treatment accorded to child support
claims. That is a critical issue for me. That an important issue for
me.
In fact, H.R. 3150 incorporated additional safeguards to enhance the
existing protections for family support.
{time} 1230
H.R. 3150 represents another example of this Congress's efforts to
encourage individual responsibility. The Republican Party feels that
individual responsibility is a basic and fundamental standard that we
should all accept. The current system promotes fiscal irresponsibility
and gives people a loophole that encourages mismanagement of individual
finances. Bankruptcy was designed to serve as a last resort to be
utilized only in the most desperate circumstances. That is not what is
happening today. In fact, today we see bankruptcy kind of synonymous
with the word convenience. We see personal responsibility for some
reason not politically correct to talk about. With the changes in this
bill, we will renotify people that they do need to be held accountable
for their debts that they have accumulated. We will remind them about
keeping their word. We will remind them to not go out and spend money
that they do not have. Accept personal responsibility.
I actually am optimistic that the country is taking a turn, it is
going back to the fundamentals of this country, basic responsibility,
strong education, et cetera, et cetera. But any formula you look at for
the success of this country has to incorporate within its terms
personal responsibility.
With regard to the consideration of amendments, the Committee on
Rules has done its best to accommodate Members who filed amendments
with the Committee on Rules. We have been more than fair in permitting
six Democrat amendments, five Republican amendments, and one bipartisan
amendment. We faced numerous duplicative amendments in the Committee on
Rules and we did our best in the Committee on Rules to allow a wide
variance of amendments on a number of key issues. In reviewing the
amendments provided to the Committee on Rules, we also noted that there
are those Members who simply do not wish to see any changes in the
bankruptcy laws. We have some Members that want this to continue to be
a tool of convenience. We have some Members who for some reason have
put personal responsibility aside and use this charade of the current
bankruptcy system as the policy that ought to be in place.
This rule is a fair rule, Mr. Speaker, and I urge all of my
colleagues to support it so that we may proceed with general debate and
consideration of amendments and the merits of this important bill.
Mr. Speaker, I reserve the balance of my time.
Ms. SLAUGHTER. Mr. Speaker, I thank the gentleman from Colorado for
yielding me the customary 30 minutes, and I yield myself such time as I
may consume.
(Ms. SLAUGHTER asked and was given permission to revise and extend
her remarks.)
Ms. SLAUGHTER. Mr. Speaker, I rise in strong opposition to this rule.
I oppose the hasty process this rule embraces, I oppose the breach of
faith that this rule embodies, and I oppose the damage to America's
children this rule refuses to address.
Last year, more than 1 million American families went through
bankruptcy, leaving millions of creditors without full payment for
their goods and services. Is the record number of bankruptcies a
serious problem? Yes. Is this bill a real answer to the problem? No one
knows. Some claim that it will result in fewer bankruptcies, but others
believe it is a giveaway to the very creditors whose profligate lending
may be the chief cause of increased bankruptcies.
Article I, Section 8 of the United States Constitution requires the
Congress ``to establish uniform Laws on the subject of Bankruptcies
throughout the United States.'' Beginning in 1792, the Congress has
taken this responsibility seriously, carefully weighing creditors'
rights against a new start for the debtor.
The precedent is that the House crafts bankruptcy legislation
carefully, and on a bipartisan basis. At yesterday's Committee on Rules
hearing, we learned that in 1978, the last time that fundamental
changes to the bankruptcy code were proposed, a National Bankruptcy
Commission proposed the outline of the changes, the House held 38 days
of hearings, and the Senate held 24 days of hearings.
Compare that careful deliberation with this bill's consideration.
Again we had recommendations from a National Bankruptcy Commission, but
this bill ignores them, and in major instances includes ideas expressly
rejected by the Commission. The House held only 4 days of hearings, and
the Committee on the Judiciary's markup was so rushed that germane
amendments offered by committee members were not even considered. In
fact, the gentleman from Illinois (Mr. Hyde), the committee chairman,
received unanimous consent to report this bill only after he promised
to recommend that the bill would be considered on the floor under an
open rule, so that additional amendments could then be debated.
Unhappily, today's rule is proof that this House's leadership did not
follow the recommendation of the gentleman from Illinois. The chairman
of the Committee on Rules explained to us that the gentleman from
Illinois did not have enough experience as the chairman to realize that
he could not make a commitment about floor debate. From my personal
observation, I would say that in his 23 years in the House and 8 years
in the Illinois House of Representatives, the gentleman from Illinois
has proved himself a master of procedure. In reality, the gentleman
from Illinois' failing is his belief that the Committee on Rules, and
this House's leadership, would respect him enough to honor his
recommendation as chairman of the Committee on the Judiciary.
So instead of the open rule, we have this rule that makes in order
only 12 of the 40 amendments that were submitted to the committee. Why
this curtailed consideration? Apparently after months of doing nothing
on the floor of the House, the House leadership decided that only 6
hours could be spent
[[Page H4345]]
considering landmark legislation affecting the lives of millions of
families filing for bankruptcy, and millions of creditors, many of them
small businesses.
Mr. Speaker, I oppose this rule because it will not allow us to
consider amendments which might have cured this bill's flaws, and
allowed a bipartisan House to support it. I am particularly concerned
about the 125,000 children who are owed child support from a parent who
declared bankruptcy.
In its current form, this bill will have a devastating impact on the
parents and children who are owed child support and alimony. It will
take us back to the days when the bankruptcy code gave child support
and alimony no greater priority than a television set or jewelry
purchased with a credit card.
Just 4 years ago, I introduced the Spousal Equity in Bankruptcy
Amendments to give priority to child and spousal support payments in
bankruptcy proceedings. That legislation became law as part of the
Bankruptcy Reform Act of 1994. Thanks to those and other child support
enforcement reforms, child support collections have increased by 68
percent since 1992. Nevertheless, we have far to go, as America's
children are still owed $34 billion a year in child support.
This bill could reverse the progress we have made in recent years. By
making large amounts of consumer debt nondischargeable in bankruptcy,
this bill would place money owed on a credit card at the same level as
alimony and child support obligations. Under this bill, after a debtor
goes through bankruptcy proceedings, he or she will still have credit
card and other types of consumer debt left to pay, and those debts will
compete with child support and alimony for the limited resources of the
post-bankruptcy debtor.
Proponents of the bill claim that they have repaired the damage that
the bill does to child support. However well intentioned, those repairs
are only cosmetic. They ignore the reality that, after bankruptcy
proceedings are over, the bankrupt debtor will be left with additional
credit card and consumer debt. When aggressive credit card collection
agencies are calling, it will be easier to pay them than the former
spouse or the powerless child.
The Committee on Rules was schizophrenic on the child support issue.
Some in the majority claimed the problem never existed or had been
fixed by amendments, and yet had heard testimony from a Member of the
majority that likened the post-bankruptcy situation to a shark joining
the sardines. That Member argued that without a procedure for enforcing
the post-bankruptcy priority that the bill claims to establish, credit
card companies will greatly overpower the competing claims of children
needing support. Clearly this issue is not resolved.
The rule does make in order an amendment by the gentleman from
Florida (Mr. Shaw) on this subject. But early analysis from bankruptcy
experts shows the Shaw amendment is unworkable for both creditors and
those claiming child support. It will inevitably cause children who are
owed child support to lose the payments that they are owed.
Several of my colleagues and I tried to offer an effective amendment
to solve the problems that this bill creates for women and children.
The amendment we sought to offer would have clarified the status of
child support and alimony. It would have ensured that child support and
alimony would be paid before unsecured debt. It would have protected
against abusive reaffirmation agreements that have an adverse effect on
a debtor's family. It would have prevented new kinds of credit card and
consumer debt from being made nondischargeable, and thereby competing
for the debtor's limited post-bankruptcy funds against child support,
alimony and other priority payments. It would have provided an
enforcement mechanism for the bill's protections for child support.
However, we were not allowed to have our amendment on the floor.
Mr. Speaker, the bill in its current form is opposed by children's
rights advocates and women's groups, who are concerned about the damage
it will do to a family in crisis. It is opposed by victim's rights
groups, such as Mothers Against Drunk Driving, who are concerned about
the way the bill will endanger settlements owed to victims of crime; it
is opposed by consumer groups, such as the Consumer Federation of
America and Consumers Union; and it is opposed by judges and scholars
such as the National Conference of Bankruptcy Judges, who are concerned
about the integrity of the bankruptcy process.
I support efforts to reform our bankruptcy laws to make debtors
responsible for the debt they incur and indeed agree that something
must be done. A full floor debate such as that contemplated by the
chairman and the Committee on the Judiciary would perhaps have
addressed many of the problems. But the Committee on Rules chose to
disregard the Committee on the Judiciary's wishes and forbid the
offering of the primary amendment to cure its most obvious flaw. We
should not and cannot allow the bill to turn back the clock on the
progress we have made in the past few years to ensure that women and
children in crisis receive the support they are owed.
Mr. Speaker, I urge my colleagues to oppose this rule. America's
children are too precious for this Congress to put their future at
risk. We should not allow an artificially imposed time limit to
preclude a full discussion of the child support question and the other
important issues raised in the bill.
By defeating the rule, we will instruct the Committee on the
Judiciary to reconsider the bill and its unintended consequences, to
complete its deliberation on all relevant amendments, and then bring
the bill back to the full House in a perfected form.
I also notify my colleagues that I will call for a vote to defeat the
previous question. If the previous question is defeated, I will offer
an amendment to the rule to allow the Jackson-Lee, Slaughter, Nadler,
Blumenauer Family Support Protection amendment to be considered by the
full House. Our Nation's children deserve at least an hour of time on
the House floor to discuss whether this bill adequately protects their
interests. If we could be sure of that protection, many of us could
support this bill.
Mr. Speaker, a vote for the previous question and this flawed rule
means that the House is unwilling to spare an hour to make sure our
children do not suffer for lack of food, clothing and shelter that
child support provides. Defeat the previous question and defeat the
rule.
Mr. Speaker, I reserve the balance of my time.
Mr. SOLOMON. Mr. Speaker, I yield such time as he may consume to the
gentleman from Harrisburg, PA (Mr. Gekas), a member of the committee
and one of the most distinguished and respected Members of this body.
Mr. GEKAS. Mr. Speaker, I thank the gentleman for recognizing my
birthplace and for yielding me the time.
Mr. Speaker, I rise in support of the rule which does allow for ample
time to debate the most vital issues that face bankruptcy and
bankruptcy reform.
I am a witness to the fact that the chairman of the Committee on
Rules and the Committee on Rules were eminently fair in the composition
of the rule which is before us here today, because the chairman and the
Committee on Rules rejected one or two of my own offerings for
amendments to be made in order. If anything shows balance on the part
of the chairman and the committee, it is that the author of the bill
and the chairman of the relevant subcommittee offered amendments which
the Committee on Rules rejected. One of them, by the way, I thought was
going to go automatically accepted by the Committee on Rules which I
crafted in accommodation to what the gentleman from Massachusetts (Mr.
Frank) and I had agreed on a certain portion of single asset, an arcane
portion of the bankruptcy bill. But the point is that a rule which
allows full debate on the most significant issues facing bankruptcy is
one that will give us full opportunity to vent all sides of those
issues.
If the minority will recall, and the gentleman from New York (Mr.
Nadler) could, I think, substantiate it, in the Committee on Rules, I
offered to the chairman and the Committee on Rules that we would be
happy to allot whatever time is necessary for the substitute measure by
the minority to be placed for debate in the full question of bankruptcy
reform. So we support the rule and urge everyone to vote ``yes.''
[[Page H4346]]
In the meantime, the three main issues that I think will be raised
during the course of the debate are A, B and C which I just want to
outline and prepare the Members for a full discussion of them. One is
the gateway system that we have prepared in H.R. 3150 which tests out
the debtor's ability to repay some of the debt right at the first
instance at the application being made for bankruptcy, the original
means-test system that we have in place. That is one contentious issue.
The second is, that is raised over and over again, almost to bore me at
least to tears, is the one that it is the credit card and lenders that
are at fault for this whole mess that we find ourselves in with
1,400,000 filings in 1997 and more bankruptcies being recorded every
day even as we speak, into unheard of numbers. That is another one that
we meet head-on in our discussion, because we are talking about the
debtor who comes to bankruptcy. We are not talking about how he got
there. It could be gambling, it could be divorce, it could be a variety
of things. So the so-called fault of the lenders, which will be one of
the attacks made on our bill, will be a second important issue. The
third is one that is almost preposterous in its formation, having to do
with somehow that our bankruptcy reform bill militates against support
obligations for the children. That is simply not the case.
{time} 1245
But to make doubly certain of it, we also have amendments that will
raise the priority of support payments to No. 1 on the list on the
bankruptcy to supplement the already existing State and Federal
statutes that guarantee that support payments will have utmost
priority.
With that I reiterate, let us support the rule, let us debate the
amendments as they appear, and then in the final analysis let us
support a sweeping change in bankruptcy reform dedicated to the
proposition that personal responsibility has to be returned to our
society through a change in the bankruptcy laws.
Ms. SLAUGHTER. Mr. Speaker, I yield 5 minutes to the gentleman from
New York (Mr. Nadler).
(Mr. NADLER asked and was given permission to revise and extend his
remarks.)
Mr. NADLER. Mr. Speaker, as the gentlewoman from New York (Ms.
Slaughter) mentioned, this bill has been rushed to the floor beyond all
prudence, and unfortunately we have not been permitted most of the
important amendments. The House leadership decided that the one thing
this bill did not need was close scrutiny or open debate, so they
choose not to allow debate in the most important amendments offered by
the minority.
The gentleman from Pennsylvania says the Committee on Rules was fair.
We gave the Committee on Rules, we told them we had 12 priority
amendments. One of those 12 was made in order. The American people are
being cheated because they will not get the open debate and open votes
on issues affecting the finances of millions of American families that
they deserve.
Have credit card companies been lending recklessly? The data
indicates they have. In fact, every American family's mailbox tells the
same story. How many pre-approved credit card solicitations have my
colleagues thrown out last week?
We had an amendment to eliminate the claims of any lender who
knowingly pushed the debtor over 40 percent of his annual income in
unsecured debt. That goes on all the time. It undermines the carefully
made loans of other creditors. Yet these lenders want the taxpayers to
help them share in the corrections with responsible collectors. That is
not right, but we will not be allowed to debate that today.
We have the amendment that would have eliminated the claims for debt
incurred at ATM machines inside gambling casinos. Trying to lend
thousand of dollars to gambling addicts in casinos at 18 to 22 percent
interest is simply immoral. We know it destroys families and causes
bankruptcies and leads to other responsible lenders not being paid. Yet
although the amendment had the support of the Republican chairman of
the subcommittee of appropriations, the gentleman from Virginia (Mr.
Wolf) who has been a leader on this issue, we will not be allowed to
debate this amendment today.
The gentleman from Massachusetts (Mr. Kennedy) had a series of
amendments to deal with unscrupulous practices by some lenders, but the
sponsors of this bill, for all their talk of personal responsibility,
do not want to debate irresponsible lending practices so we will not
have an opportunity to debate those amendments.
The gentleman from Massachusetts (Mr. Delahunt) had an amendment to
protect the hard-earned benefits paid to our veterans, and the Social
Security benefits of retirees are paid for but we cannot talk about
that on the floor today.
We will not get a chance to debate the amendments sponsored by my
colleague from New York (Ms. Slaughter) and myself along with the
gentlewoman from Texas (Ms. Jackson-Lee) the gentlewoman from
Connecticut (Mrs. Kennelly) and the gentleman from Oregon (Mr.
Blumenauer) to protect child support collections from the terrible
effects of this bill because the majority is afraid to have these
issues come before the American people. Instead we will get another
sham amendment crafted by the promoters of this legislation which will
again pretend to fix the problem, the same problem they had first
denied existed, then proclaim to have fixed in committee and will now
try to fix again. But we will not be able to debate any real solution.
I did have an amendment made in order which implements changes
recommended by the National Bankruptcy Conference of the Small Business
Administration. The bill threatens to force thousands of small or
medium-sized businesses into liquidation, out of business, bury the
jobs, because they will be buried under a mountain of paperwork and
bureaucratic rules and deadlines that will not apply to big business,
only to small business. No, this bill's special ruse is small business.
It will cost jobs and destroy the dreams of small business people.
How much time do we get to debate the future of small business in
country? Five minutes on each side. That is all the Republicans think
small businesses deserve before Congress buries the small businesses.
But do not worry. The next time the majority wants to kill an
environmental protection law, they will tell us they are doing it to
save small business. Before we believe them we should remember what
they did today.
I regret that we have not been able to work in a more bipartisan
basis. I was pleased by the progress of negotiations which the staff
conducted over several weeks which seem to be yielding a reasonable and
principled compromise. But unfortunately that good work will not see
the light of day. One day we were told suddenly the negotiations were
off and everything we had talked about was off the table.
We are getting yesterday's news, the same wish list from the credit
card companies. They have spent a bundle lobbying this one. As my
colleagues know, the New York Times today says $40 million. I am not so
naive as to think middle-class families on the brink can compete with a
$40 million lobbying effort by the Nation's biggest banks and credit
card companies.
Mr. Speaker, this is no way to rewrite the code. It is simply
legislative malpractice. I believe this bill is not ready and the
record is incomplete.
Mr. Speaker, I know how to count, and I know the majority has the
votes to pass this embarrassment today. The minority will do what we
ought to do, point out the weaknesses in the bill and suggest
corrections. But I am under no illusions about the outcome. All I can
observe is that this is a pretty shameful way to celebrate the
centennial of the Bankruptcy Act, and that if, God forbid through some
foolishness this bill makes it into law, we will hear a year or 2 from
now the cries of the thousands and thousands of small businesses and
middle-income and low-income people who will be buried by this bill,
and then we will have to start undoing the handiwork we do today.
Mr. McINNIS. Mr. Speaker, I yield 2 minutes to the gentleman from
California (Mr. Dooley).
Mr. DOOLEY of California. Mr. Speaker, I rise in support of this
rule, and I rise in support of this bill, H.R. 3150.
Is it a perfect rule? No. But is it a responsible rule? Yes.
As my colleagues know, it is time for us to have fundamental reform
of our
[[Page H4347]]
Nation's bankruptcy, and it should be guided by 3 basic principles:
restoring responsibility, protecting consumers and then sharing
fairness. H.R. 3150, which preserves a historic fresh start for those
who truly need it is a solution.
Our Nation is witnessing an unsustainable soar in personal
bankruptcies. Bankruptcies have increased by more than 400 percent
since 1980 with one more million personal bankruptcies filed in 1996.
Last year alone, despite a booming economy and low unemployment, a
record 1.3 million people filed for bankruptcy, more than 1 in every
100 American households.
The overwhelming majority of Americans who pay their bills on time
are the ones who are paying the price for this surge in bankruptcy. It
takes approximately 33 Americans to pay for one bankruptcy, and
bankruptcy will cost each American household an estimated $400 per year
in higher prices for goods and services.
We must restore a sense of responsibility to our bankruptcy system
and stop it from becoming a first step rather than a last resort. More
and more people are choosing bankruptcy as a financial planning tool,
and responsible Americans are the ones who are forced to pick up the
tab from those who walk away from their debts.
Mr. Speaker, 3150 would restore personal responsibility and fairness
to our bankruptcy system. The bill would amend the bankruptcy code and
employ a needs-based approach where debtors in need get relief but only
the relief that they need. Anyone earning an amount equal to or above
the Nation's median income and are able to pay at least 20 percent of
his or her unsecured debt over the course of 5 years would be forced to
comply with Chapter 13 which requires a repayment plan rather than
Chapter 7. H.R. 3150 provides tremendous flexibility, and in turn it
needs, allows, the court to consider extraordinary circumstances such
as medical costs or sudden loss of employment.
Most Americans agree that the time has come for meaningful and fair
bankruptcy reform. Please join me in supporting this rule and this
important piece of legislation so that our bankruptcy system can be
approved for all Americans.
Ms. SLAUGHTER. Mr. Speaker, I yield 2 minutes to the gentleman from
Texas (Mr. Edwards).
Mr. EDWARDS. Mr. Speaker, I speak as someone who had hoped to support
a bipartisan measure to deal with a problem of increasing bankruptcies
in America. But I am disappointed in the result of this bill.
Specifically this bill would undermine the Texas constitutional
protection for family homesteads. It is disappointing to me that in a
Republican-led Congress that has paid a lot of lip service to the
concept of States' rights, this bill would run roughshod over the
States' rights and the property rights of Texas and 5 other States:
Florida, Kansas, Oklahoma, Minnesota and South Dakota.
Mr. Speaker, there can be no more personal property right that a
State can try to protect than the right of one's own home, and I am
deeply disappointed that the leadership in this House refused to
recognize our 6 States' efforts to protect that important property
right.
Let me say also, if this bill is about personal responsibility, it
misses the mark because nowhere in it do I find any effort to ask
multibillion dollar credit card companies to face their responsibility
for having increased consumer debt by billions of dollars through
unsolicited credit card mailings and through unsolicited increases in
credit card limits.
I will finish with a personal note. When my mother, my 74-year-old
mother, died 5 years ago, I went to her one-bedroom apartment in
Houston to collect her things and found on the kitchen table letters
from credit card companies on one hand saying, ``You are 2 to 3 months
late in your payments,'' and on the other hand on the same table found
those same credit card companies and others saying, ``Congratulations,
we're increasing your credit card limit by thousands of dollars.'' I
believe this bill failed in its responsibility to make not only
American families but also American corporations face the
responsibility for the serious problem that has been created.
Mr. McINNIS. Mr. Speaker, I yield myself such time as I may consume.
Well, to my colleague from Texas (Mr. Edwards), I used to be a police
officer, and I never recall ever being asked to respond to a situation
where somebody claimed they were forced to use their credit card.
My colleagues know there is personal responsibility. Of course
people, as we know, when we buy a car we always have people trying to
sell us another car, but does that let us say, well, I do not need to
pay for the car I originally bought because somebody else wants to sell
me an additional car? I mean, it just does not make logical sense.
Because of the time restriction, let me go on to a couple other
points, and, Mr. Speaker, I control the floor. To the previous remarks
made on the amendments submitted, let us talk about the fairness of the
Committee on Rules. I think there has been a little misdirection here.
We had 39 amendments, 39 amendments submitted to the Committee on
Rules. The chairman of the Committee on Rules has said repeatedly he
wants to make it as fair as possible, but he also has to manage this
rule. Of the 39 amendments, 11 Republican amendments, 27 Democratic
amendments, 12 amendments were made in order.
Now several of the amendments were repetitive. Of the 12 amendments
that were made in order, 5 of them were Republican, and by the way the
Republicans control the majority of this committee, and 6 of them by
the minority of the committee were made in order for the Democrats. In
other words the Democrats got one more amendment than the Republicans
did, and then one bipartisan amendment was made as well.
The other issue that I think is critical is that the gentleman from
New York stood up, and frankly I question about some of the whining
because I think this has been a very, very fair approach. His statement
was that the Democrats had 12 priority amendments and that the
Republicans only made one in order. I do not know where he was. I
thought he was in the committee. Physically he was at the committee
last night, but that is not what occurred in his presence. In his
presence what occurred is that the Democrats had 7 priority amendments,
and we made 3 of them in order, 3 of them. And let me add again that
the Democrats have one more amendment in order on this bill than do the
Republicans.
Mr. Speaker, I reserve the balance of my time.
{time} 1300
Ms. SLAUGHTER. Mr. Speaker, I yield 30 seconds to the gentleman from
Texas (Mr. Edwards).
Mr. EDWARDS. Mr. Speaker, I hope the American people heard the
gentleman point out on this floor that he does not consider the credit
card companies in any way responsible for the billions of dollars in
debt that have been increased, to a large extent because they have sent
out easy credit cards, unsolicited credit cards, to teenagers and
senior citizens. According to his philosophy of personal
responsibility, I guess drug dealers should not be held responsible for
the drug problem in America, because nobody forced those people in
America to use drugs. If that is the kind of personal responsibility
that is behind this bill, I do not want any part of it.
Mr. McINNIS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I take it from the comments of the gentleman from Texas
(Mr. Edwards) that he associates small business people, which I have a
lot in my district, with drug dealers. Is that what the gentleman is
saying, because they came and charged in the store for some reason, it
is the store merchant's responsibility? It is the small businessman in
my district's responsibility if somebody comes in and charges something
in their store and does not pay for it?
I would say to the gentleman from Texas (Mr. Edwards), there is a
time in this country to accept personal responsibility. If you cannot
afford it, do not buy it; and if you do buy it and you cannot afford
it, do not blame it on the merchant.
Mr. Speaker, I reserve the balance of my time.
Ms. SLAUGHTER. Mr. Speaker, I yield 2 minutes to the gentlewoman from
Texas (Ms. Jackson-Lee).
[[Page H4348]]
(Ms. JACKSON-LEE of Texas asked and was given permission to revise
and extend her remarks.)
Ms. JACKSON-LEE of Texas. Mr. Speaker, nothing needs to be said about
this bill, other than it is a bankrupt bill and it is bankrupting
America.
I stand to oppose this rule for the children of America. 325,000
bankruptcy filings are based upon child support and alimony payments.
This rule and this particular legislation disregards the importance of
protecting our children at risk. What it does is it takes the
multibillion-dollar credit card companies and it puts them at equal
level to those parents trying to fight every day to keep their doors
open and their children alive. Yes, it is just that bad.
We tried in the Committee on Rules to present to the Republican
members of the Committee on Rules an amendment, an omnibus child
support amendment. The gentlewoman from New York (Ms. Slaughter) has
been a leader on this issue, yet that amendment has been rejected.
What do they have in its place? Something unsatisfactory. They have
something that says oh, that is okay. You can put the credit card debt
equal to the child support. What does that mean? Do you have time to
sit and make 12 and 15 calls a day, like the multibillion-dollar credit
card companies, harassing people in order to get payments? No, you do
not.
So there is no equality here. We wanted to protect child support and
alimony payments, so that hard-working Americans could keep their head
above water.
Let me tell you what the real issue is, 3 billion contacts every day
to Americans asking them to take this credit card and this credit card.
I believe in personal responsibility. I want people to pay their bills,
and Americans pay their bills. Today they wait when the debt is 125
percent of income. They do not recklessly go down to the bankruptcy
courts. In fact, no one throws a party on their neighborhood block when
they have to go to the bankruptcy court.
I tell you, this bill should go back to committee, with only five
hearings. We were promised an open rule in committee, it is on the
record, yet we did not get one.
This is a bad rule. Vote it down, vote for Americans, vote for
working people. This is a bad, bad bill.
Mr. Speaker, I come to the floor of the House to oppose this rule.
The function of the House Rules Committee is to examine amendments and
make germane amendments in order, not to try to defeat the bill in the
Rules Committee before it reaches the floor. This is a bad way to run
this House and it undemocratic.
I appeared, before the Rules Committee with the recommendation that
four of my amendments to H.R. 3150 be made in order, because I
seriously question whether this bill, as it is now written, will
accomplish its goal of reforming our present bankruptcy system without
causing significant harm to many innocent parties. Sure, I believe that
the bill in its philosophical approach and legislative function,
appears to unnecessarily burden the rights of the bankrupt debtor, but
in the end, my objections to this bill are much deeper than that. As a
member of the Judiciary Committee's Subcommittee on Commercial and
Administrative Law, who has dealt with this legislation since its
inception, I have several serious reasons why I believe there should
have been more of an inclusive rule for H.R. 3150. This is a bad rule
and this is not democracy.
I am not shy to say that Chairman Hyde promised an open rule to the
Democrats in Committee. That is exactly why the Democrats did not offer
more amendments in the Judiciary Committee. Then we go to the Rules
Committee with an assurance that we would get an open and inclusive
rule and what we have here is a restrictive and exclusive rule. This is
no way to legislate, no way to make policy, no way to run this house.
It is bad for collegiality of the House, and most importantly it is bad
for the country. This is a bad rule . . . and this is not democracy.
I was prepared to offer an amendment, co-sponsored by Rep. Slaughter
of New York, a Member of the Rules Committee which would have
completely corrected certain serious problems in the bill. First of
all, the amendment would protect child support and alimony payments in
a Chapter 7 or Chapter 13 bankruptcy proceeding by excluding these
payments from the definition of ``current monthly income'' in the bill.
Secondly, the amendment would ensure that all priority payments like
child support and alimony would be paid before any unsecured creditors,
whether it is mandated as a part of the means test or as a
nondischargeable credit card debt in Chapter 7 or in Chapter 13
repayment plans. Third, the amendment would strike all sections of the
bill that make unsecured or credit card debt competitive with child
support and alimony payments. And finally, no presumably
nondischargeable debt owed to a credit card or credit lending
institution can be collected if in good faith it is believed that its
collection would impede upon an individual's ability to meet child
support or alimony obligations. These provisions, in particular, would
finally make H.R. 3150, a ``woman and child'' friendly, rather than, a
``woman and child'' adverse piece of legislation.
The only amendment allowed to be offered on the floor of the House
which remotely speaks to child support is the Boucher-Gekas amendment
which does not accomplish as much as the Jackson-Lee/Slaughter
amendment. While it moves child support and alimony obligations from
seventh priority to first priority during the bankruptcy proceedings,
the child support debts must still compete with the credit card debts,
or unsecured creditors. Listen to me colleagues, the mothers and
children must still wait in line for the big corporations to be paid,
or compete with them since those debts have become non-dischargeable
debt. This is a bad rule and this is not democracy.
That is why I am hoping that Members will vote for the Nadler/Meehan/
Berman/Jackson-Lee Substitute amendment because it strikes Section 141
of the bill which would thereby eliminate new non-dischargeable status
for these credit card and other debts which would compete with alimony
and child support. This is bad rule and this is not democracy.
Now my colleagues, let me tell you a little about the Means Testing
provision in this bill. It is not a means test, it is just a mean test.
The bill's mean Means testing would bar anyone earning the nation's
median income--about $51,000 for a family of four--from using Chapter 7
proceedings if they could pay off all secured debt, such as a home
mortgage or car loan, and 20 percent of unsecured debt, such as credit
card bills, over three to five years.
I offered an amendment with Chairman Hyde which passed that would
make the Means testing more fair. This amendment was not made in order
and not allowed to be offered on the floor. This is a bad rule and this
is not democracy. First Lady Hillary Rodham Clinton said in a May 7th
article:
I have no quarrel with responsible bankruptcy reform, but I
do quarrel with aspects of the bill (H.R. 3150) that would
force single parents to compete for their child support
payments with big banks trying to collect credit card debt. .
. Any effort to reform the bankruptcy system must protect the
obligations of parents to support their children.
This is a bad rule, and this is not democracy. I urge my colleagues
to oppose this rule, and vote ``no'' on the rule for H.R. 3150.
Mr. McINNIS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, it amazes me to hear the gentlewoman from Texas talk in
such a manner as she does. It takes all responsibility away from the
person who goes in and purchases the product.
My question to the gentlewoman would be, has she ever been the
recipient of a bankruptcy? In other words, has she ever been the
creditor? I was.
When I first got out of school, I had my little business. I had three
small children and my wife. My wife and I were struggling. We rendered
the service. You know what? The person walked out on us, for a
bankruptcy of convenience.
So you can give all these sorry stories and sob stories, but, let me
tell you, there is the other side of the story. In your statement you
need to be there and reflect on the other side of the story. And there
is nothing, nothing wrong with personal responsibility in this country.
Now, for the second point made by the gentlewoman from Texas about
the unfairness of this, how it ought to go back for more hearing. Let
me say, I know the gentlewoman, to her credit, comes to the Committee
on Rules on a regular basis. This bill has had over 60 witnesses. Every
interest group I know has testified either in committee or had
opportunities to testify somewhere in the process of this. This is not
something that fell out of the sky.
There are a lot of people out there that are suffering. There are a
lot of people that are suffering, not because they went and bought
something they knew they could not afford. There are a lot of people
who, on good faith on a person's word, sold them something, and the
person did not keep their word.
Let me give you an example. Come to my office. I invite the
gentlewoman
[[Page H4349]]
from Texas to my office, room 215, Cannon Building. You will see a bull
elk in my office. Do you know where I go got that? I represented a
woodsman, and this woodsman owed me about $5,000 personally. I loaned
the money. He never paid me.
I told him, I said, ``You gave me your word.'' He said, ``I gave you
my word.'' I said, ``Are you going to declare bankruptcy?'' He said,
``No, I am going to give you something of value.'' He brought me in
this bull elk. He kept his word.
The other issue that is critical, and this is nothing but a
diversionary tactic, is this child support thing. Let me repeat this
very quickly. The President of the California Family Support Council
says, ``H.R. 3150 contains a wish list of provisions which
substantially enhances our efforts to enforce support obligation during
the bankruptcy of a support obligor. It closes many of the loopholes
which currently exist in bankruptcy and which greatly hamper our
efforts to enforce support,'' speaking of child support, ``debts, when
a debtor has other creditors who are also seeking participation in the
distribution of the assets of the debtor's bankruptcy estate.''
That letter was sent to the chairman. I would be happy after their
turn to yield a couple of minutes to the gentleman from Pennsylvania
(Mr. Gekas). I would like the chairman to go into a little more detail
about that hearing a couple of minutes from now. Let us address that.
I do not want one diluting the importance of this bill by some
diversionary tactic by saying, well, this takes away from child
support. It does not. The rule is fair. We ought to pass the rule and
pass the bill.
Mr. Speaker, I reserve the balance of my time.
Ms. SLAUGHTER. Mr. Speaker, I yield 30 seconds to the gentlewoman
from Texas (Ms. Jackson-Lee).
Ms. JACKSON-LEE of Texas. Mr. Speaker, I thank the gentlewoman for
yielding me time.
Mr. Speaker, I appreciate the sincerity of the gentleman. But just as
he has his beliefs, I have my facts. The facts are that the amendments
do not correct the imbalance between credit card and child support. You
have to fight the credit card companies to get your child support.
The other fact is that 60 percent of those who file bankruptcy have
been unemployed in the last couple of months. We want personal
responsibility. In fact, we have supported an amendment that would
study why small businesses go bankrupt or are not being paid.
This bill needs to go back for hearing so that we can bring forth a
true bipartisan bill that would answer your concern and truly commit us
to personal responsibility.
Ms. SLAUGHTER. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman
from Texas (Mr. Bentsen).
(Mr. BENTSEN asked and was given permission to revise and extend his
remarks.)
Mr. BENTSEN. Mr. Speaker, I rise against the rule. Once again, it
appears that the average Members of the House, Republicans and
Democrats, cannot be trusted to legislate, even though that is what we
were sworn in to do. The Committee on Rules and the Republican
leadership of have decided what amendments will be made in order. The
gentleman from Colorado says the chairman of the Committee on Rules
needs to have a managed rule so he can manage this bill through.
I am not sure what the hurry is. I guess because we have to get out
for another recess. This has been a Congress more of recesses than a
Congress of action, even on important issues like bankruptcy reform.
I actually agree with the gentleman on a lot of it. I actually would
tell the gentleman on his situation, he probably would have done better
to ask for a promissory note than a bull moose head for his wall. But,
nonetheless, let us go forward.
The problem with this bill and the problem with this rule is the
Republicans for so long, since I have been in Congress, have always
been talking about returning powers to the States. But this bill in
sections 181 and 182 preempt State law with respect to the State
constitutions dealing with homestead, particularly in my home State of
Texas.
Let me read a letter from the Governor of Texas, Governor Bush, along
with the Lt. Governor Bullock and Speaker James E. ``Pete'' Laney. ``We
strongly oppose Congress' effort to pass this legislation with the
inclusion of the $100,000 homestead cap. The homestead cap is a clear
violation of states' rights with regard to State private property laws.
State and local government participation should be maintained in
Federal bankruptcy law.''
Mr. Speaker, I will include the whole letter for the record.
Mr. Speaker, this is the whole point. Here we are talking about
returning power to the States on one day, and then the next day we are
taking it back away from them, whatever is most convenient for whatever
our goals may be. To rush this legislation through, again, I agree with
the gentleman on most of this, but for some reason, we cannot trust the
435 Members of this body to go through, spend the time, debate the
amendments and bring up various amendments. We can all think. We all
have the same power, or should have the same power to offer amendments.
But this leadership, which cannot figure out what direction it is
going in, has now come up with the rule that mirrors the strategy of
this leadership, whether it is busting the budget by $22 billion on the
highway bill, or trying to craft a budget bill that is going nowhere
fast, and then debating it in the middle of the night, when nobody
except people in Hawaii would be paying attention.
Apparently this is just another example of the failed Republican
leadership that cannot get anything done, and now wants to change the
bankruptcy laws in the most significant way in the last 20 years, and
wants to do it with 1 hour of general debate, 12 amendments, 10 minutes
on what we are going to do with State homestead laws. I think that is
ridiculous, and it is a real shame for this body to consider this.
State of Texas,
Office of the Governor,
Austin, TX June 2, 1998.
Hon. Henry Hyde,
Chairman, House Judiciary Committee, Washington, DC.
Dear Chairman Hyde: The House Judiciary Committee and
Senate Judiciary Committee have included in their respective
bankruptcy reform bills (S. 1301 and HR 3150) an amendment
that would place a monetary cap of $100,000 on the amount of
homestead equity individuals can protect from bankruptcy
foreclosure proceedings. We are writing to express our
opposition to the amendment and let you know how greatly it
could affect Texas residents.
The Texas homestead provisions, included in the Texas
Constitution, exempt a Texas resident's homestead in the
event of a declared bankruptcy and place no monetary
restrictions on that property. The Texas law does provide
certain restrictions, such as limiting homestead property to
one acre in urban area and 200 acres per family in a rural
area. By placing a monetary cap of $100,000 on the amount of
equity individuals can protect from foreclosure, the
amendment to both bankruptcy reform bills would preempt the
Texas Constitution.
We strongly oppose Congress' efforts to pass this
legislation with the inclusion of the $100,000 homestead cap
amendment. The homestead cap is a clear violation of states'
rights with regard to state private property laws. State and
local government participation should be maintained in
federal bankruptcy law.
Thank you for your consideration.
Sincerely,
George W. Bush,
Governor.
Bob Bullock,
Lt. Governor.
James E. ``Pete'' Laney,
Speaker.
Mr. McINNIS. Mr. Speaker, I yield myself such time as I may consume.
The gentleman from Texas, I realize that late nights offend him
because he would prefer to be at the golf course. But the fact is the
reason the Republicans run these late nights is because we have got a
lot of work to do, and the gentleman can participate in that work.
Second of all, in regards to the gentleman's comment about my bull
elk head, I would be happy to take a promissory note from the gentleman
for the amount, because I know he will pay. I know he will not take the
bankruptcy for convenience.
I kind of assume the gentleman is going to ask me to yield time. I
will preempt that and say no, the other side can yield the gentleman
time if he would like.
Mr. Speaker, I yield 4 minutes to the gentleman from Pennsylvania
(Mr. Gekas).
[[Page H4350]]
Mr. GEKAS. Mr. Speaker, I thank the gentleman for yielding me time.
Mr. Speaker, while the gentleman from Texas is on his feet, I had
informed him and reinformed him, as I know the gentleman is aware, that
an amendment that we intend to offer will satisfy the complaint of the
Governor of Texas as to the current exemption base that is listed in
the bill. We are trying to accommodate the State of Texas and the State
of Florida and others who want to retain their homestead exemption.
When the question occurs about whether or not our bill treats child
support cruelly or handsomely, depending on the point of view, I must
reiterate something that the gentleman from Colorado had begun to
articulate. The support enforcement communities around the Nation, New
York, California, Virginia and others, have stated that they are in
full support of what we are attempting to do in 3150 with respect to
the privatization of support payments.
Here is a letter from the California Family Support Council, to which
the gentleman from Colorado has alluded. We have a letter from the City
of New York which thanks us for the provisions that we have in 3150 as
to support, making it easier for them to collect support.
What is left unsaid in all of this, which I am going to iterate and
reiterate as often as I can, is that the vast majority, 95 percent, of
child support issues are raised in a court order situation in which the
court orders support payments to be made by X, and no matter what
happens in bankruptcy court or any other court, they are enforced over
the year with the marshals and the jails and the sheriffs and the
bailiffs, a whole system to enforce the court orders on support.
{time} 1315
Nothing that we will do over on the bankruptcy side is going to harm
their ability to enforce support payments. But insofar as, through some
happenstance, that the child support that escapes the court system that
is set up to enforce child support leads to consideration of that same
issue in bankruptcy, we take extra pains to prioritize the support
payments even in those few cases comparatively that the bankruptcy
court must deal with with respect to support.
The amendments that we are going to offer will even go farther and
set the priority with which no one could quarrel on support.
Mr. McINNIS. Mr. Speaker, I reserve the balance of my time.
Ms. SLAUGHTER. Mr. Speaker, I yield 30 seconds to the gentleman of
Texas (Mr. Bentsen) to explain the allegation he would rather play golf
at night than work.
Mr. BENTSEN. Mr. Speaker, first of all, I do not play golf. Second of
all, I was unaware you could play golf at night. I would in many
evenings rather be home with my children. But I do not recall the
gentleman being on the floor at 12:30 in the morning when we were
debating the Republican budget resolution, because I was here debating
against the $10 billion cuts my colleagues want to make in veterans
programs and the cuts they want to make in education. I just wanted to
clarify that.
To my colleague, the gentleman from Pennsylvania (Mr. Gekas), and I
would yield if I had the time, it would be unprecedented, I know, in my
time in Congress that anybody would yield to the other, is that I do
want to work with the gentleman, as I said. But the fact is it is
unprecedented action that my colleagues are taking at preempting State
homestead laws in this bill. For the record the Governor of Texas has
said they are for the amendment, but they take no position on the bill.
Ms. SLAUGHTER. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman
from Massachusetts (Mr. Frank).
Mr. FRANK of Massachusetts. Mr. Speaker, as a general supporter of
this bill, I did want to express my dismay at that attack on the
gentleman from Texas. That remark about playing golf at night certainly
does not grant this debate any reasonable weight.
Mr. McINNIS. Mr. Speaker, will the gentleman yield?
Mr. FRANK of Massachusetts. No, just as the gentleman, having made
the attack on the gentleman, would not yield to him, I certainly would
not yield at this point.
I do want to say to my colleagues, while I generally like the bill, I
also wanted some amendments, but they are following the wrong course.
What we should do, and we can still do it, offer these as amendments to
the campaign finance bill, because the same Committee on Rules that
would not allow amendments to the defense bill and shut off reasonable
amendments to this bill, and I regret that as a supporter, this same
Committee on Rules has made more amendments in order to the campaign
finance bill than I think it has made in order for all other bills that
have come up in this Congress.
So given what the Committee on Rules has done, the Committee on Rules
is actually out shopping for nongermane amendments. So while we have to
do this very important bill in a quick-time operation, Members who,
like myself, had good amendments to this bill which were germane to
this bill and were shut out, despite, in some cases, assurances that we
would get them in, make them nongermane amendments to the campaign
finance bill.
Follow this pattern. Go to the Committee on Rules. Make any amendment
we want to bankruptcy a nongermane amendment to the campaign finance
bill. Not only will it be made in order, but we will have unlimited
debate time.
It does seem to me, when we are judging the seriousness of purpose
and fairness of procedure, to compare these. Here is the campaign
finance bill. Here is the bankruptcy bill. The bankruptcy bill is a
very important bill. It will have a significant impact on this country,
and I am generally in favor of it.
But we get amendments killed by the Committee on Rules, presumably on
the direction of the leadership. We get amendments with only 10 minutes
to debate. Then we get the campaign finance bill where amendment upon
amendment, as far as the campaign finance bill is concerned, germane is
Michael Jackson's brother.
The whole concept that has always been at the core of the House of
Representatives that an amendment should be germane to the bill has
been thrown out the window.
So I have to say I am particularly dismayed as a supporter of the
basic concept of this bill to see a rule come forward which does
violence to fair debate in this particular instance and then makes a
mockery of it elsewhere. Then the gentleman from Texas is, I think,
unfairly impugned for complaining about it. So I urge people to vote
against this rule.
Mr. McINNIS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, to the gentleman from Massachusetts, let me tell him,
the golf comment was preceded by a comment from the gentleman from
Texas regarding recess period and a few other things. He speaks, on
which is pretty typical with his approach, speaks on one hand for the
microphone about bipartisanship and cooperation, and I want to help
you, and then, on the other hand, spends the rest of his time attacking
the Republican leadership and the Republican efforts to, in this
particular bill, say, look, it is not wrong in this country to say you
have to accept personal responsibility. It is not wrong in this country
to say, if you are going to buy something, you have got to pay for it.
It is not wrong in this country to say, when you owe somebody money,
when you gave them your word, your word that you are going to pay for
it, keep your word and pay your bills.
It is always this party that feels very strongly when we have
somebody that comes up in a hardship case, let us say somebody gets a
cancer, they are uninsured, they are down on their luck. I mean, that
is what it is designed for.
But as is typical, the liberals have taken advantage of it, taken
bankruptcy way beyond what its original intents were, and now we have a
system of convenience. Look, go ahead, charge everything you want. Take
every credit card you want. If you are worried about paying your bills,
file bankruptcy. It does not matter. You are not shamed in the
community. You do not have to worry about anything. That kind of
behavior should not go on.
Mr. Speaker, I reserve the balance of my time.
[[Page H4351]]
Ms. SLAUGHTER. Mr. Speaker, I yield 3 minutes to the gentleman from
Massachusetts (Mr. Delahunt).
Mr. DELAHUNT. Mr. Speaker, I thank the gentlewoman from New York for
yielding to me.
Mr. Speaker, I guess I want to pick up on that theme of
responsibility. We are going to hear, I am sure, much about
responsibility today, personal responsibility.
But I also wanted to pick up on an observation made by the gentleman
from New York (Mr. Nadler) in terms of congressional responsibility.
There is no doubt that this particular proposal has rushed through the
legislative process, unlike any proposal in my limited experience.
I dare say, as I talk to colleagues throughout and listen to the
statements that have been made, there have been fewer hearings on this.
The rush to bring this proposal to the floor was such that it is
interesting to read the committee report in terms of the cost estimate.
I want to take the time to read it. This is the majority report.
``The estimate of the Congressional Budget Office was not available
at the time of this report. The committee believes that the enactment
of H.R. 3150 will not have a substantial budget effect for the fiscal
year 1999 and subsequent years.''
Well, guess what? They were wrong. They were wrong to the tune of
$300 million over the course of the next 5 years. That is 300 million
taxpayer dollars.
As the debate unfolded earlier on the issue surrounding the point of
order, the ranking member, the gentleman from New York (Mr. Nadler),
was correct when he said, in terms of the impact of these mandates
under H.R. 3150 will cost the private sector over $1 billion, over $1
billion.
The gentleman from Colorado indicates his concern about private
mandates. The CBO estimates that the impact on the private sector will
be in excess of $1 billion over 5 years. But we are in such a rush to
secure passage of this legislation that the point is bring it to the
floor, get it done, limit debate.
This is not responsibility. This is not a responsible legislative
process. We, too, have a collective responsibility. Let us call it
congressional responsibility. I urge that the rule be defeated and the
bill also be defeated.
Mr. McINNIS. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, to the gentleman from Massachusetts, first of all, as a
suggestion, I think he has got his, with good intent, but I think his
facts are wrong. I would suggest that he visit with the gentleman from
Ohio (Mr. Portman) on our side, and the gentleman can talk to him about
his concern he has got on unfunded mandates.
What especially bothers me, though, about the gentleman's comments,
he talks about, in his short career up here, about how this bill has
been rushed more than any other bill. I am not sure where the gentleman
has been. I realize he is busy.
Let me tell the gentleman, there have been lots of hearings on this
bill. Let me just read it. With regard to H.R. 3150 alone, the
subcommittee held four hearings. Over the course of those hearings,
more than 60 witnesses representing a broad cross-section of interest
and constituents in the bankruptcy committee testified. Nearly every
major organization having an interest in reform had an opportunity to
participate in these hearings.
Mr. Speaker, I yield 2 minutes to the gentleman from Pennsylvania
(Mr. Gekas) if he would just comment about the comments just made by
the gentleman from Massachusetts how this bill was rushed to the floor,
no chance for input, and so on and so forth.
Mr. GEKAS. Mr. Speaker, I thank the gentleman for yielding to me.
Mr. Speaker, I have been amused by listening to the litany of
criticisms about how we rushed through it. Comparisons were made about
what happened with the 1978 bill that finally became law.
Prior to 1978, the opposition is pleased to say, they had 5 years to
work on a bankruptcy bill that became the bankruptcy bill of 1978. That
subcommittee and that committee that worked on it for 10, 12, 15 days.
After 5 years, they still had a markup with new ideas and new proposals
to consider even through the markup stages of the subcommittee and the
full committee. So even with the 5 years, they were not ready at the
final moment to have a final bill, just like we did not.
We have new ideas, new circumstances occurring all the time. But the
main themes of this bankruptcy reform bill were born of the 1,400,000
unexplained filings and our society being drenched in debt of
individual debtors who, in some cases, could repay some of the debt. We
believe that enough time has been devoted to it.
Moreover, even during the time that we had, we had the benefit of the
Commission report, the Bankruptcy Commission. So we had a body that had
worked on 2 years' worth of investigation and testimony and hearings on
the bankruptcy. So we incorporated that.
All of a sudden, we can see, if the gentleman from Massachusetts will
acknowledge, we already had, by adopting some of the recommendations of
the Bankruptcy Commission, 2 years of work put right into 3150. That is
not speeding up or rushing.
In addition to that, we had the hearings that the gentleman from
Colorado has mentioned and the number of witnesses. But beyond that, we
had tremendously intricate consultations with people in bankruptcy,
from debt organization standpoint, from consumers standpoint,
bankruptcy trustees, bankruptcy judges, conferences, Chambers of
Commerce, you name it, credit unions.
The credit unions are anxious for the passage of this bill. Their
whole system is being attacked daily by the number of filings that they
see within their system. They want this bill passed, and so do we.
Ms. SLAUGHTER. Mr. Speaker, I yield 2 minutes to the gentleman from
North Carolina (Mr. Watt).
Mr. WATT of North Carolina. Mr. Speaker, the subject of bankruptcy
should not be a partisan issue. It never has been in the history of
this House. It should not be today or in the future. There should be no
Republican perspective or Democratic perspective on this issue.
In 1994, Congress established a Commission to study and recommend
changes to the bankruptcy law. The Commission issued its report last
October. This bill comes to the floor today without the inclusion of
the great, great majority of the recommendations of that Commission.
{time} 1330
It comes with this many amendments having been offered before the
Committee on Rules, a total of 45 proposed amendments, and it comes
under a rule under which only 12 of those proposed amendments will have
the benefit of debate in this House.
These are important proposed amendments that were left out. One
excludes veterans' and Social Security benefits from the calculation of
current monthly income for the purposes of bankruptcy or means testing
under this bill.
One provides that a residential landlord would be required to seek
relief from the automatic stay, as are other creditors seeking such
relief, before being able to move to evict a residential tenant who is
elderly or disabled or who is a veteran.
These are important amendments that the Committee on Rules has said
to this House, we are not going to allow the democratic process to work
its will. We are going to close off debate.
Ms. SLAUGHTER. Mr. Speaker, I yield 30 seconds to the gentleman from
Massachusetts (Mr. Delahunt).
Mr. DELAHUNT. I think it is important to note, Mr. Speaker, for the
record, in response to the chairman of the subcommittee, that upon an
inquiry by me to the chairman of the National Bankruptcy Commission, I
asked him about necessary data.
I said, and I am quoting, ``Every commission was frustrated by the
absence of reliable data dealing with the bankruptcy process. Please
communicate with the CBO, with the GAO, and get that data before you
take action.''
I sent that letter, it was signed by other Members, and we are still
waiting for that result. But here we are today, on the floor of the
House without the evidence and the data that is necessary.
Ms. SLAUGHTER. Mr. Speaker, I yield myself the balance of my time.
(Ms. SLAUGHTER asked and was given permission to revise and extend
her remarks and include extraneous material.)
[[Page H4352]]
The SPEAKER pro tempore (Mr. Duncan). The gentlewoman from New York
(Ms. Slaughter) is recognized for 30 seconds.
Ms. SLAUGHTER. I urge Members to vote no on the previous question,
Mr. Speaker. If the previous question is defeated, I will offer an
amendment to the rule that will make in order an amendment that will
improve the bill's provisions that weaken child support, alimony, and
victims' protections under bankruptcy.
Mr. Speaker, I urge a no vote on the previous question.
Mr. Speaker, I include for the Record information on the vote on the
previous question and other material.
The material referred to is as follows:
The Vote on the Previous Question: What It Really Means
This vote, the vote on whether to order the previous
question on a special rule, is not merely a procedural vote.
A vote against ordering the previous question is a vote
against the Republican majority agenda and a vote to allow
the opposition, at least for the moment, to offer an
alternative plan. It is a vote about what the House should be
debating.
Mr. Clarence Cannon's Precedents of the House of
Representatives, (VI, 308-311) describes the vote on the
previous question on the rule as ``a motion to direct or
control the consideration of the subject before the House
being made by the Member in charge.'' To defeat the previous
question is to give the opposition a chance to decide the
subject before the House. Cannon cites the Speaker's ruling
of January 13, 1920, to the effect that ``the refusal of the
House to sustain the demand for the previous question passes
the control of the resolution to the opposition'' in order to
offer an amendment. On March 15, 1909, a member of the
majority party offered a rule resolution. The House defeated
the previous question and a member of the opposition rose to
a parliamentary inquiry, asking who was entitled to
recognition. Speaker Joseph G. Cannon (R-Illinois) said:
``The previous question having been refused, the gentleman
from New York, Mr. Fitzgerald, who had asked the gentleman to
yield to him for an amendment, is entitled to the first
recognition.''
Because the vote today may look bad for the Republican
majority they will say ``the vote on the previous question is
simply a vote on whether to proceed to an immediate vote on
adopting the resolution * * * [and] has no substantive
legislative or policy implications whatsoever. But that is
not what they have always said. Listen to the Republican
Leadership Manual on the Legislative Process in the United
States House of Representatives, (6th edition, page 135).
Here's how the Republicans describe the previous question
vote in their own manual: ``Although it is generally not
possible to amend the rule because the majority Member
controlling the time will not yield for the purpose of
offering an amendment, the same result may be achieved by
voting down the previous question on the rule * * * When the
motion for the previous question is defeated, control of the
time passes to the Member who led the opposition to ordering
the previous question. That Member, because he then controls
the time, may offer an amendment to the rule, or yield for
the purpose of amendment.''
Deschler's Procedure in the U.S. House of Representatives,
the subchapter titled ``Amending Special Rules'' states: ``a
refusal to order the previous question on such a rule [a
special rule reported from the Committee on Rules] opens the
resolution to amendment and further debate.'' (Chapter 21,
section 21.2) Section 21.3 continues: ``Upon rejection of the
motion for the previous question on a resolution reported
from the Committee on Rules, control shifts to the Member
leading the opposition to the previous question, who may
offer a proper amendment or motion and who controls the time
for debate thereon.''
The vote on the previous question on a rule does have
substantive policy implications. It is the one of the only
available tools for those who oppose the Republican
majority's agenda to offer an alternative plan.
____
Previous Question on H.Res. 462--H.R. 3150--Bankruptcy Reform Act
At the end of the resolution add the following new
sections:
``Sec. 2. Notwithstanding any other provision of this
resolution, it shall be in order to consider the amendment
specified in section 3 of this resolution as though it were
after the amendment numbered 11 in House Report 105-573. The
amendment may be offered only by Representative Jackson-Lee
of Texas or her designee and shall be debatable for 30
minutes.
``Sec. 3. The amendment described in section 2 is as
follows:
Page 6, line 11, insert the following before the 1st
semicolon: ``, but excludes (1) maintenance for or support of
a child of the debtor, received by the debtor and (2) current
alimony, maintenance, or support paid by the debtor for the
benefit of a spouse, former spouse, of child of the debtor'';
Page 16, after line 25, insert the following (and make such
technical and conforming changes as may be appropriate):
(A) in paragraph (2) by inserting ``before any unsecured
claim is paid,'' after ``cash payments'';
Page 17, strike line 15 and all that follows through
``1326(b);'' on line 24, and insert the following:
``(i) that all claims entitled to priority under section
507(a)(7) are paid in full before any nonpriority unsecured
claim is paid;
``(ii) that, to the extent not inconsistent with clause
(i), payments to unsecured nonpriority creditors who are not
insiders shall equal or exceed $50 per month of the plan;
``(iii) that, during the applicable commitment period, the
total amount of plan payments on account of unsecured
nonpriority claims shall equal the monthly net income of the
debtor multiplied by the number of months in the commitment
period less payments pursuant to section 1326(b); and
Page 18, line 14, strike ``(iii)'' and insert ``(iv)''.
Page 18, line 24, strike ``(iv)'' and insert ``(v)''.
Page 48, after line 13, insert the following (and make such
technical and conforming changes as may be appropriate):
SEC. 119B. PROTECTION AGAINST REAFFIRMATION AGREEMENTS
ADVERSELY AFFECTING CHILD SUPPORT.
Section 524 of title 11, United States Code, is amended by
adding at the end the following:
``(i) Notwithstanding any other provision of this title, an
agreement of the kind described in subsection (c) shall be
void unless the court determines that such agreement will not
have an adverse impact on the ability of the debtor to
support a dependent of the debtor.''.
Page 54, line 15, insert ``, but includes any tangible
personal property reasonably necessary for the maintenance or
support of a dependent child'' before the semicolon.
Beginning on page 65, strike line 16 and all that follows
through line 25 on page 66 (and make such technical and
conforming changes as may be appropriate).
Page 68, strike lines 8 through 23 (and make such technical
and conforming changes as may be appropriate).
Page 72, strike line 2, and insert the following: at the
end and inserting a semicolon; and
Page 72, strike line 9, and insert the following: port that
are due after the date the petition is filed; and
``(8) the plan provides that all remaining debts to a
spouse, former spouse, or child of the debtor, due before or
after the date the petition is filed, for alimony to,
maintenance for, or support of such spouse or child, or to a
spouse, former spouse, or child of the debtor, to the extent
such debt is the result of a property settlement agreement, a
hold harmless agreement, or any other type of debt that is
not in the nature of alimony, maintenance, or support in
connection with or incurred by the debtor in the course of a
separation agreement, divorce decree, any modifications
thereof, or other order of a court of record, determination
made in accordance with State or territorial law by a
governmental unit, but not to the extent that such debt is
assigned to another entity, voluntarily, by operation of law,
or otherwise (other than debts assigned pursuant to section
408(a)(3) of the Social Security Act, or such debt that has
been assigned to the Federal government, or to a State or
political subdivision of such State, or the creditor's
attorney) shall be paid before the payment of any other debt
provided for in the plan unless the beneficiary of the
payment waives the obligation that such payment be made
before paying such other debt''.
Page 75, line 21, insert ``(a)'' before
``Notwithstanding''.
Page 76, line 12, insert ``and any debt of a kind described
in paragraph (6), (9), or (13) of section 523(a) of this
title,'' before ``shall''.
Page 76, line 14, strike ``or (14)'' and insert ``or
(19)''.
Page 76, line 17, strike the close quotation marks and the
period at the end.
Page 76, after line 17, insert the following:
``(b)(1) For purposes preserving the priority established
in subsection (a), the holder of claim for a debt of a kind
described in paragraph (2), (4), or (19) of section 523(a) of
this title that is not discharged may not take any action to
obtain payment or collection (including engaging in any
communication with the debtor or with any person who holds
property of the debtor) of such debt if such holder--
``(A) knew or should have known that taking such action, or
obtaining payment of such debt, would impair the ability of
the debtor to pay a debt that has priority under such
subsection; or
``(B) failed to verify immediately before taking such
action, by good faith means designed to identify all debts
that have priority under such subsection, that the debtor
does not then owe any debt that has priority under subsection
(a).
``(2) If such holder violates paragraph (1), such holder
shall be liable to any person injured by such violation for
the sum of $3000, actual damages, and a reasonable attorney's
fee.''.
Mr. McINNIS. Mr. Speaker, I yield myself the balance of my time.
The SPEAKER pro tempore. The Chair recognizes the gentleman from
Colorado (Mr. McInnis) for 1 minute remaining to close debate.
Mr. McINNIS. Mr. Speaker, this rule should be passed and it will be
passed, and then we are going to get to have debate, and that debate is
all about
[[Page H4353]]
personal responsibility. No matter how the Democrats want to cut it,
the fact is that it is about personal responsibility, about keeping our
word, about not buying something if we do not have the money to pay for
it.
The previous question vote itself is simply a procedural vote, Mr.
Speaker, to close the debate on this rule and proceed to a vote on its
adoption. The vote has no substantive or policy implications
whatsoever.
Mr. Speaker, I include for the Record an explanation of the previous
question.
The material referred to is as follows:
The Previous Question Vote: What It Means
House Rule XVII (``Previous Question'') provides in part
that: There shall be a motion for the previous question,
which, being ordered by a majority of the Members voting, if
a quorum is present, shall have the effect to cut off all
debate and bring the House to a direct vote upon the
immediate question or questions on which it has been asked or
ordered.
In the case of a special rule or order of business
resolution reported from the House Rules Committee, providing
for the consideration of a specified legislative measure, the
previous question is moved following the one hour of debate
allowed for under House Rules.
The vote on the previous question is simply a procedural
vote on whether to proceed to an immediate vote on adopting
the resolution that sets the ground rules for debate and
amendment on the legislation it would make in order.
Therefore, the vote on the previous question has no
substantive legislative or policy implications whatsoever.
Mr. McINNIS. Mr. Speaker, I yield back the balance of my time, and I
move the previous question on the resolution.
The SPEAKER pro tempore. The question is on ordering the previous
question.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Ms. SLAUGHTER. Mr. Speaker, I object to the vote on the ground that a
quorum is not present and make the point of order that a quorum is not
present.
The SPEAKER pro tempore. Evidently a quorum is not present.
The Sergeant at Arms will notify absent Members.
This will be a 17-minute vote. As previously stated on orders by the
Speaker, this will be a strictly enforced 17-minute vote.
Pursuant to clause 5 of rule XV, the Chair will reduce to a minimum
of 5 minutes the period of time within which a vote by electronic
device, if ordered, will be taken on the question of agreeing to the
resolution.
The vote was taken by electronic device, and there were--yeas 236,
nays 183, not voting 14, as follows:
[Roll No. 217]
YEAS--236
Aderholt
Archer
Armey
Baesler
Baker
Ballenger
Barr
Barrett (NE)
Bartlett
Barton
Bass
Bateman
Bereuter
Berry
Bilbray
Bilirakis
Bliley
Blunt
Boehlert
Boehner
Bonilla
Bono
Boswell
Boucher
Boyd
Bryant
Bunning
Burr
Burton
Buyer
Callahan
Calvert
Camp
Campbell
Canady
Cannon
Castle
Chabot
Chambliss
Chenoweth
Christensen
Coble
Coburn
Collins
Combest
Cook
Cooksey
Cox
Cramer
Crane
Crapo
Cubin
Cunningham
Davis (VA)
Deal
DeLay
Diaz-Balart
Dickey
Dooley
Doolittle
Dreier
Duncan
Ehlers
Ehrlich
Emerson
English
Ensign
Everett
Ewing
Fawell
Foley
Forbes
Fossella
Fowler
Fox
Franks (NJ)
Frelinghuysen
Gallegly
Ganske
Gekas
Gibbons
Gilchrest
Gillmor
Gilman
Goode
Goodlatte
Goss
Graham
Granger
Greenwood
Gutknecht
Hansen
Hastert
Hastings (WA)
Hayworth
Hefley
Herger
Hill
Hilleary
Hobson
Hoekstra
Horn
Hostettler
Hulshof
Hunter
Hutchinson
Hyde
Istook
Jenkins
Johnson (CT)
Johnson, Sam
Jones
Kasich
Kelly
Kim
Kind (WI)
King (NY)
Kingston
Kleczka
Knollenberg
Kolbe
LaHood
Largent
Latham
LaTourette
Lazio
Leach
Lewis (CA)
Lewis (KY)
Linder
Livingston
LoBiondo
Lucas
Maloney (CT)
Manzullo
McCollum
McCrery
McDade
McHugh
McInnis
McIntosh
McKeon
Metcalf
Mica
Miller (FL)
Moran (KS)
Moran (VA)
Morella
Myrick
Nethercutt
Neumann
Ney
Northup
Norwood
Nussle
Oxley
Packard
Pappas
Parker
Paul
Paxon
Pease
Peterson (MN)
Peterson (PA)
Petri
Pickering
Pitts
Pombo
Porter
Portman
Pryce (OH)
Quinn
Radanovich
Ramstad
Redmond
Regula
Riggs
Riley
Roemer
Rogan
Rogers
Rohrabacher
Ros-Lehtinen
Rothman
Roukema
Royce
Ryun
Salmon
Sanford
Saxton
Schaefer, Dan
Schaffer, Bob
Sessions
Shadegg
Shaw
Shays
Sherman
Shimkus
Shuster
Skeen
Smith (MI)
Smith (NJ)
Smith (OR)
Smith (TX)
Smith, Adam
Smith, Linda
Snowbarger
Solomon
Souder
Spence
Stearns
Stump
Sununu
Talent
Tauscher
Tauzin
Taylor (NC)
Thomas
Thornberry
Thune
Tiahrt
Traficant
Upton
Walsh
Wamp
Watkins
Watts (OK)
Weldon (FL)
Weldon (PA)
Weller
White
Whitfield
Wicker
Wolf
Young (AK)
Young (FL)
NAYS--183
Abercrombie
Ackerman
Allen
Andrews
Baldacci
Barcia
Barrett (WI)
Becerra
Bentsen
Bishop
Blagojevich
Blumenauer
Bonior
Borski
Brady (PA)
Brown (FL)
Brown (OH)
Capps
Cardin
Carson
Clay
Clayton
Clement
Clyburn
Condit
Conyers
Costello
Coyne
Cummings
Danner
Davis (FL)
Davis (IL)
DeFazio
DeGette
Delahunt
DeLauro
Deutsch
Dicks
Dingell
Dixon
Doggett
Doyle
Edwards
Engel
Eshoo
Etheridge
Evans
Fattah
Fazio
Filner
Ford
Frank (MA)
Frost
Furse
Gejdenson
Gephardt
Gordon
Green
Gutierrez
Hall (OH)
Hall (TX)
Hamilton
Harman
Hastings (FL)
Hefner
Hilliard
Hinchey
Hinojosa
Holden
Hooley
Hoyer
Jackson (IL)
Jackson-Lee (TX)
Jefferson
John
Johnson (WI)
Johnson, E. B.
Kanjorski
Kaptur
Kennedy (MA)
Kennedy (RI)
Kennelly
Kildee
Kilpatrick
Klink
Kucinich
LaFalce
Lampson
Lantos
Lee
Levin
Lewis (GA)
Lipinski
Lofgren
Lowey
Luther
Maloney (NY)
Manton
Markey
Martinez
Mascara
Matsui
McCarthy (MO)
McCarthy (NY)
McDermott
McGovern
McHale
McIntyre
McKinney
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Millender-McDonald
Miller (CA)
Minge
Mink
Moakley
Mollohan
Murtha
Nadler
Neal
Oberstar
Obey
Ortiz
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Pickett
Pomeroy
Poshard
Price (NC)
Rahall
Rangel
Reyes
Rivers
Rodriguez
Roybal-Allard
Rush
Sabo
Sanchez
Sanders
Sandlin
Sawyer
Schumer
Scott
Serrano
Sisisky
Skaggs
Skelton
Slaughter
Snyder
Spratt
Stabenow
Stark
Stenholm
Stokes
Strickland
Stupak
Tanner
Taylor (MS)
Thompson
Thurman
Tierney
Torres
Towns
Turner
Velazquez
Vento
Visclosky
Waters
Watt (NC)
Waxman
Wexler
Weygand
Wise
Woolsey
Wynn
Yates
NOT VOTING--14
Bachus
Berman
Brady (TX)
Brown (CA)
Dunn
Farr
Gonzalez
Goodling
Houghton
Inglis
Klug
Olver
Scarborough
Sensenbrenner
{time} 1351
Mr. YATES and Mr. FROST changed their vote from ``yea'' to ``nay.''
Mr. HEFLEY changed his vote from ``nay'' to ``yea.''
So the previous question was ordered.
The result of the vote was announced as above recorded.
The SPEAKER pro tempore. The question is on the resolution.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Ms. SLAUGHTER. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. This will be a 5-minute vote.
The vote was taken by electronic device, and there were--yeas 251,
nays 172, not voting 10, as follows:
[Roll No. 218]
YEAS--251
Aderholt
Archer
Armey
Bachus
Baesler
Baker
Ballenger
Barcia
Barr
Barrett (NE)
Bartlett
Barton
Bass
Bateman
Bereuter
Bilbray
Bilirakis
Bliley
Blunt
Boehlert
Boehner
Bonilla
Bono
Boswell
Boucher
Boyd
Brady (TX)
Bryant
Bunning
Burr
Burton
Buyer
Callahan
Calvert
Camp
Campbell
Canady
Cannon
Castle
Chabot
Chambliss
Chenoweth
Christensen
Coble
Coburn
Collins
Combest
Condit
Cook
Cooksey
Cox
Cramer
Crane
Crapo
Cubin
Cunningham
Danner
Davis (VA)
Deal
DeLay
Deutsch
Diaz-Balart
Dickey
[[Page H4354]]
Dicks
Dingell
Dooley
Doolittle
Dreier
Duncan
Dunn
Ehlers
Ehrlich
Emerson
English
Ensign
Everett
Ewing
Fawell
Foley
Forbes
Fossella
Fowler
Fox
Franks (NJ)
Frelinghuysen
Frost
Gallegly
Ganske
Gekas
Gibbons
Gilchrest
Gillmor
Gilman
Goode
Goodlatte
Goodling
Goss
Graham
Granger
Greenwood
Gutknecht
Hamilton
Hansen
Hastert
Hastings (WA)
Hayworth
Hefley
Herger
Hill
Hilleary
Hobson
Hoekstra
Horn
Hostettler
Hulshof
Hunter
Hutchinson
Hyde
Istook
Jenkins
Johnson (CT)
Johnson, Sam
Jones
Kasich
Kelly
Kennedy (RI)
Kim
Kind (WI)
King (NY)
Kingston
Kleczka
Knollenberg
Kolbe
LaHood
Largent
Latham
LaTourette
Lazio
Leach
Lewis (CA)
Lewis (KY)
Linder
Livingston
LoBiondo
Lucas
Maloney (CT)
Manzullo
McCollum
McCrery
McDade
McHugh
McInnis
McIntosh
McIntyre
McKeon
Metcalf
Mica
Miller (FL)
Minge
Moran (KS)
Moran (VA)
Morella
Myrick
Nethercutt
Neumann
Ney
Northup
Norwood
Nussle
Oxley
Packard
Pappas
Parker
Paul
Paxon
Pease
Peterson (MN)
Peterson (PA)
Petri
Pickering
Pitts
Pombo
Porter
Portman
Pryce (OH)
Quinn
Radanovich
Ramstad
Redmond
Regula
Riggs
Riley
Roemer
Rogan
Rogers
Rohrabacher
Ros-Lehtinen
Rothman
Roukema
Royce
Ryun
Salmon
Sanford
Saxton
Scarborough
Schaefer, Dan
Schaffer, Bob
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Shimkus
Shuster
Sisisky
Skeen
Smith (MI)
Smith (NJ)
Smith (OR)
Smith (TX)
Smith, Adam
Smith, Linda
Snowbarger
Solomon
Souder
Spence
Stearns
Stump
Sununu
Talent
Tauscher
Tauzin
Taylor (NC)
Thomas
Thornberry
Thune
Tiahrt
Traficant
Upton
Walsh
Wamp
Watkins
Watts (OK)
Weldon (FL)
Weldon (PA)
Weller
White
Whitfield
Wicker
Young (AK)
Young (FL)
NAYS--172
Abercrombie
Ackerman
Allen
Andrews
Baldacci
Barrett (WI)
Becerra
Bentsen
Berry
Bishop
Blagojevich
Blumenauer
Bonior
Borski
Brady (PA)
Brown (OH)
Capps
Cardin
Carson
Clay
Clayton
Clement
Clyburn
Conyers
Costello
Coyne
Cummings
Davis (FL)
Davis (IL)
DeFazio
DeGette
Delahunt
DeLauro
Dixon
Doggett
Doyle
Edwards
Engel
Eshoo
Etheridge
Evans
Fattah
Fazio
Filner
Ford
Frank (MA)
Furse
Gejdenson
Gephardt
Gordon
Green
Gutierrez
Hall (OH)
Hall (TX)
Harman
Hastings (FL)
Hefner
Hilliard
Hinchey
Hinojosa
Holden
Hooley
Hoyer
Jackson (IL)
Jackson-Lee (TX)
Jefferson
John
Johnson (WI)
Johnson, E. B.
Kanjorski
Kaptur
Kennedy (MA)
Kennelly
Kildee
Kilpatrick
Klink
Kucinich
LaFalce
Lampson
Lantos
Lee
Levin
Lewis (GA)
Lipinski
Lofgren
Lowey
Luther
Maloney (NY)
Manton
Markey
Martinez
Mascara
Matsui
McCarthy (MO)
McCarthy (NY)
McDermott
McGovern
McHale
McKinney
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Millender-McDonald
Mink
Moakley
Mollohan
Murtha
Nadler
Neal
Oberstar
Obey
Olver
Ortiz
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Pickett
Pomeroy
Poshard
Price (NC)
Rahall
Rangel
Reyes
Rivers
Rodriguez
Roybal-Allard
Rush
Sabo
Sanchez
Sanders
Sandlin
Sawyer
Schumer
Scott
Serrano
Sherman
Skaggs
Skelton
Slaughter
Snyder
Spratt
Stabenow
Stark
Stenholm
Stokes
Strickland
Stupak
Tanner
Taylor (MS)
Thompson
Thurman
Tierney
Towns
Turner
Velazquez
Vento
Visclosky
Waters
Watt (NC)
Waxman
Wexler
Weygand
Wise
Wolf
Woolsey
Wynn
Yates
NOT VOTING--10
Berman
Brown (CA)
Brown (FL)
Farr
Gonzalez
Houghton
Inglis
Klug
Miller (CA)
Torres
{time} 1402
Mr. SHERMAN changed his vote from ``yea'' to ``nay.''
So the resolution was agreed to.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
The SPEAKER pro tempore (Mr. Duncan). Pursuant to House Resolution
462 and rule XXIII, the Chair declares the House in the Committee of
the Whole House on the State of the Union for the consideration of the
bill, H.R. 3150.
{time} 1404
In the Committee of the Whole
Accordingly the House resolved itself into the Committee of the Whole
House on the State of the Union for the consideration of the bill (H.R.
3150) to amend title 11 of the United States Code, and for other
purposes, with Mr. Miller of Florida in the chair.
The Clerk read the title of the bill.
The CHAIRMAN. Pursuant to the rule, the bill is considered as having
been read the first time.
Under the rule, the gentleman from Pennsylvania (Mr. Gekas) and the
gentleman from New York (Mr. Nadler), each will control 30 minutes.
The Chair recognizes the gentleman from Pennsylvania (Mr. Gekas).
Mr. GEKAS. Mr. Chairman, we are about to embark on one of the most
momentous pieces of legislation that has come to the floor in a long
time. And to signify the importance of the measure, we significantly
begin by yielding to the gentleman from Illinois (Mr. Hyde), chairman
of the Committee on the Judiciary, he being a leader of the committee
and of the effort that brings us to this point in bankruptcy reform
legislation.
Mr. Chairman, I yield such time as he may consume to the gentleman
from Illinois (Mr. Hyde).
(Mr. HYDE asked and was given permission to revise and extend his
remarks.)
Mr. HYDE. Mr. Chairman, before I talk about the bill in chief, I
would like to say parenthetically that I am a little disturbed at the
controversy over whether or not I kept my word in asking for an open
rule. I did ask for an open rule. It was not formally asked. It was
down here at the desk to the chairman of the Committee on Rules.
I did not make a commitment that there would be an open rule because
that is not my prerogative. That is up to the Committee on Rules. I
suppose the fact that there were 43 amendments offered at the markup
was a disincentive to have an open rule, but, nonetheless, I offered to
use whatever force and effect I would have to get amendments that the
gentleman from New York (Mr. Nadler) wanted that were serious
amendments made in order. And, again, unfortunately, because of
weather, I was in an airplane yesterday afternoon coming from
Evansville, Indiana by way of Cincinnati, and planes were canceled. I
was not here. I just hope nobody feels I did not live up to my
commitment which was to ask for an open rule. I just wanted to state
that.
Mr. NADLER. Mr. Chairman, will the gentleman yield?
Mr. HYDE. I yield to the gentleman from New York.
Mr. NADLER. Mr. Chairman, I just want to say, I do not doubt for a
moment the integrity and the word of the gentleman from Illinois, the
chairman of the committee. I am sure that he did exactly what he
committed to do and asked the Committee on Rules for an open rule.
I assume he asked that the priority amendments that we asked for be
made in order. I just regret that he was not more influential, perhaps,
with the Committee on Rules and that they did not make more than one
out of the 12 amendments that we had a priority on in order. I do not
doubt for a moment nor would I ever cast aspersion on the integrity or
the good word of the gentleman from Illinois.
Mr. HYDE. Mr. Chairman, I thank the gentleman very much. I can only
say, one cannot overestimate my lack of influence with some of the
institutions around here.
In any event, I am pleased that the Committee on the Judiciary, after
a 3-day markup in May, favorably reported bankruptcy reform legislation
designed to address deficiencies in current bankruptcy processes and
mitigate adverse impacts of bankruptcy filings. We recognized the
importance of responding to the many developments since the Bankruptcy
Code's enactment a generation ago, including a burgeoning bankruptcy
case load that reached a new high of over 1.4 million filings during
the 1997 calendar year.
Last September, our colleague, the gentleman from Florida (Mr.
McCollum), introduced H.R. 2500, the Responsible Borrower Protection
Bankruptcy Act, a bill designed in part to implement the concept of
needs-based bankruptcy.
[[Page H4355]]
In February the chairman of the Committee on the Judiciary
Subcommittee on Commercial and Administrative Law, the distinguished
gentleman from Pennsylvania (Mr. Gekas), built on this approach by
introducing H.R. 3150, the Bankruptcy Reform Act of 1998.
H.R. 3150 incorporated, with modifications and additions, most of
H.R. 2500's consumer bankruptcy provisions while also addressing other
bankruptcy related subjects.
Our committee sought to achieve an appropriate balance between debtor
and creditor rights in endorsing a needs-based bankruptcy process that
would increase creditor recoveries while offering relief to deserving
debtors. Those who needed an immediate fresh start would get it, but
those who could afford to pay a substantial portion of their
obligations out of future income before getting a fresh start would be
required to do so.
Under H.R. 3150 as reported, individuals or couples with income
levels equaling or exceeding national median figures that take into
account family size may be ineligible, depending on certain
calculations, to be chapter 7 debtors. Chapter 7 offers a fresh start,
without encumbering future income, to individual debtors who are
prepared to give up all of their nonexempt assets. Those denied access
to chapter 7 under the pending legislation generally will have the
option of making payments under a chapter 13 plan for a number of years
and qualifying for a limited discharge eventually.
The chapter 7 disqualification is more limited in scope as a result
of committee action raising the income threshold for disqualification
from 75 percent to 100 percent of national median income figures.
The higher cutoff point, endorsed by the committee, addresses a major
argument of opponents of this legislation that the needs-based formula
was too harsh in its treatment of people with very limited means.
Our committee sought to ensure that family support obligations would
be protected under the reported version of the bill. It adopted an
amendment that I offered to prevent any dilution of the priority
treatment accorded claims of spouses, former spouses and children for
alimony, maintenance, or support, and also adopted four family support
related amendments offered by the learned gentleman from Virginia (Mr.
Boucher). Although this legislation was never intended to derogate from
the preferred treatment of family support obligations under bankruptcy
law, the Committee on the Judiciary welcomed the opportunity to take
action emphasizing, in a number of contexts, its firm commitment to
facilitating the fulfillment of such obligations.
In addition, as a result of a provision in the manager's amendment,
the priority in distribution for support related obligations is
substantially enhanced compared with current law.
I wish to commend the gentleman from Pennsylvania (Mr. Gekas) for
introducing H.R. 3150 and conducting important hearings on bankruptcy
reform in his subcommittee. He is performing, as he does so often, an
important public service by serving as our floor manager for this bill.
The remedial legislation before us not only covers consumer issues
but also addresses business bankruptcy, tax related issues in
bankruptcy, and transnational bankruptcy. It merits the support of this
body.
I hope in the months ahead we will be able to point to bankruptcy
reform as one of the significant achievements on a bipartisan basis of
the 105th Congress.
Mr. GEKAS. Mr. Chairman, H.R. 3150 is one of the most comprehensive
legislative efforts to reform bankruptcy law and practice in the 20
years since the enactment of the Bankruptcy Code in 1978. The guiding
principle of these reforms has been to restore personal responsibility
and integrity in the bankruptcy system and to ensure that it is fair
for both debtors and creditors.
This bill represents the culmination of more than three years of
careful analysis and review of our nation's current bankruptcy system.
In the past year, the Subcommittee on Commercial and Administrative
Law, of which I serve as Chairman, has held nine hearings on various
aspects of bankruptcy reform. With regard to H.R. 3150 alone, the
Subcommittee held four hearings. Over the course of those hearings,
more than 60 witnesses, representing a broad cross-section of interests
and constituencies in the bankruptcy community, testified. Nearly every
major organization having an interest in bankruptcy reform had an
opportunity to participate in these hearings.
H.R. 3150's reforms pertain to consumer and business bankruptcy law
and practice, and includes provisions regarding the treatment of tax
claims and enhanced data collection. H.R. 3150 also establishes a
separate chapter under the bankruptcy Code devoted to the special
issues and concerns presented by international insolvencies.
Why do we need needs-based consumer bankruptcy reform? The answers
are not only easy, but obvious. Last year, bankruptcy filings topped
1.4 million and even exceeded the number of people who graduated
college in that same year. Nevertheless, literally thousands of people
who have the ability to repay their debts are simply filing for
bankruptcy relief and walking away from those debts without paying
their creditors a single penny under the current system.
Why do we care about creditors? Again, the answer is easy and
obvious. When they don't get paid, someone suffers a loss. The only way
they can make up that loss is by passing it along to us--you and me--in
the form of increased prices and higher interest rates. Besides being
unfair to those of us who pay our debts, the current consumer
bankruptcy system at best lacks balance, at worst lacks morality and is
subject to abuse.
There are two extreme approaches to bankruptcy relief: No one is
allowed any bankruptcy relief or bankruptcy relief is granted to anyone
who requests such relief. Our current system has become dangerously
close to the latter extreme and the enormous leap in the number of
bankruptcy cases being filed appear to document that.
H.R. 3150's needs-based reforms will restore balance to consumer
bankruptcy law while reducing its potential for abuse. Not only will
everyone in the bankruptcy system benefit from these reforms, but
people like us--the corner grocer who extends credit to his neighbors,
the family who's buying its first home and trying to get the lowest
rate of interest for financing that purchase, the single mother who's
applying for credit for the first time--are the ones who will also
benefit from H.R. 3150.
H.R. 3150 is our response. It offers a balanced approach to reform
with regard to consumer as well as business bankruptcy reform. In
addition, as reported from the Full Committee last month, H.R. 3150
fully protects the priority treatment accorded to child support claims
and fully responds to the concerns that some have expressed about this
issue.
H.R. 3150 creates a debtor's ``bill of rights'' with regard to the
services and notice that a consumer should receive from those that
render assistance in connection with the filing of bankruptcy cases.
Through misleading advertising and deceptive practices, ``petition
mills'' deceive consumers about the benefits and detriments of
bankruptcy. H.R. 3150 responds to this problem by instituting mandatory
disclosure and advertising requirements as well as enforcement
mechanisms.
In all, H.R. 3150 represents a balanced approach to bankruptcy reform
with the goal of reducing abuse, promoting greater uniformity, and
restoring public confidence in the integrity of the bankruptcy system.
I include the following letters of support for H.R. 3150 in the
Record.
National Federation of
Independent Business,
Washington, DC, June 9, 1998.
Hon. George Gekas,
U.S. House of Representatives,
Washington, DC.
Dear Representative Gekas: On behalf of the 600,000 small
business owners of the National Federation of Independent
Business (NFIB), I am writing to urge your support for H.R.
3150, the Bankruptcy Reform Act of 1998.
Small business is concerned, as many are, about the rapid
increase of bankruptcy filings over the last several years.
Whether their customers are other businesses or individual
consumers, small businesses feel the pain to their bottom
line when their customers go bankrupt. As an unsecured
creditor, most small businesses never even get a chance to
get back what they are owed.
A recent poll found that 77 percent of NFIB members want to
make the criteria for declaring bankruptcy more stringent.
Small business owners feel current law is in desperate need
of reform in order to curb the abuses of the current federal
bankruptcy system.
H.R. 3150 goes a long way to fight the abuses to the
bankruptcy system. Most importantly, the legislation strikes
a fair balance by giving small business owners more of a
chance to get back what is rightfully theirs, while still
providing bankruptcy protection to those small businesses who
truly need it.
I urge you to give small business a chance to get what is
theirs. Support H.R. 3150, the Bankruptcy Reform Act of 1998.
Sincerely,
Dan Danner,
Vice President,
Federal Governmental Relations.
____
National Consumer Bankruptcy Coalition
STATEMENT ON THE HOUSE JUDICIARY COMMITTEE'S PASSAGE OF H.R. 3150
We are very pleased that the House Judiciary Committee
today favorably reported The
[[Page H4356]]
Bankruptcy Reform Act of 1998 (H.R. 3150), clearing the
measure for action by the full House. We also applaud
Chairman Hyde and the Committee members for putting to rest
any question about the priority status of child support and
alimony payments in the bankruptcy process. The amendments
adopted by the Committee specifically and categorically state
that child support and alimony payments must be given
priority in bankruptcy proceedings. There is no greater
personal responsibility than meeting one's child support and
alimony obligations, and we strongly support these measures
to ensure that these payments are in no way affected by this
legislation.
The result is that H.R. 3150 has emerged from the Committee
even stronger in terms of personal responsibility and should
enjoy strong bipartisan support on the House floor. We urge
the full House to act upon this legislation at the earliest
opportunity so that sensible, fair bankruptcy reform can be
enacted in 1998. We are also pleased that the Senate plans to
move forward next week on significant bankruptcy reform
legislation.
H.R. 3150 will restore personal responsibility and fairness
to our bankruptcy system. For too long now, our flawed
bankruptcy law has provided complete debt relief to
individuals who have enough income to repay at least some of
what they owe. As a result, the overwhelming majority of
Americans who pay their bills on time have been forced to
pick up the tab--to the tune of about $400 per household--for
those who walk away from their debts. This important
legislation will correct this flaw by ensuring that
bankruptcy filers receive only the amount of debt relief they
need, no more and no less.
American Bankers Association; American Financial Services
Association; America's Community Bankers; Bankruptcy
Issues Council; Consumer Bankers Association; Credit
Union National Association; Independent Bankers
Association of America; National Retail Federation;
U.S. Chamber of Commerce.
____
Chamber of Commerce of the
United States of America,
Washington, DC, March 2, 1998.
Hon. George Gekas,
U.S. House of Representatives,
Washington, DC.
Dear Representative Gekas: The U.S. Chamber of Commerce--
the world's largest business federation representing more
than three million businesses of every size, sector and
region--strongly supports bankruptcy reform legislation,
specifically, H.R. 3150, the Bankruptcy Reform Act of 1998.
We urge you to support this bankruptcy reform legislation
sponsored by Chairman George Gekas, Representatives Bill
McCollum, Rick Boucher and James Moran. H.R. 3150 will reform
our bankruptcy laws and establish a ``needs-based'' system
which aids all Americans who are affected by the abuses and
misuses of the current code. The timing of this legislation
could not be more critical.
The number of personal bankruptcy filings, which canceled
approximately $40 billion in consumer debt last year, is
rising precipitously. Early indications for 1997 suggest that
we will see the number rise by 20 percent over the 1996
record and the amount of debt canceled rise by 33 percent.
Given the strong performance of the economy during the past
year, these staggering increases in filings suggest that our
bankruptcy system must be reformed. Of course, the consumer
debt taken off the books by the bankruptcy system is not
really erased--instead, the cost is shifted to third parties
such as households and businesses, in the form of higher
prices and higher interest rates.
In addition to the creation of a ``needs-based'' system,
the Chamber applauds the efforts by Chairman Gekas,
Representatives McCollum, Boucher and Moran in addressing
small business and farm bankruptcies, tax collections and
single-asset realty cases, as well as inclusion of education-
related provisions and protections for those who receive
inadequate or improper counseling. These efforts could be key
in providing the best climate in which small business can
prosper.
We look forward to working with you and your colleagues on
passing this legislation in this session of Congress.
Sincerely,
R. Bruce Josten,
Executive Vice President,
Government Affairs.
____
U.S. Chamber of Commerce,
Washington, DC, June 8, 1998.
To Members of the U.S. House of Representatives: The U.S.
Chamber of Commerce, the world's largest business federation,
representing more than three million businesses of every
size, sector and region, urges you to support passage of the
``Bankruptcy Reform Act of 1998,'' H.R. 3150. This important
bipartisan legislation will reform our bankruptcy laws and
establish a ``needs-based'' system that will aid all
Americans who are affected by the abuses and misuses of the
current code.
The number of personal bankruptcy filings, which canceled
approximately $40 billion in consumer debt last year, is
rising precipitously. Early indications for 1997 suggest that
we will see the number rise by 20 percent over the 1996
record and the amount of debt canceled rise by 33 percent.
Given the strong performance of the economy during the past
year, these staggering increases in filings indicate that our
bankruptcy system must be reformed. The fact is the consumer
debt taken off the books by the bankruptcy system is not
really erased. Instead, the cost is shifted to third parties
such as households and businesses, in the form of higher
prices and higher interest rates.
The U.S. Chamber of Commerce believes that this bill would
close a number of loopholes in the law that encourages
debtors to take advantage of our current system and avoid
paying their debts. The legislation would steer debtors away
from the more lenient ``Chapter 7'' filing, back to ``Chapter
13,'' where courts establish timely repayment plans for those
that are able to repay a portion of their debts. Repeated use
of bankruptcy laws to continually walk away from debts would
be severely restricted.
Because of the importance of this legislation to the
business community and consumers, we may include votes on or
in relation to H.R. 3150 as key votes in the Chamber's annual
How They Voted ratings.
Sincerely,
R. Bruce Josten.
____
National Federation of
Independent Business,
Washington, DC, January 30, 1998.
Hon. George Gekas,
Chairman, Subcommittee on Commercial and Administrative Law,
Committee on Judiciary, U.S. House of Representatives,
Washington, DC.
Dear Chairman Gekas: On behalf of the 600,000 small
business owners of the National Federation of Independent
Business (NFIB), I applaud your efforts to introduce real
bankruptcy reform legislation.
Small business is concerned, as many are, about the rapid
increase of bankruptcy filings over the last several years.
Whether their customers are other businesses or individual
consumers, small businesses feel the pain to their bottom
line when their customers go bankrupt. As an unsecured
creditor, most small businesses never even get a chance to
get back what they are owed.
A recent poll found that 77 percent of NFIB members want to
put more limits on people's ability to declare bankruptcy.
Small business owners feel current law is in need of reform
because the federal bankruptcy system has been abused.
The Bankruptcy Reform Act of 1998 that you and Congressman
Moran have authored goes a long way to fight the abuses to
the bankruptcy system. It will also give small business
owners more of a chance to get what is rightfully theirs,
while still providing bankruptcy protection to those who
truly need it.
Thank you for your leadership on this issue. NFIB looks
forward to working with you as this issue proceeds through
your subcommittee.
Sincerely,
Dan Danner,
Vice President,
Federal Governmental Relations.
____
U.S. Department of Justice, United States Trustee,
Northern and Eastern Districts of California and
Nevada,
San Francisco, CA, May 11, 1998.
Representative George W. Gekas,
U.S. House of Representatives,
Washington, DC.
Dear Mr. Gekas: The Small Business Proposal, a component of
H.R. 3150, the ``Bankruptcy Reform Act of 1998,'' is not an
untested concept and would codify the ``best practices'' of
the United States Trustees. Since January 1, 1995, the field
offices of Region 17 have conducted Initial Debtor Interviews
in every chapter 11 case filed. In advance of the interview,
we request the debtor supply detailed financial information
to our office. At the interview, we use that information to
focus on the debtor's business and work with the debtor to
understand what is required to emerge successfully from
chapter 11. We continuously monitor the debtor's financial
progress during the pendency of the chapter 11 case with
particular emphasis on the debtor's continuing viability. The
result of this practice is quicker, and more likely
successful, reorganization for chapter 11 cases.
Please contact me if you have any questions.
Sincerely,
Linda Ekstrom Stanley,
United States Trustee.
____
The City of New York
Law Department,
New York, NY, April 15, 1998.
Hon. George W. Gekas,
Chairman, House Subcommittee on Commercial and Administrative
Law, Rayburn House Office Building, Washington, DC.
Dear Chairman Gekas: The City of New York (the ``City'')
would like to thank you for your leadership in drafting H.R.
3150, the Bankruptcy Reform Act of 1998. The legislation will
be of great benefit to the City because it will strengthen
the ability of local governments to collect ad valorem taxes.
As your Subcommittee prepares for consideration of H.R. 3150,
I would like to offer my comments and suggestions on key
provisions of the legislation.
The City is especially supportive of ``Title V, Tax
Provisions'', which will help ensure that local governments
receive more of the tax debt they are owed. Title V will also
make the bankruptcy process more predictable and stable for
local governments. While these changes will be very
beneficial to the City, it is critical that one provision of
H.R. 3150 be clarified to avoid unintentionally increasing
bankruptcy filings while reducing local government revenue.
[[Page H4357]]
As drafted, H.R. 3150 proposes a new section, Section 511
of the Bankruptcy Code, which provides for an Internal
Revenue Code rate of interest on tax claims. This provision
is problematic as it does not specifically identify or limit
the types of taxes subject to the proposed interest rate.
Were this section limited to excise tax claims or tax claims
on or measured by income or gross receipts, the City would
have minimal objection that the interest rate should be the
``statutory rate'' for such taxes. On the other hand, if the
bill defines ``tax'' as including ad valorem taxes, the City
would have a very strong objection, as the interest rate
would be significantly less than that which is charged by the
City, and would, in fact, encourage bankruptcy filings by
real property owners in order to obtain this more favorable
rate. H.R. 3150 should specifically exclude ad valorem taxes
from the definition of ``tax'' under Section 511.
The City supports the language in the Bankruptcy Reform Act
of 1998 that recognizes that ad valorem taxes must be paid
ahead of other debts in bankruptcy cases. The City applauds
your leadership on this critical revision of Bankruptcy Code
Section 724 for the protection of local government budgets.
Cities are non-consensual creditors and are in a unique
relationship with debtors in bankruptcy. As such, cities
should be paid before other creditors in bankruptcy cases.
The City strongly supports H.R. 3150's revisions to Section
505 of the Bankruptcy Code. The legislation would provide
that a challenge to real property assessment may occur only
if the period of time to contest such tax did not expire by
operation of law. Section 505 of the Bankruptcy Code
presently allows debtors to challenge any tax covering any
period of time unless such tax had been contested and
adjudicated prior to the commencement of the bankruptcy case.
Thus, taxes may be contested in a bankruptcy proceeding even
if the statute of limitations to challenge the taxes had
expired under the relevant state law. This Section is
patently unfair to taxing authorities. It fosters abuse by
debtors who potentially can force a government to litigate
taxes which were collected years ago and had not been timely
challenged. It leaves municipalities in a fiscally precarious
and vulnerable position. There is no legal finality to tax
challenges or stability in local government finances. Since
there is no statute of limitations as Section 505 of the
Bankruptcy Code is presently drafted, the changes made by
H.R. 3150 to Section 505 of the Bankruptcy Code are of
enormous importance.
The City supports H.R. 3150's modifications to Section 342
of the Bankruptcy Code that would require a debtor to submit
necessary information for creditors, such as taxpayer
identification numbers, and parcel numbers for blocks and
lots, and to list the appropriate department or agency for
filing City claims. This information will enable the City to
act more efficiently. However, the City would like
clarification that governmental units are allowed to
designate safe harbor mailing addresses for each department,
agency or instrumentality of such governmental units. In
addition, the City would like a clarification that ``notice''
to a particular department, agency or instrumentality of a
governmental unit shall not constitute ``notice'' to other
departments, agencies or instrumentalities of the same
governmental unit.
Thank you again for your leadership on bankruptcy issues.
H.R. 3150 can greatly improve the City's ability to collect
debts owed by bankruptcy filers which will relieve revenue
pressure on all other taxpayers. We appreciate your support
for the changes outlined above, and with these clarifications
support the prompt passage of H.R. 3150.
Sincerely,
Michael D. Hess,
Corporation Counsel.
____
Commonwealth of Virginia, Department of Social Services,
Division of Child Support Enforcement
Richmond, VA, June 9, 1998.
Hon. James P. Moran,
House of Representatives, Washington, DC.
Dear Congressman Moran: As Director Nick Young is
traveling, I am responding to your request for comments on
child support-related portions of H.R. 3150. The inclusion of
provisions in H.R. 3150 to improve child support collections
when a debtor has filed for protection under the Bankruptcy
Code would be very helpful to families in Virginia.
Amendments proposed in Section 146 would substantially assist
our efforts to enforce child support obligations during the
bankruptcy of a child support obligor. Currently, there exist
in bankruptcy a number of issues that make enforcement of
child support debts difficult when that parent has other
creditors also attempting to gain a position in the ranking
for distribution of the debtor's bankruptcy estate.
While we have many valuable tools with which to enforce
child support collections, bankruptcy can place the child
support debt collection in competition with other creditors.
This is not normally the case in the rest of our support
enforcement tools; child support takes high precedence. In
bankruptcy cases filed under Chapters 12 and 13, we must
cease income withholding orders and add the child support
debt into all the other financial obligations considered in
developing the debtor's plan. This hardly puts children
first!
Congressman Gekas' proposed amendments in section 146 would
correct this situation, and ensure ``children first'' in
bankruptcy situations where child support is involved. We
most certainly believe these amendments are beneficial to
Virginia's families and the larger welfare reform initiative
across the country.
Sincerely,
Bill Brownfield,
Legislative Coordinator.
____
California Family Support Council,
Sacramento, CA June 4, 1998.
Hon. George W. Gekas,
House of Representatives, Washington, DC.
Dear Chairman Gekas: The California Family Support Council
is an organization of district attorneys and other
professionals in the State of California who represent the
interest of the children of this state in the establishment
and collection of support under the federal child support
enforcement program (Social Security Act, Title IV-D). As
president of the Council I wish to express the gratitude of
our members for your inclusion of provisions in H.R. 3150 to
improve child support collections when a debtor has filed for
protection under the Bankruptcy Code.
In particular, section 146 of H.R. 3150 contains a
veritable ``wish list'' of provisions which substantially
enhances our efforts to enforce support obligations during
the bankruptcy of a support obligor. It closes many of the
``loopholes'' which currently exist in bankruptcy and which
greatly hamper our efforts to enforce support debts when a
debtor has other creditors who are also seeking participation
in the distribution of the assets of a debtor's bankruptcy
estate.
Congress has already provided many tools which give us an
enormous collection advantage over other creditors outside
bankruptcy. We can, for example, intercept tax refunds;
prosecute for criminal non-support or contempt of court;
revoke, suspend or non-renew licenses; obtain income
withholding order which, under federal law, have an absolute
priority over other creditors' claims (42 U.S.C.
Sec. 666(B)(7); obtain penalties against employers who fail
to honor income withholding orders; obtain such income
withholding orders without leave of court; and obtain
security bonds or guarantees for the payment of support. In
addition nonpayment of support interstate is a federal crime.
All of these collection techniques--and many more--are
available at little or no cost to support obligees through
the child support enforcement program.
During bankruptcy, however, many of these remedies must be
reconciled with other bankruptcy code provisions which
protect the debtor and place support obligees in competition
with other creditors. What is worse, in cases filed under
Chapters 12 and 13, income withholding must cease and the
support debts must be structured to conform to the debtor's
plan.
If the amendments you propose in section 146 of H.R. 3150
were enacted, the opposite would be true. Plans could not be
confirmed or discharges granted unless all postpetition
support payments were made; income withholding would not be
affected by the filing of a bankruptcy petition; lingering
issues relating to the dischargeability of certain support
debts would be clarified; and distinctions between assigned
and unassigned support would be eased. In short, your
proposed amendments would make the effect of bankruptcy on a
child support creditor negligible.
I have been informed that there is some opposition to H.R.
3150 based on the premise that support creditors would be
worse off if certain credit car debts were made
nondischargeable and credit card creditors and support
creditors were in competition for the same post-discharge
assets. I can only say that we are in competition with those
creditors prior to bankruptcy now. We do not see such debts
as impairing our ability to collect support, especially in
view of the advantages child support creditors have under
current state and federal law as outlined above. Our problems
stem not from competition with credit card creditors outside
bankruptcy, but from the disadvantages we incur as collectors
of support under current bankruptcy law during bankruptcy.
Your proposed amendments would give support creditors an
enormous advantage over other creditors during bankruptcy and
greatly aid us in the discharge of our support enforcement
responsibilities.
I just want you to know that, on behalf of the public child
support enforcement community in California, we
enthusiastically support your efforts and look forward to the
swift enactment of H.R. 3150.
Yours very truly,
Jonathan Burris,
President.
____
Bank of America
San Francisco, CA, March 11, 1998.
Hon. George W. Gekas,
House of Representatives, Rayburn House Office Building,
Washington, DC.
Dear Congressman Gekas: I am writing to urge your support
of H.R. 3150, the ``Bankruptcy Reform Act of 1998''.
Consumer bankruptcy reform is urgently needed to address
the recent explosion in the number of personal bankruptcy
filings. Last year, for the first time in history, more than
1 million personal bankruptcy petitions were filed. It is
anticipated that as many as 1.4 million consumers will file
for bankruptcy this year. This explosion in filings is most
troubling given that it comes at a time when the American
economy is strong and unemployment is low.
[[Page H4358]]
The rise in personal bankruptcies has an undeniable impact
on Bank of America. However, it is consumers who are
absorbing the heaviest burden. This year, approximately $40
billion in consumer debt will be written off as a result of
personal bankruptcy filings. These losses translate to
approximately $400 for every American household and are
passed on to all consumers as higher interest rates and
higher prices for goods and services. In effect, the vast
majority of consumers who pay their bills on time are picking
up the tab for those who do not.
Our flawed bankruptcy system allows this inequity to
continue. The Bankruptcy Code allows individuals to erase all
their debts even if they have the ability to repay some
portion of them. Not surprisingly, the overwhelming majority
of filers--70 percent--choose Chapter 7, which allows
virtually all debts to be erased regardless of whether the
debtor could repay some of what he or she owes. Recent
research shows, in fact, that about 25 percent of Chapter 7
filers have the ability to repay their housing debt plus at
least one-third of their remaining debts. One in twenty
Chapter 7 filers has sufficient income to repay all debts,
but receives complete relief anyway.
H.R. 3150 would change the law to ensure that individuals
receive the amount of debt relief they need, no more and no
less. It would allow those in the most serious financial
difficulty to get the fresh start they need while requiring
those with an ability to repay a portion of their debts to do
so. It is a sensible solution to a serious problem.
I urge your support of H.R. 3150. This legislation
represents important consumer bankruptcy reform that is
necessary to stem the rising costs associated with personal
bankruptcies, while making the bankruptcy system more
equitable for consumers, creditors and debtors alike.
Sincerely,
James G. Jones.
____
National Association of Counties,
Washington, DC, June 8, 1998.
Hon. George W. Gekas,
Chairman, Commercial and Administrative Law Subcommittee of
the House Judiciary Committee, Rayburn House Office
Building, Washington, DC.
Dear Chairman Gekas: The National Association of Counties
(NACo) supports the Bankruptcy Reform Act of 1998 (H.R. 3150)
as reported by the Committee on the Judiciary. We urge the
House of Representatives to vote for H.R. 3150 when it is
considered on the floor.
NACo particularly is pleased with provisions included in
the bill reported by the Committee on the treatment of state
and local government tax liens in bankruptcy proceedings. The
provisions in H.R. 3150 are very important to states,
counties, cities and school districts. The bill would change
a number of sections in the Bankruptcy Code that have caused
counties to lose millions of dollars in property tax
revenues. Counties have to increase taxes, cut programs or
find substitute funding to replace this lost revenue as a
result of current federal bankruptcy law. We are pleased that
the bill contains a majority of the provisions developed and
proposed by the National Association of County Treasurers and
Finance Officers, an affiliate of NACo.
If you have any questions about the position of the
National Association of Counties, please call Ralph Tabor or
our staff at 202-942-4254.
Thank you for your consideration.
Sincerely,
Larry E. Naake,
Executive Director.
____
Colorado Counties, Inc.,
Denver, CO, April 29, 1998.
Hon. George W. Gekas,
Member, House Judiciary Committee,
Rayburn House Office Building, Washington, DC.
Dear Congressman Gekas: On behalf of Colorado's 63 county
governments, I am writing to urge your continued support of
H.R. 3150 also known as the ``Bankruptcy Reform Act of
1998.'' We understand that the House Judiciary Committee will
be marking up the legislation in the next week, and we
appreciate your leadership in assuring its provisions are
considered favorably.
As you are aware, the National Association of County
Treasurers and Finance Officers (NACTFO) has been an active
participant in the ongoing discussions related to the
priority of ad valorum tax liens in bankruptcy proceedings.
The organization previously submitted to you a paper entitled
``Local Government Recommendations for Bankruptcy Code,'' and
attended all public hearings of the National Bankruptcy
Review Commission.
As H.R. 3150 is considered in the Judiciary Committee, we
encourage you to consider the attached ``Specific
Recommendations to Amend H.R. 3150'' dated April 10, 1998, as
prepared by The Honorable Ray Valdes, Co-Chair of the
Legislative Committee of the National Association of County
Treasurers and Finance Officers. The recommendations include
a number of provisions that we believe will make H.R. 3150 an
even stronger reform measure.
If you have specific questions regarding the proposal, I
encourage you to contact The Honorable Ray Valdes at
407.321.1130 or The Honorable Sandy Hume, Boulder County
Treasurer, at 303.441.3500.
Thank you for your consideration.
Sincerely,
Peter B. King,
Director.
____
National Association of
Federal Credit Unions,
Washington, DC, February 26, 1998.
Hon. George W. Gekas,
Chairman, Commercial and Administrative Law,
House Judiciary Committee, Washington, DC.
Dear Chairman Gekas: On behalf of the National Association
of Federal Credit Unions (NAFCU), the only national trade
association exclusively representing the interests of the
nation's federal credit unions, I wish to commend you on your
efforts to restore personal responsibility to the bankruptcy
system.
NAFCU believes that the ``Bankruptcy Reform Act of 1998''
(H.R. 3150) will help to ensure that the system is fair for
debtors, creditors and consumers. Because of the unique
structure of member-owned credit unions all losses suffered
by a credit union are passed down through the members in the
form of higher loan rates, lower rates on savings and/or more
stringent lending criteria. Credit unions take great pride in
working with their members who encounter financial
difficulties and your legislation is certainly a step in the
right direction. NAFCU is pleased to endorse this
legislation.
NAFCU would like the opportunity to testify and share with
the Committee the impact bankruptcies have on member-owned
cooperative credit unions, and the unique role credit unions
can play in assisting those in dire financial straits.
Thank you for the opportunity to participate in this
important effort. Please allow me to extend a special note of
appreciation to the members of your staff, especially Dina
Ellis, for their assistance and support.
We look forward to working with you on this and other
challenging issues affecting credit unions and your credit
union constituents.
Sincerely,
William J. Donovan,
Senior Vice President,
Deputy General Counsel.
____
National Multi Housing Council and National Apartment
Association,
Washington, DC, February 2, 1998.
Hon. George Gekas,
Chairman, Commercial and Administrative Law Subcommittee,
House of Representatives, Washington, DC.
Dear Chairman Gekas: On behalf of the National Multi
Housing Council (``NMHC'') and the National Apartment
Association (``NAA''), I am writing to convey our strong
support of your legislation, the ``Bankruptcy Reform Act of
1998.''
NMHC and NAA jointly operate a federal legislative program
which provides a unified voice for the private apartment
industry. Our combined memberships are engaged in all aspects
of the ownership and operation of apartments, including
finance, development, construction, and management.
Bankruptcy filings in the nation continue their upward
climb. According to the most recent information from the U.S.
Department of Justice's Administrative Office of U.S. Courts,
the federal agency which oversees the nation's federal
bankruptcy courts, bankruptcy filings during the 12-month
period ending September 30, 1997, were highest on record at
1,367,364, representing over a 400 percent increase since
1980.
The National Bankruptcy Review Commission has spent
considerable time investigating the cause of these bankruptcy
filings, and while there is no single answer, it is clear
that part of the problem lies in the abuses of the U.S.
Bankruptcy Code. NMHC and NAA believe that your legislation
will help to stem these abuses and provide a more level
playing field between debtors and creditors.
NMHC and NAA commend you for your leadership in reforming
the Code and look forward to working with you during the
105th Congress to pass the Bankruptcy Reform Act of 1998.
Sincerely,
Scott Belcher.
____
[News release from the National Retail Federation]
National Retail Federation Voices Support for Bankruptcy Reform Act of
1998
bill would stem soaring filings and restore common sense to bankruptcy
code
Washington, DC, February 3, 1998--The National Retail
Federation, the world's largest retail trade association,
today voiced its support for The Bankruptcy Reform Act of
1998, calling it a giant first step that puts responsibility
and sensibility back into the bankruptcy code.
``We applaud Rep. Gekas and his colleagues for their
leadership in crafting this common-sense approach to
bankruptcy reform,'' said NRF President Tracy Mullin. ``This
bill will ensure that those with real need get real relief.''
The bill, introduced by Reps. George Gekas (R-PA), Thomas
Moran (D-VA), Bill McCollum (R-FL) and Rick Boucher (D-VA),
addresses what NRF believes are fundamental flaws in the
current bankruptcy code: that individuals with the ability to
repay their debts are not required to do so, nor is there any
mechanism to determine their ability to pay.
Mullin noted that the number of individuals filing
bankruptcy has soared in recent years--up nearly 60 percent
in two years--in
[[Page H4359]]
spite of a growing economy and low unemployment. A recent
study also revealed that 25 percent of those filing Chapter 7
could repay at least one-third of their debts.
``That's just plain wrong,'' she said. ``The bottom line is
the costs associated with bankruptcy don't disappear;
everyone pays for those who walk away from their debts.''
Retailers lost billions last year in bankruptcy claims. The
growth in bankruptcy filings--particularly Chapter 7
filings--costs the average U.S. household an estimated $500
in higher prices for goods and services.
``The Bankruptcy Reform Act of 1998 is a positive step
forward to restoring common sense to the bankruptcy code,''
Mullin concluded.
The National Retail Federation (NRF) is the world's largest
retail trade association with membership that includes the
leading department, specialty, discount, mass merchandise and
independent stores, as well as 32 national and 50 state
associations. NRF members represent an industry that
encompasses over 1.4 million U.S. retail establishments,
employs more than 20 million people--about 1 in 5 American
workers--and registered 1997 sales of $2.5 trillion. NRF's
international members operate stores in more than 50 nations.
____
Fleet,
Horsham, PA, May 19, 1998.
Hon. George W. Gekas,
Rayburn House Office Building,
Washington, DC.
Dear Congressman Gekas: On behalf of Fleet Financial Group
I urge you to support H.R. 3150, the ``Bankruptcy Reform Act
of 1998'' which is scheduled to come to the House floor this
week. H.R. 3150 was reported favorably by the Judiciary
Committee last week and contains urgently needed reforms to
the consumer bankruptcy system. The bill establishes a fair
and equitable ``needs'' test that requires those that can
afford to repay some or all of their debts to do so.
Consumer bankruptcy filings exceeded 1.3 million last year,
an increase of 20% from 1996 and more than 350% from 1980.
Contrary to popular belief, credit cards are not a leading
cause. Credit card loans represent only 7% of total US
consumer debt and less than 16% for bankrupts. Ninety-six-
percent of credit card holders pay on-time and only one-
percent end up in bankruptcy .
Surveys have found an increasing number of consumers view
bankruptcy as an acceptable option with little or no stigma.
The 5,000 petitions filed daily cost responsible debtors
upwards of $400 per year, or the equivalent of one-month's
groceries for a family of four. To protect these families, it
is essential that the system be reformed as proposed by H.R.
3150.
Some opponents of this legislation have argued that it
raises concerns about child support payments. However, the
Judiciary Committee adopted several amendments last week
designed to strengthen and clarify the priority given to
child support payments in bankruptcy proceeding and to deal
effectively with other issues raised. Current federal and
state law, as well as H.R. 3150 as reported by the Judiciary
Committee, make it clear that child support must be paid 100%
before repayment of any unsecured debt, including credit card
debt. In fact, the House and Senate both recently passed the
Child Support Performance and Incentive Act of 1998 that
strengthens current law by increasing penalties for
nonpayment of child support. That bill is going to conference
and is expected to be signed into law by the President soon.
Fleet Financial Group urges you to vote YES on H.R. 3150
when it comes to the House floor and to reject amendments
that weaken the needs test or otherwise undermine this
important legislation.
Sincerely,
Joseph W. Saunders,
Chairman and CEO.
____
Experian,
Orange, CA, April 15, 1998.
Hon. George W. Gekas,
Chairman, House Judiciary Subcommittee on Commercial and
Administrative Law, House of Representatives, Washington,
DC.
Dear Mr. Chairman: I am writing on behalf of Experian, a
leader in the consumer credit reporting industry, to express
our support for your bill, H.R. 3150, the Bankruptcy Reform
Act of 1998. Your bill represents a balanced approach to
restoring personal responsibility to our federal bankruptcy
system.
The proposal to require certain filers to repay at least
some of their debt when seeking bankruptcy protection is a
commonsense measure. The current bankruptcy system is flawed
because it allows debtors that clearly have an ability to
repay to walk away from their debts. Credit grantors deserve
a chance to work out a payment schedule with consumers who
have reasonable incomes.
At the same time, your proposal ensure that relief will be
available for those who truly need bankruptcy protection. In
addition, Experian supports the provisions of H.R. 3150 that
promote consumer education and encourage debtors to fully
explore alternatives to bankruptcy.
Now is the time for bankruptcy reform. The U.S. economy is
stable and unemployment is low. Yet, last year 1.4 million
individuals filed for personal bankruptcy, a record number
that has more than doubled during the past decade. Personal
bankruptcies costs the economy more than $40 billion each
year, an amount that translates to about $400 per American
family.
Please continue your leadership on this important reform
measure.
Sincerely,
D. Van Skilling,
Chairman and CEO.
____
Sent to All Members of the House Judiciary Committee, May 5, 1998
Dear Representative: We are writing in anticipation of the
Committee's consideration of HR 3150, the ``Bankruptcy Reform
Act of 1998.'' Our organizations urge the Committee to
endorse a provision reported by the Subcommittee on April 23
to delete the $4 million cap from the definition of single
asset real estate.
Single asset real estate is a form of real estate financing
whereby the owner of a single piece of commercial real estate
borrows funds from a lender and gives a mortgage on the
property as collateral. The distinguishing feature of this
arrangement is that the owner holds the property as an
investment and does not conduct any business on the property.
Therefore, arguments that this will cost jobs are baseless
and erroneous. Rather, bankruptcies that cause property
deterioration result in vacant buildings, tax losses to
communities, economic decay and significant job losses.
Congress recognized that single asset entities should
receive expedited treatment with the passage of the
Bankruptcy Reform Act of 1994. However, during the final
hours just prior to passage, a $4 million cap was arbitrarily
inserted into the definition of single asset real estate. The
presence of the $4 million cap is indefensible because there
is no basis in fact, law, or commercial lending practice for
the cap. To the contrary, the utility of the single asset
provisions in avoiding or shortening futile Chapter 11
reorganization proceedings is greater, rather than less, for
large properties with more secured debt. Therefore, the $4
million cap should be deleted to permit the efficient
operation of the single asset provisions and the fulfillment
of their purpose.
Finally, mortgages may be used to fund pensions, annuities
and life insurance. They will be at risk in the next downturn
of the economic cycle if defaulting single asset real estate
owners are permitted to abuse the bankruptcy process.
For these reasons, we strongly support HR 3150, and
specifically, the provision in the bill that would delete the
$4 million cap from the definition of single asset real
estate.
Sincerely,
American Bankers Association.
American Council of Life Insurance.
Mortgage Bankers Association of America.
National Association of Realtors.
Institute of Real Estate Management.
____
Household,
June 8, 1998.
U.S. House of Representatives,
Washington, DC.
Dear Representative: Household International strongly
supports passage of HR 3150, the Bankruptcy Reform Act of
1998, and we urge your support for the bill when it appears
on the floor of the House later this week.
Household International, headquartered in Illinois with
major facilities in California, Nevada and Virginia, is a
leading provider of consumer finance and credit card products
in the United States, Canada and the United Kingdom.
Household Finance Corporation, one of Household's core
businesses, is the oldest consumer finance company in the
United States. Household Credit Services and Household Retail
Services are two of the nation's largest issuers of general
purpose and private-label credit cards. Our principal credit
card products include the GM card and the AFL-CIO's Union
privilege card. Household recently reached agreement to buy
Beneficial Corporation and upon completion of that merger
will have more than 1000 branches throughout the United
States.
Despite a strong economy, personal bankruptcies are soaring
and reached a record 1.3 million in 1997. Bankruptcies cost
consumers about $40 billion last year, equal to about $400
per family working to pay its bills. HR 3150 does not have as
a goal reducing the total number of bankruptcies, but it
contains a mechanism to guide some 11% of filers who have the
means to pay some of their debts into Chapter 13 bankruptcy
where they will work with the court to create a repayment
plan to pay a portion of the debts they have run up.
Household believes it is only fair that those who can pay
some of the debts do so, and according to a poll released by
the National Consumer league, 76% of the public agrees that
``individuals should not be allowed to erase all their debts
in bankruptcy if they are able to repay a portion of what
they owe.''
Amendments to HR 3150 added at the full Committee mark-up
raised the income level for the safe harbor provision of the
bill and added protections for children and spouses receiving
child support and/or alimony above those in existing law. We
believe the bill is fair and needed. Household strongly urges
your support for HR 3150.
Sincerely,
J. Denis O'Toole,
Vice President, Government Relations.
[[Page H4360]]
____
Mellon Bank,
One Mellon Bank Center,
Pittsburgh, PA, June 8, 1998.
Hon. George W. Gekas,
U.S. House of Representatives,
Washington, DC.
Dear Congressman Gekas: I am writing to call your attention
to a matter that is of vital interest to every bank, savings
and loan, credit union and retailer across Pennsylvania. The
issue is bankruptcy reform. There is currently a bill in the
House that, in our view, addresses this growing problem and
injects some common sense reforms into our outdated
bankruptcy system. This bill, H.R. 3150, was recently
reported out of the House Judiciary Committee and is
scheduled for a vote on the floor this week.
As you know, filings for bankruptcy have skyrocketed in
recent years to a point where it has become the option of
choice for many who face financial difficulties. While we
would never preclude the choice of a Chapter 7 filing for
those truly in need of complete debt relief, we do take issue
with those who possess the means to repay their debts but
instead walk away from their obligations.
This abuse of the system does have a cost. At Mellon, in
fact, we lost, on average, over $75 million in each of the
last three years as a result of bankruptcy filings. We are
forced to raise the cost of credit for our responsible
customers to cover the losses we incur because of bad debt.
For retailers, like department stores, losses are covered
through higher prices on merchandise. But no matter how the
losses are recouped, the end result is the same; people who
pay their debts cover the cost of those who do not.
To correct this worsening problem, we are asking you to
endorse ``needs-based'' bankruptcy reform legislation. H.R.
3150, we believe, provides a model reform measure for
Congress to adopt and we think the ideas presented in this
bill warrant your close inspection and your support.
Please vote ``yes'' on bankruptcy reform.
Sincerely yours,
Martin G. McGuinn,
Chairman.
____
Community Associations Institute,
April 27, 1998.
Hon. George W. Gekas,
U.S. House of Representatives,
Washington, DC.
Dear Chairman Gekas: On behalf of the 42 million Americans
who live in the nation's 205,000 community associations--
condominium associations, cooperatives and homeowners
associations, I would like to thank you for supporting small
but important changes to the Federal Bankruptcy Code.
Your willingness to include our changes in your amendment
in the nature of a substitute to H.R. 3150 is greatly
appreciated. These changes will obligate owners in homeowners
associations, condominium associations and cooperatives who
file for bankruptcy to pay association assessment fees as
long as they--or their Trustees--maintain an ownership
interest in their units. Community association assessments
will also not be treated as executory contracts.
While changes to the Code in 1994 added important
provisions dealing with the collection of post-petition
assessments in certain condominiums and cooperatives,
homeowners associations and commercial condominium
associations were inadvertently omitted from the final
legislation. Your inclusion of our language in your amendment
will expand existing provisions to include homeowners
associations and tie the responsibility for post-petition
assessments to ownership.
Without this change, bankrupt owners could continue to
avoid their assessment obligations whenever their units are
vacant or occupied by people who do not pay rent--while all
other association residents are left to pick up the tab.
Again, thank you for taking notice of the importance of
this issue to over 42 million Americans. Please contact me by
phone (703-548-8600), fax (703-684-1581) or email
([email protected]) if CAI may be of assistance in any
way.
Sincerely,
Cornelia I. Schneider,
Issues Manager, Government & Public Affairs.
____
America's Community Bankers,
June 9, 1998.
Dear Representative: America's Community Bankers (ACB)
urges you to support H.R. 3150, which would provide much-
needed reform for our nation's bankruptcy laws.
This legislation mandates that debtors who have the ability
to repay a portion of their debts be required to do so,
introducing the ``needs-based'' concept into the bankruptcy
system. Under the ``needs-based'' system, debtors who truly
need bankruptcy relief are provided a relatively quick and
easy discharge in Chapter 7, while debtors who have the
ability to repay are permitted to structure reasonable
repayment plans in Chapter 13.
Further these revisions ensure that residential real estate
mortgages cannot be ``crammed down,'' or reduced in priority,
in bankruptcy. This rule, articulated by the Supreme Court in
the 1993 Nobelman case, provides for fairness and certainty
in mortgage-related transactions.
Moreover, it should be noted that any issues relating to
child support and alimony have been resolved by the House
Judiciary Committee. While H.R. 3150 did not alter existing
law with respect to the priority of child support and alimony
payments, the Judiciary Committee did adopt a series of
amendments to address this issue. These amendments
specifically and categorically provide that child support and
alimony payments will be afforded priority over unsecured
debts, both during and subsequent to the bankruptcy
proceedings. Thus, child support and alimony payments are
clearly protected under H.R. 3150.
H.R. 3150 creates an equitable system that balances the
interests of both debtors and creditors. ACB and our members
urge you to vote for H.R. 3150 because it will preserve and
improve the bankruptcy system for all Americans.
Sincerely.
Robert R. Davis,
Director of Government Relations.
____
Council for Citizens Against
Government Waste,
Washington, DC, April 17, 1998.
Hon. George Gekas,
U.S. House of Representatives,
Washington, DC
Dear Representative Gekas: This letter is in response to
your request for our opinion on H.R. 3150 (The Bankruptcy
Reform Act of 1998). On behalf of the 600,000 members of the
Council for Citizens Against Government Waste (CCAGW), I am
pleased to support this important legislation. H.R. 3150
establishes fair and reasonable bankruptcy guidelines
designed to protect debtors, creditors, and consumers while
still holding debtors personally accountable.
In 1997, 1.33 million bankruptcy petitions were filed in
this country, erasing an estimated $40 billion in consumer
debt, which resulted in increased interest rates, set higher
prices and increased layoffs. Each household will pay out an
extra $400 this year to account for that consumer debt. H.R.
3150 ensures that responsible consumers will no longer be
forced to shoulder such a large burden. By establishing a
system that determines the amount of financial relief a
debtor actually needs and requiring people to repay what they
can, H.R. 3150 obligates debtors to take more responsibility
for their situation.
H.R. 3150 also creates a ``Debtor's Bill of Rights'' which
requires law firms and other consumer credit agencies to
refund the full cost of representing a debtor if they do not
adequately inform consumers of their rights and the potential
harm bankruptcy can cause. Too often, debtors are not aware
of options other than bankruptcy. The ``Debtor's Bill of
Rights'' should reduce the amount of bankruptcy claims filed
and therefore reduce the total amount of debt passed on to
responsible consumers. Additionally, H.R. 3150 establishes a
financial management training program that debtors may be
required to complete in order to have his or her debts
discharged. Educating debtors encourages them to become
fiscally responsible and reduces the chance that their
financial situation will again become unstable.
The Bankruptcy Reform Act of 1998 contains numerous
provisions which protect all of those involved in a
bankruptcy claim: the debtor, the creditor, and all
consumers. In this time of economic prosperity, it is
important that legislation be enacted that will help those in
dire financial situations while protecting responsible
consumers who unfairly shoulder the cost of bankruptcies. We
encourage your colleagues to support H.R. 3150.
Sincerely,
Thomas A. Schatz,
President.
____
The Bankers Roundtable,
Washington, DC, April 27, 1998.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
Washington, DC
Dear Mr. Chairman: The Bankers Roundtable, representing the
nation's major banking companies, strongly supports the
Bankruptcy Reform Act of 1998, H.R. 3150. As you are aware,
studies have shown that the 1.3 million bankruptcies filed in
1997 have cost consumers over $40 billion. As a result, U.S.
households have had to pay over $400 each in increased annual
borrowing costs. A responsible approach to reform, such as
H.R. 3150, would benefit the vast majority of Americans who
properly use consumer debt as a tool to manage their
household finance and repay their debts in a timely manner.
H.R. 3150's means-test would maintain Chapter 7 discharge
of debts for poor or heavily indebted borrowers while
requiring those with the capacity to repay all or some of
their debts to do so. Further, the bill's other balanced
measures to reduce fraud and abuse in bankruptcy filings
would aid in ensuring that consumers continue to have access
to credit at reasonable and affordable terms and rates.
Attached please find a copy of the Roundtable's Policy
Statement on Consumer Bankruptcy Reform. The Bankers
Roundtable asks for your support for H.R. 3150, including the
concept of a means-test, and looks forward to working with
you on this legislation.
Sincerely,
Anthony T. Cluff,
Executive Director.
____
National League of Cities,
Washington, DC, June 3, 1998.
Hon. George W. Gekas,
U.S. House of Representatives,
Washington, DC
Dear Representative Gekas: The National League of Cities
(NLC) urges your support in the passage of provisions of the
[[Page H4361]]
``Bankruptcy Reform Act of 1998'' (H.R. 3150) that would aid
local governments. The inclusion of the Investment in
Education Act, as passed by the Senate in November 1997 in
H.R. 3150, recognizes the importance of payment of ad valorem
taxes to local governments to support education. NLC strongly
urges you to support these provisions and the amendments made
by the House Judiciary Committee that would strengthen the
Investment in Education Act.
This legislation is very important to local governments
because it would change provision of the Bankruptcy Code that
have caused local governments to lose millions of dollars in
property tax revenues. As you know, property taxes are the
bread and butter of the education budget for cities, towns,
counties, and school districts.
Of the provisions included in this bill, it is most
important that local governments are able to receive the
local statutory interest rate on ad valorem tax claims
associated with bankruptcies. Cites and towns are non-
consensual creditors and are in unique situations with their
constituents. In New York City and some New Jersey, Texas,
Illinois, and California cities and towns the local interest
rate accruing on unpaid taxes should be double the I.R.S.
statutory rate. Cities cannot afford to have their interest
rate ``crammed down''. Clarifying that the local interest
rate should be applied for unpaid ad valorem taxes would put
an end to unnecessary favorable treatment for bankruptcy
filers who have not paid their property taxes.
NLC strongly encourages you to pass the Investment in
Education provisions in H.R. 3150 this year, to ensure cities
and towns, vital revenues for their education budgets. NLC
looks forward to working with you towards the passage of
bankruptcy legislation. If you have any questions, please,
please have your staff contact Kristin Cormier, NLC
Legislative Counsel, at (202) 626-3020.
Sincerely,
Brian O'Neill,
President, Councilman, Phildelphia, PA
(Mr. NADLER asked and was given permission to revise and extend his
remarks.)
Mr. NADLER. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, bankruptcy is a dull, boring and technical subject. Not
many people pay detailed attention to it. And advocating that people
behave responsibly and pay their debts, if at all possible, is
attractive and unassailable.
{time} 1415
I know that many people, seduced by that slogan, signed up to support
this bill. But it was false packaging, an attractive wrapper to
disguise one of the worst special interest bills we have considered in
many years.
When you strip away the veneer and the verbiage, there stands,
starkly revealed, a bill with one central purpose, to take large sums
of money from middle- and low-income American families in distress and
give it to the credit card companies; and, while we are at it, to take
large sums of money from other creditors and give it to the credit card
companies. This is a bill of, by, and for the credit card companies
which have waged a long and expensive campaign for it.
Who benefits from this bill? The credit card companies. Who gets hurt
by this bill? Middle- and low-income families who are in over their
heads in debt because of a medical emergency, a lost job, gambling
addiction; mothers rearing young children dependent on child support or
spouse support; crime victims seeking victim's compensation; other
creditors who cannot afford the high-priced lawyers of the credit card
companies to compete for the collection and who will have to forgo
repayment of the $260 million to $1.3 billion the Congressional Budget
Office says this bill will add to administrative costs and which will
come out of money to be recovered by the creditors; small business
owners whose businesses this bill will force into liquidation instead
of survival; and the taxpayers, who will have to foot the $214 million
the CBO says this bill will add to the Federal budget.
Who supports this bill? The credit companies and the big banks. Who
opposes this bill? The consumer groups, the AFL-CIO, the women's
groups, the victims' rights organizations, the bankruptcy judges, the
bankruptcy trustees, the National Bankruptcy Conference, the National
Association of Chapter 13 Trustees, the National Association of
Consumer Bankruptcy Attorneys, the Administration; in short, everybody
who knows the bankruptcy system except the credit card companies and
the big banks. In fact, this legislation is nothing more than a special
interest favor to the big credit companies and the big banks. It will
take American families in terrible economic straits and it will allow
creditors to harass them with litigation. It will allow MasterCard and
Visa to snatch child support from struggling families. It will clog our
courts. It will invade the privacy of families by requiring them to
make their tax returns public so that banks and other creditors can
review the most private details of their lives, including medical
expenses, and it will cost the taxpayers a bundle to collect the
reckless debts of credit card companies who sent out more than 3
billion credit card solicitations last year to children, family pets
and people already in over their heads.
Why do we need this bill? We have heard a great many extravagant
claims about the reasons why more than 1.3 million Americans filed for
bankruptcy last year. The underlying assumption of this legislation
that millions of Americans are essentially deadbeats using the
bankruptcy code to cheat unsuspecting and helpless megabanks is quite
frankly a slander against the American people.
Mr. Chairman, we have been told that the reason we have increased
bankruptcy filings is that social mores have changed, that there is no
longer a stigma associated with bankruptcy, that people use it as a
first financial planning option instead of as a last resort, that there
is an easy availability of bankruptcy. But this does not make sense.
The bankruptcy code does not cause people to go bankrupt. Lack of
health insurance, downsizing, jobs moving abroad, family
disintegration, the sort of problems you would hear about if you
listened to your neighbors, that is what causes bankruptcy. What is
really scandalous is that instead of dealing with the pressures on
American families, this Congress chooses to go after the victims. In
fact, the Committee on the Judiciary received testimony from academics,
from people like Professor Ausubel of the University of Maryland,
demonstrating a direct link between deregulation of interest rates,
increased lending and the increase in bankruptcies. These findings are
supported by the work of the FDIC and we are waiting for the completion
of a Congressional Budget Office review of the data which it appears
will also likely confirm these findings.
What we have seen is that although real interest rates, the costs
banks pay for money, have dropped substantially over the last 20 years,
credit card interest rates, the price American consumers pay to borrow
money on their credit cards, have remained extraordinarily high. The
result, credit card operations are now the most profitable of all
banking operations, up to five times more profitable than noncredit
card operations. If it were true, as we are told by the supporters of
this bill, that it is changing social mores, lack of a stigma that are
getting people to file for bankruptcy when they still can pay their
debts before they are in over their heads when they would not have done
so years ago, one would expect that the ratio of debt that people have
to their income would have gone down, because people are now filing
when they still can pay their debts, whereas earlier they did not.
But, in fact, look at this chart. It shows just the opposite. In
1983, the average debt-to-income ratio of a Chapter 7 filer, someone
who filed for bankruptcy, was 87 percent. It went up consistently. It
has doubled. Now it is 164 percent, which means it went up, not down.
People are twice as deeply in debt today before they file for
bankruptcy as they were in 1981. They are more desperate. They do not
file easily. They wait as long as they can.
In fact, if you look at the rise in bankruptcies and you look at the
rise in the debt-to-income ratio in people at large and how much debt
people have which started increasing with the deregulation of credit
card rates about 20 years ago, you find it tracks almost exactly. Look
at this. As the debt-to-income ratio goes up, that is what causes the
bankruptcy filings to go up.
It is the irresponsible lending by the credit card companies that is
largely responsible for the increase in bankruptcy filings. In fact, if
we wanted to do something about this, we should limit that
irresponsible lending. But unfortunately, that amendment was not made
in order. We should say that it is an objection to claim, that you
cannot collect your debt if you lent the money after you knew that the
person was already in over his head, after he
[[Page H4362]]
already had a debt to income ratio of 40 or 60, draw the line, percent,
but that unfortunately the Committee on Rules did not make in order.
We know that credit card lending is very profitable today. In fact,
if you look at the chart, you see the profitability of credit cards
versus the profitability of the overall banking system. The overall
banking system has remained at the same level of profitability for the
last 25 years. The profitability of the credit card system, however,
has doubled. We have to bail them out with this bill because they are
losing some money on bad debts when their profitability is five times
the profitability of all other parts of the banking system.
Credit card interest rates have stayed up. The cost of money has gone
down from 14 percent, reduced by half to 6 percent, but the credit card
interest rates have gone down from 18 to 16 percent. Then we are told
that we will save $400 per American family if we pass this bill because
the credit card companies will lower the interest rates to counter the
fact that they are getting more money from deadbeats. Look at the
record. If you believe that, there are a couple of bridges in New York,
not just the Brooklyn Bridge, that I can sell you for only a couple of
billion dollars.
The fact is that car loans have gone down, mortgages have gone down,
the cost of money has gone down, the credit card interest rates stay up
and that is why they are so profitable. If we pass this bill, they will
be even more profitable, but it will not be passed through to the
consumer by a nickel.
Having said all that, we agree, there are some people who abuse the
system. There are people who are filing for Chapter 7 bankruptcy who
can afford to repay their debts. Let us crack down on them. But that is
what the Democratic substitute says. Let us crack down on them, but let
us crack down on them through a reasonable test, a test that really
looks at their ability to pay.
The administration in its statement of opposition says:
The formulaic mechanism in H.R. 3150 will not distinguish
accurately those debtors who have the capacity to repay from
those that do not have that capacity. A properly structured
system would give bankruptcy courts greater discretion to
consider the specific circumstances of a debtor in
bankruptcy.
That is what we want to do in this substitute. That is what we did in
the bill that the committee refused to consider. The fact is if you
look at the ability to repay, you will want to look at someone's income
and his expenses, how much is he paying in rent, not as the bill before
us would say, how much does the Internal Revenue Service think someone
in the northeastern United States is probably paying for rent. Who
cares what someone might be paying for rent, the average person. The
question is how much is he paying for rent, how much is he paying for
child care, for his medical expenses for his wife or his daughter or
whatever. A formula does not work. We have to have a human being there,
a judge, who can take a look at the situation to make a judgment, not a
computer.
The majority brags about this bill, that you can put it into a
computer and the result will be put out, no human discretion, no human
sympathy, no human understanding and no facts, only theory, from the
Internal Revenue Service, of all people. That is what this means-based
test is. Even if you pass the means test, under this bill you will be
harassed by creditor motions that are not permitted in the law now, by
the threat of litigation, and it will lead to many people who meet the
means test having to withdraw their petitions because they cannot
afford to pay the lawyers to fight the banks' lawyers on these
frivolous, dilatory motions.
The other thing this bill does, because its major function is to give
a lot of money to the credit card companies, is that credit cards jump
the line. They are going to be nondischargeable in bankruptcy. The
administration says the bankruptcy code generally makes debts
nondischargeable only where there is an overriding public purpose as
with debts for child support and alimony payments, educational loans,
tax obligations or debts incurred by fraud. What is the overriding
public policy purpose for skipping the credit cards ahead of the
secured debtor, ahead of priority debt and making it nondischargeable?
There is no public policy purpose. What is the public policy purpose
for saying that in a Chapter 13 workout plan, you cannot confirm the
plan unless you pay $50, minimum monthly, to the credit card companies?
So if your ability to repay is $75 a month, $50 goes to the credit card
companies and $25 is left for everything else.
Credit cards uber alles. Why? Why should the other creditors take
second fiddle, creditors who have security interests, creditors who may
have done more due diligence? And if your ability to repay is $40, less
than the $50 minimum, they cannot confirm a plan, so you are too rich
for a Chapter 7 bankruptcy and you are too poor for a Chapter 13
bankruptcy and you fall right through the cracks. And because the
purpose of this bill is in these ways, by nondischargeability and a $50
minimum under Chapter 13, to give the money to the credit card
companies, it fouls up the child support, it fouls up the victim's
collection of crime victim's compensation.
The sponsors of the bill say they fixed it in committee. First they
denied it. Then they said they fixed it. Now they have an amendment to
say they fixed it. But all the groups who deal with this, the women's
groups, the child support groups, the administration, they say those
fixes are cosmetic, they do not deal with the problem, and they do not.
What does it do to small business? For reasons I know not, this bill
adds great paperwork requirements to small businesses, constricts the
time limits in which they have to do things, adds in effect a mini
confirmation hearing before the confirmation hearing, all of which will
result, as the Small Business Administration tells us, in thousands and
thousands of small businesses that go into Chapter 13 and Chapter 11
for workouts to restructure their debts, to reorganize and to come out
of it, retaining the business, retaining their employees, they will not
be able to meet it, they will liquidate, jobs are gone. Why should we
do this to small business?
Finally, this bill is a budget buster. CBO tells us, the
Congressional Budget Office, it will cost the taxpayers $214 million
out of the Federal budget, and they tell us it is a private sector
burden of $260 million to $1.3 billion. That is the effect this bill
would have.
In summary, this bill affects negatively everybody except the credit
card companies and the big banks. The bill is ill-considered, it is not
ready to move, it is a budget-buster, it takes away the rights of
debtors, and it will hurt many creditors as it aids the credit card
companies in their search for greater profits. This bill is unworthy of
this House and will cause misery to our neighbors and financial
distress. This bill is in fact morally bankrupt and I urge my
colleagues to reject it.
Mr. Chairman, I reserve the balance of my time.
Mr. GEKAS. Mr. Chairman, I yield myself such time as I may consume,
only to say, to repeat as often as possible, that the support
enforcement agencies of the country are happy with the provisions of
H.R. 3150 with respect to collection of child support. We will spread
on the record as we have time and time again letters from the
California support people, New York and others who are blessedly happy
with what we are trying to do on support matters.
Mr. Chairman, I yield 3 minutes to the gentleman from Florida (Mr.
McCollum).
(Mr. McCOLLUM asked and was given permission to revise and extend his
remarks.)
Mr. McCOLLUM. Mr. Chairman, I thank the gentleman for yielding me
this time.
Mr. Chairman, I rise in strong support of this bill. I certainly
respect the gentleman from New York (Mr. Nadler), but I disagree with a
lot of his analysis and I want to go through it quickly.
First of all, we had a $44 billion loss in bankruptcies last year
alone. We have seen an over 100 percent increase in personal bankruptcy
filings from 1986 to 1996. And last year, the year in which the economy
probably did better than any other time in the history of the Nation,
bankruptcy filings were up some 20 percent in that year alone.
[[Page H4363]]
{time} 1430
We have got a problem in this country, whatever the reason may be.
Maybe some of that does belong because credit card companies send too
many notices out to people, but by and large that is not the reason
that we have the problem. It is because people are not exercising
individual responsibility because they are not going to a payback plan
when they could afford to pay back their debts as they once did, at
least in larger numbers than they do now.
What our bill has tried to do is to help the consumer. The person who
is responsible who does have credit card and other debt who does pay
that debt back, help them to avoid the cost that they are paying
because of the bad debt people who take advantage of pure bankruptcy
and do not pay back the debt they are supposed to and could pay back.
The fact of the matter is that no credit card company or any other
creditor is going to absorb the losses of the magnitude we are talking
about. They are going to cost shift. They are going to pass that on.
They do it in the cost of goods and services, fees and interest rates.
Will they all come down if we pass this bill? I do not know, but they
sure as heck are going to go up if the rate of bankruptcies continue to
climb the way they are now.
So our bill is a consumer protection bill. It creates a needs-based
test, and it is a very simple formula. It says to take median family
income, determine what that is. For a family of four that is about
$51,000 last year. If they have less than a median family income, they
can still file plain old vanilla pure bankruptcy under chapter 7, and
do not worry about the means test and the needs test. But if they have
over 50,000, they have got to go through this formula. Take monthly
gross income, deduct from that monthly gross income the amount of
secure debt payments, how much is being paid on the car. Then deduct
from that the amount paid for child support, alimony, other court
ordered support. Then deduct from that the monthly payments for other
living expenses which are calculated under the Internal Revenue Service
Code like we do for our taxes, for whatever they are, and if after
doing that there is left over $50 a month or more and if by applying
what there is left over they could pay off 20 percent or more of their
unsecured debt over 5 years, then they have to file chapter 13 or a
payback plan from a bankruptcy. Still get bankruptcy protection, but
they have to file the kind where they actually pay back what they owe.
That is the basic premise of bankruptcy law. People who can afford to
pay it back ought to be required to pay it back. That is the premise of
this bill. There is nothing more and nothing less here, and I would
certainly encourage my colleagues to recognize the fact that whatever
else they think, this is a simple formula, it is not complicated, it is
not expensive, it could be done with all the data that goes into
bankruptcy courts anyway in the first place. We need to put personal
responsibility back into the system again, and I encourage the adoption
of this bill in the strongest of terms.
Mr. Chairman, I thank the gentleman for having yielded this time to
me.
Mr. GEKAS. Mr. Chairman, I yield 3 minutes to the gentleman from
Virginia (Mr. Boucher).
Mr. BOUCHER. Mr. Chairman, I want to commend the gentleman from
Pennsylvania (Mr. Gekas) for bringing H.R. 3150 to the floor today. It
incorporates the core provisions of H.R. 2500 which the gentleman from
Florida (Mr. McCollum) and I introduced last year. That measure was
cosponsored by 185 Members of the House, including 40 Members on this
side of the aisle, the Democratic side. These core reform measures are
a part of H.R. 3150, and they truly have bipartisan support.
A central tenet of the reform is the needs-based test for chapter 7
that was just described in the statement by the gentleman from Florida
(Mr. McCollum). That is the complete liquidation provision under the
bankruptcy law. Under that approach bankruptcy filers who could pay a
significant amount of their debts would no longer be able to get
complete liquidation. If they wanted bankruptcy protection, they would
be required to use chapter 13 and then make whatever payments they
could afford under a court supervised repayment plan. And the needs-
based reform is essential to this measure that we have before us and to
achieving genuine bankruptcy reform.
During the 12-month period that ended on March 31, there were 1.37
million personal bankruptcy petitions filed across the country, and
that was an increase of almost 25 percent over the previous year. That
increase in personal bankruptcy filings occurred during the best
economy that we have had in this country in decades, and so we would
have expected exactly the opposite result, fewer bankruptcy filings
rather than more. And yet in that 1 year period we had a 25 percent
increase.
The dramatic increase is caused, I think, by several factors. First
of all, an attitudinal change among many Americans who no longer view
bankruptcy as a last resort but view it as a first opportunity and
treat it today as a financial planning tool and today engage in
bankruptcies of mere convenience. The bankruptcy system was never
intended to function that way. The bill before the House would return
chapter 7 to its intended use by making it available for those who need
it and requiring that those who can pay their debts, we pay a
substantial portion of those by filing under chapter 13.
Mr. Chairman, that change will benefit all consumers of goods and
services and all responsible borrowers. Today about $44 billion in
consumer debt is wiped out each year through bankruptcy filings. That
wipeout of $44 billion in debt carries a hidden tax of about $400 on
the typical American family. That reflects the higher prices that are
charged for goods and services by merchants whose debt is wiped out in
bankruptcy and reflects the higher credit cost, interest charges, that
are imposed by lenders, many of whose debts are wiped out in bankruptcy
as well.
The enactment of H.R. 3150 would significantly lessen that hidden
charge, and it is my privilege to appear today in support of this
measure, and I strongly encourage its passage by the House.
Mr. NADLER. Mr. Chairman, I yield 3\1/2\ minutes to the gentlewoman
from California (Ms. Lofgren).
Ms. LOFGREN. Mr. Chairman, as someone who has worked on bankruptcy
revision as a lawyer in the past, I cannot stand here and say that the
existing system is perfect. In fact it is not perfect, and there are
areas in which reform is warranted. However, I do not believe that H.R.
3150, the bill before us, provides an acceptable answer to the defects
that currently exist.
Much has been said about why we are seeing this increase in
bankruptcy filings. It is clear that part of the reason is the massive
increase in the amount of unsolicited and unwarranted credit that is
being promulgated throughout our country.
Last week my little girl received an unsolicited, preapproved credit
card application at home. I was of a mind to let her take the card
since creditors cannot collect against minors in California, but
instead we ripped it up.
Because of the problems of this bill, Congress has seen an
unprecedented response from people who do not ordinarily become
involved in legislative matters of this kind, including bankruptcy
judges from all over the United States who have urged us to stop this
process because of the bill's unintended consequences.
Much has been said about the impact on women and children, and I
wanted to note as a member of the Committee on the Judiciary I did
support the minor amendments made during committee mark-up to try to
address the issue of child support, but they did not fix the problem.
In fact, the National Organization for Women wrote after the markup,
``The Judiciary Committee adopted a number of amendments supposedly to
cure the problem of having past due child support and alimony
obligations compete with credit card debts, but careful analysis shows
these changes are only cosmetic. There are still substantial problems
with H.R. 3150.''
I believe that is why 20 women's organizations have contacted us to
tell us they oppose this bill, including such organizations as the
American Association of University Women, the Business
[[Page H4364]]
and Professional Women of the United States, Church Women United, the
Older Women's League and the YWCA of the United States of America.
There is another issue that I think needs to be raised for those of
us who come from high cost States, and that is the probably unintended,
bias against certain parts of our country. Recently I was contacted by
a bankruptcy attorney in Santa Clara County. This is a lawyer who
teaches bankruptcy law, who represents creditors in addition to
debtors, and he says that the nationwide income standard used in the
qualifications test for chapter 7 would eliminate most residents of
Santa Clara County, in fact most of urban California, from eligibility
to file chapter 7.
Further, if an individual is able to meet the test, the housing
allowance is a further disadvantage. Urban Americans will no longer be
able to file for bankruptcy.
As someone whose family has lost income to someone who filed for
bankruptcy, I do not like it, I understand that no one likes it, but
there is a reason for bankruptcy law, and that is so that one can fail
in America and yet continue to have a life. That is why bankruptcy is
provided for in our Constitution, and I will quote the CEO of a high-
tech company who said this to me and Chairman Hyde in Los Angeles a
week ago. ``We innovate in this country because we have the freedom to
fail. That is what our bankruptcy laws do. Do not change it, do not
ruin it.''
Mr. GEKAS. Mr. Chairman, I yield myself such time as I might consume.
It is interesting; I bring this to the attention of the gentlewoman
from California who has been in the forefront of expressing concern
about the support quotient in 3150 wherein the California Family
Support Council, which I assume is statewide in California, endorses
enthusiastically the measure 3150 and all that it contains with respect
to support. I commend that to her reading and ask her to consider
voting for the bill.
Mr. Chairman, I yield 3 minutes to the gentleman from Virginia (Mr.
Moran).
Mr. MORAN of Virginia. Mr. Chairman, I am a lead sponsor of this
measure because the bankruptcy system in this country is not serving
the national interest. What used to be the option of last resort has
too often become the preferred option of choice, and so a legislative
fix is vital to distinguish between those who truly need and deserve a
fresh start and those capable of assuming greater responsibility and
making good on at least some of what they owe.
Mr. Chairman, unless steps are taken now to reform the bankruptcy
system while economic times are good, we will not have the political
resolve to fix it when the economy is not as strong. Today wages are
up, unemployment is down, interest rates and inflation are low, but the
rate of personal bankruptcies has increased dramatically. Last year
personal bankruptcies rose 20 percent, reaching a record high of 1.4
million files. Think about it. More people filed for personal
bankruptcy than graduated from college last year. What does that say
about our country?
And while many would like to blame the credit card industry for the
sharp increase in bankruptcy filings, it is important to note that the
credit card industry is not the impetus for the current bankruptcy
crisis. More than 96 percent of credit card holders pay bills as agreed
to, and only 1 percent ever end up in bankruptcy.
According to a Federal Reserve Board survey last year credit cards
account for a mere 3.7 percent of consumer debt, hardly large enough to
cause the current bankruptcy crisis. While many may still want to
vilify the shylocks of Shakespeare's day, the credit system of today is
far more democratized. Creditors today include Main Street merchants
who often sell products under installment plans, credit unions who
include most Members of Congress and even State and local governments.
Mr. Chairman, I have a letter here that I got from Mattress
Discounters. These people have a customer base that is almost
exclusively moderate income families who need their purchasing
installment plan. Now they tell me that they receive almost 3,000
consumer bankruptcy notifications each month, 36,000 a year, and the
cost to the company has risen to over $30 million a year. The irony of
this situation is that the average debtor filing for bankruptcy
protection has assets exceeding $184,000. But because of this consumer
bankruptcy, the company had to close 50 stores across the country, and
that meant the loss of jobs in communities all over the country as well
as the fact that their customer base of moderate income people does not
have access to this line of credit.
{time} 1445
People need that, and yet if we don't fix this system, we are
foreclosing their credit opportunities.
Mr. Chairman, the key issue is that it is not fair for households who
pay their debts to pay $400 a year in added expenses to compensate for
the bad debts of their neighbors who do not pay their debts. I hope
Members will support this bill.
Mr. NADLER. Mr. Chairman, I yield two minutes to the gentleman from
Massachusetts (Mr. Meehan).
Mr. MEEHAN. Mr. Chairman, I come before the House today as a
supporter of bankruptcy reform. It will enable creditors to collect
some debt that is currently being discharged through bankruptcy and
that would channel debtors who can afford to pay a substantial portion
of their unsecured debts into Chapter 13 repayment plans.
Having said that, Mr. Chairman, let me now say that I come before the
House today in opposition to this bill, H.R. 3150. There is nothing
inconsistent about supporting pro-creditor bankruptcy reform and
opposing H.R. 3150. The fact is, you can means test eligibility for
Chapter 7 without relying on rigid IRS expense standards to evaluate a
debtor's ability to pay his or her debts. You can means test without
permitting aggressive creditors to target low and moderate income
debtors with expensive and protracted and contentious litigation over
their bankruptcy rights. You can address manipulation of the bankruptcy
system by high income debtors without simply declaring large amounts of
credit card debt to be exempt from discharge.
In short, you can replace H.R. 3150 with the Nadler-Meehan-Berman
substitute. The result will be a balanced bankruptcy reform that
enhances creditor recovery without drastically diluting the fresh start
for financially strapped debtors or impeding alimony and child support
collection.
On the other hand, voting yes on an unamended version of H.R. 3150
would send to the conference committee an unbalanced bill, and the
Senate wants nothing to do with that and the Clinton Administration
will veto this bill. That route is dangerous for the most vulnerable
debtors and dangerous for the prospects of prompt bankruptcy reform.
I urge my colleagues to do the right thing and support the substitute
and reject the unamended version, this bill, of H.R. 3150.
Mr. GEKAS. Mr. Chairman, I yield two minutes to the gentleman from
Delaware (Mr. Castle).
(Mr. CASTLE asked and was given permission to revise and extend his
remarks.)
Mr. CASTLE. Mr. Chairman, I thank the gentleman very much for
yielding me time. I join the gentleman in his strong support for H.R.
3150.
Mr. Chairman, I must say that hearing these arguments, we need to
understand that when anybody files for bankruptcy, somebody else has to
suffer. Generally when you had it up, the entire United States of
America suffers. We have heard some facts, but I think we need to
repeat some of these facts as well as to what is happening in
bankruptcy in the United States today.
It is incontrovertible in my mind that we are in a bankruptcy crisis
in this country. Personal bankruptcy's have risen 400 percent since
1980. Over 1 million people filed for bankruptcy in 1997, which cost
consumers $40 billion in higher prices and interest rates from the
debts that was erased. That averages to $400 per household in the
United States of America. Some studies estimate that 14 responsible
borrowers are needed to support each irresponsible borrower who files
for bankruptcy. Those are unbelievable figures in a time of perhaps the
greatest economic prosperity in the history of the United States of
America.
What we have here in this legislation is a very strong first step.
This is not
[[Page H4365]]
an ultimate solution to the bankruptcy problems. There is wide
disagreement and too few facts right now for Congress to fashion an
omnibus bankruptcy reform act that pinpoints exact causes of
bankruptcy, and we do not know what that is. We need to look whether or
not it is credit cards, and there may be some evidence of that, or
gambling or other debts that caused that. But this legislation allows
us to do it and it strengthens the system.
First, it establishes a system of data collection in the Federal
bankruptcy courts to determine who, when, where, why and how people
file for bankruptcy. We absolutely need to have that information and
that knowledge. We do not have it today.
Second, it forces debtors to receive private credit counseling before
filing for bankruptcy and unloading their debts on American consumers.
That also is needed. Perhaps people need to be told what they have to
do.
Third, it forces people who have the ability, the ability to pay for
their unsecured debts, to file under Chapter 13 of the bankruptcy code
and repay their creditors. These are good things. We should do it and
support this legislation.
Mr. Chairman, I rise today to express my strong support for H.R.
3150, the Bankruptcy Reform Act of 1998. The facts are incontrovertible
that the United States is in a bankruptcy crisis. Personal bankruptcies
have risen 400 percent since 1980. Over a million people filed for
bankruptcy in 1997 which cost consumers $40 billion in higher prices
and interest rates from the debt that was erased. That averages to $400
per household. Some studies estimate that 14 responsible borrowers are
needed to support each irresponsible borrower who files for bankruptcy.
Congressional oversight of this issue is long past due, and I am
pleased to see that the House Judiciary Committee, through the
leadership of Representative George Gekas, Chairman Henry Hyde, and
Representative Rick Boucher, has reported H.R. 3150 as a strong first
step toward addressing the bankruptcy crisis.
I say ``strong first step'' because no one should be disillusioned
that H.R. 3150 is the ultimate solution to the bankruptcy crisis. There
is wide disagreement and too few facts for Congress to fashion a
omnibus bankruptcy reform bill that pinpoints the exact causes of
bankruptcy. Despite evidence that only 1 percent of credit card holders
file for bankruptcy in any given year, some have suggested that credit
card companies who overextend credit to irresponsible borrowers are to
blame. Others point to casinos and gambling institutions as the
principal cause. Still others blame our culture of consumerism and a
lack of education about managing money and personal finance. The truth
is we do not know the cause, but we know the problem is serious.
Herein lies the strength of H.R. 3150. The bill takes the only steps
we can all agree on. First, it establishes a system of data collection
in the Federal bankruptcy courts to determine who, when, where, why and
how people file for bankruptcy. With this data, Congress in the years
to come can address the root cause of bankruptcies with wisdom and
confidence we do not have today.
Second, it forces debtors to receive private credit counseling before
filing for bankruptcy and unloading their debts on American consumers.
Third, it forces people who have the ability to pay more of their
unsecured debts to file under Chapter 13 of the Bankruptcy Code and
repay their creditors over 5 years according to a court-approved
repayment plan. According to the bill's means-testing formula, debtors
whose income is greater than 100 percent of the national median family
income must develop a plan to repay their unsecured creditors if they
have the ability to pay at least 20 percent of their unsecured debt and
have more than $50 in their pocket each month after paying their
secured debts (car payments, home mortgage, etc.), priority debts
(alimony, child support, back taxes, etc.), living expenses.
A recent Consumers League Poll reports that 76 percent of Americans
believe that individuals should not be allowed to erase all their debts
if they are able to repay a portion of what they owe. With such a
groundswell of support from the American people the choice is simple. A
vote against H.R. 3150 is a vote for irresponsible debtors and a vote
against the 14 responsible consumers needed to pay for each bankruptcy
filed. I urge you to vote in favor of H.R. 3150.
Mr. NADLER. Mr. Chairman, I yield 5\1/2\ minutes to the gentleman
from Massachusetts (Mr. Delahunt).
(Mr. DELAHUNT asked and was given permission to revise and extend his
remarks.)
Mr. DELAHUNT. Mr. Chairman, I thank the gentleman for yielding me
time.
Mr. Chairman, we have heard a lot today about personal responsibility
and that individuals must be held accountable. Now, no one disagrees
with the principles of personal accountability and responsibility. The
problem, however, with the rhetoric, is that there is no data, no
evidence, no credible research. The gentleman from Delaware was
absolutely correct. But there is no information to establish a link
between the dramatic increase in personal bankruptcy and the change we
are told that has taken place in people's attitudes about bankruptcy.
There is an additional issue of accountability and responsibility
here, but it is one of corporate responsibility. Because while no one
really knows the cause of the increase in bankruptcy filings, I submit
it is more likely that the increase is the result of irresponsible
lending practices by the credit card industry.
I agree with a noted consultant to the industry itself who stated,
``The principal factor in the increase of bankruptcies has been the
dramatic lowering of loan standards over the past five years.''
A respected Wall Street analyst agreed with him and was quoted
recently in the Congressional Quarterly. ``The bank and other credit
card lending institutions brought this problem upon themselves. They
shot themselves in the foot by using some of the weakest and most
pitiful loan underwriting techniques that I have ever witnessed.''
Well, as others have said, we have all experienced the aggressive
marketing tactics of the credit card industry. More than 3 billion
solicitations were issued last year, 30 for every family in America.
Let us talk about responsibility. Let us look at just one of these
solicitations. It is in the form of a check. It was sent to my
daughter. Let me highlight some of the comments on the check.
``This $2,875 check is real. Your signature on the back is all that
it takes to turn your live check into cash.''
Another observation: ``Book a terrific spring break vacation.''
Another comment: ``Treat yourself, your family or friends.''
Another statement: ``Need more than $2,875? Just call us if you want
to make even bigger plans for this spring.''
There is a p.s. too. ``This offer expires May 18, 1998. Have a
question about this offer? Just call.'' ``Just call.'' ``For your
protection, please destroy this check if you decide not to cash it.''
Is this corporate responsibility? Is this sound responsible lending?
Well, my daughter is a full-time student who lives at home and has no
regular income. It is so ironic to hear representatives of the credit
card companies and others here pontificate about personal
responsibility.
You all know from your own personal responsibility that they are
relentless in their pursuit of customers and profit, and that is good.
But regardless of the target's age, lack of sophistication,
vulnerability, and even bad credit history?
Let me just read a story for you for a moment from the Wall Street
Journal of March of this year. ``Rick and Christie Fetterhoff of
Harrisburg, Pennsylvania,'' and I think the Chair of the subcommittee
is from Pennsylvania, I do not know if he knows this couple, but it has
been reported, ``have been in Chapter 13 bankruptcy protection since
November 1995. But within the last several months, they have received,
among other pitches, $5,000 loan offer checks from Banc One Corporation
and Capital One Corporation and the promise of $250,000 to $500,000
from New Century Mortgage Corporation if they would just sign up.
``I was going to try to send some in, admits Mrs. Fetterhoff, who has
more than $160,000 in debt, but I said no, no. It is tempting.'' And
the credit card industry preaches personal responsibility?
Now, few in this chamber are sympathetic to that sort of hypocritical
argument when it comes from the tobacco companies or the liquor
industry or the gaming interests. Well, we should not let the credit
card industry get away with it either.
If this bill becomes law, the result will be the use of hundreds of
millions of dollars of taxpayer dollars to create a publicly funded
collection agency to increase the profitability of credit card
companies. So let us focus on responsibility ourselves and defeat this
bill.
[[Page H4366]]
Mr. GEKAS. Mr. Chairman, I yield three minutes to the gentleman from
New Jersey (Mr. Rothman).
(Mr. ROTHMAN asked and was given permission to revise and extend his
remarks.)
Mr. ROTHMAN. Mr. Chairman, I thank the gentleman from Pennsylvania
for yielding me time.
Mr. Chairman, there is something wrong with the following picture.
Last year, in the midst of our country's greatest economic growth of
this generation, America saw a record number of bankruptcies, 1.4
million. This year, as America's economic expansion continues, America
will set a new record for bankruptcies. But record number of Americans
are not going broke. They are simply taking advantage of a bankruptcy
system that encourages people to avoid paying their debts. That is what
is wrong, and we have to stop those abuses.
When people who can afford to pay their debts do not, guess who picks
up the tab? Working and middle class families, because companies charge
higher prices to make up for those losses.
We need a bankruptcy system to give truly needy Americans a fresh
start. But it must be a bankruptcy system with integrity, designed to
encourage personal responsibility, not to discourage it.
The new bankruptcy reform bill, H.R. 3150, will do just that. It
still gives people who cannot afford to pay their debts the ability to
declare bankruptcy and to get a fresh start. But it will require people
who can pay back their debts to do so.
Make no mistake about it. Under this bill, any American who chooses
to go bankrupt can still go bankrupt. But if the person has the means
after they pay their child support and alimony, after they pay off
their secured debts and living expenses, if they still can pay off 20
percent of their remaining debt, then they should be required to pay
back that debt. It is simply good personal responsibility.
Hard-working middle-class taxpayers who play by the rules have a hard
enough time paying their own bills. They should not have to pay the
bills of those who run up debts they can afford to repay, but who
simply choose not to repay the debts.
When I was practicing law, I worked with a great many small business
people who were taken advantage of by someone or some company who owed
them money, but who simply misused and abused the out-of-control
bankruptcy system to make victims out of those small business people.
{time} 1500
We need to protect the hardworking Americans and consumers who are
the innocent victims of our present out-of-control bankruptcy system.
Therefore, I urge my colleagues to support the Bankruptcy Reform Act
of 1998. It protects our families, it protects our small businesses,
and it restores some measure of personal responsibility to our out-of-
control U.S. bankruptcy system.
Mr. GEKAS. Mr. Chairman, I yield 2 minutes to the gentlewoman from
New York (Mrs. Kelly) with the promise that she will come back later.
Mrs. KELLY. Mr. Chairman, I thank the gentleman from Pennsylvania for
yielding to me the time to clarify some very important provisions of
this legislation.
Mr. Chairman, I rise today in strong support of H.R. 3150, the
Bankruptcy Reform Act. Some of my colleagues would have us believe that
this legislation would undermine alimony and child support. All
arguments to this effect are pure distortion of the actual language of
this bill.
This bankruptcy reform legislation before us today does nothing of
the sort. In reality, it strengthens the Bankruptcy Code's protections
for ex-spouses and children.
I will quote to my colleagues a May 13 nonpartisan Congressional
Research Service memorandum: ``No provisions in H.R. 3150 would repeal
the current protections that child support receives. The bill would
reinforce the legal status of these payments in some ways.''
H.R. 3150 is quite clear that the child support and alimony must be
paid first and in their entirety before a single dollar is paid out to
nonpriority, unsecured creditors. This priority holds even where an ex-
spouse who has the obligation to pay alimony has drawn on an unsecured
credit line to pay marital obligations.
As a constant fighter for the rights of ex-spouses to have first
priority to every cent of assets, I would vehemently oppose any
legislation that would reduce the ability of women and children to
receive support payments.
If people would take the time to read this legislation, they would
see that H.R. 3150 will benefit, not harm, child support and ex-spousal
support.
Members can speak to the possibility that future Congresses may
change bankruptcy law, but let us keep the debate focused on the
effects of this bill. H.R. 3150 strengthens the rights of ex-spouses
and children to receive support before any other creditor.
Mr. NADLER. Mr. Chairman, I yield 3 minutes to the gentlewoman from
Texas (Ms. Jackson-Lee).
(Ms. JACKSON-LEE of Texas asked and was given permission to revise
and extend her remarks.)
Ms. JACKSON-LEE of Texas. Mr. Chairman, the best of all worlds would
be that this is a distortion, that in fact we could conclude at the end
of this debate that we were just spewing out words and in fact we could
vote for H.R. 3150 as the right kind of legislation.
But might I share with my colleagues some of the facts that are real
in this issue. We do all need and are committed to personal
responsibility, each and every one of us. In fact, we teach it to our
children. The last thing we want to get is a phone call at work saying
we owe some money.
But let me share with my colleagues, Mr. Chairman, the real truth of
the American public. Some years ago, the American public filed
bankruptcy with only 70 percent debt. Today, the American public waits
and strains themselves and only files bankruptcy when their debt is 164
percent of income. That is the average working man and woman who every
day brings home under $50,000 a year and tries as they may to make ends
meet.
This bankruptcy bill kicks them out of the courthouse and tells them,
off to the curb with you, smother yourselves with debt. You are nothing
but deadbeats.
H.R. 3150 could have been a bipartisan bill if we had the opportunity
to have hearings and documentation of how best to treat this problem.
There are 3 billion contacts with Americans every day promoting
utilization of credit over and over again.
This is why I am against this particular legislation, because 300,000
people engaged in the bankruptcy filings of 1.3 million are divorcees
and mothers and custodial parents seeking to get child support and
alimony.
It does impact child support and alimony. It is not corrected by any
of these amendments. Once the bankruptcy proceeding is over, once the
prioritization has been made, when people have to pay their debts,
credit card monies are equal to their child support.
While one is in the bankrupt situation, one is required and is
responsible for paying both of them. Who has a greater leverage to
force one to pay? That parent with the child who is trying to get their
child support payments? Absolutely not. It is the credit card company
and others who can call over and over and over again.
I have heard from my constituents in Texas and across this Nation how
they have lost jobs because of the credit card companies who have
sought to over and over again be able to repeat to them that they have
not paid.
If this bill was the kind of bill that all of us could support, my
colleagues can rest assured we would be right here, because we believe
in the American system and the American way of doing what is right,
making sure that small businesses are protected.
I support an amendment to study what happens to small businesses when
they go into bankruptcy. But we have so many groups that are against
this. We have the Lawyers for Children In America, Federally Employed
Women, Legal Defense and Education Fund, the American Nurses
Association, Women United for Action, Women's Policy Center, Church
Women United. We have the Clearinghouse on Women's Issues, Coalition of
Labor Union Women.
This is a bad bill. The administration is against this bill. I simply
ask, send it back to committee. Let us do what is right for the
country.
[[Page H4367]]
I am strongly opposed to H.R. 3150 and I encourage my colleagues to
also vote against the bill. H.R. 3150 unnecessarily burdens the right
of bankrupt debtors to have a fresh start by creating a formula which
forces bankruptcy filers to involuntarily enter Chapter 13 if they meet
certain arbitrary income qualifications.
This approach to bankruptcy reform has been opposed by the Executive
Office of the President, 110 federal Bankruptcy Judges as well as a
coalition of 57 well respected Bankruptcy Law professors.
This bill is not about personal responsibility, it is about the
redirection of bankruptcy filers, to banks, credit card companies and
credit lending institutions, and in turn, this bill will hurt a lot of
women and children who are dependent on child and spousal support.
This bill subordinates the needs of support recipients to credit card
companies like Master-card and Visa. As the First Lady said in a May 7
article, ``I have no quarrel with responsible bankruptcy reform, but I
do quarrel with aspects of this bill that would force single parents to
compete for their child support payments with big banks trying to
collect credit card debt.
I have received numerous letters from my constituents in Houston, who
are concerned about the effects of this legislation. One such letter is
from a student graduate supporting a wife on a limited income, worried
that with new changes in the code, he will not be able to adequately
support his family. Another is from a debtor whose financial
responsibilities became overwhelming and is concerned that he will be
unable to support his children and his ex-wife and pay off his non-
domestic creditors under the new code.
Any effort to reform the bankruptcy system must protect the
obligations of parents to support their children. This bill is a new
and catastrophic threat to our children who rely on child support.
According to a recent study by the U.S. Department of Health and
Human Services, between 1978 and 1991, 21-28 percent of poor children
in America did not receive any child support from their non-custodial
parent, and child support is an issue critical to the well-being of our
nation's children. During 1997, an estimated 300,000 bankruptcy cases
involved child support and alimony orders. In about half these cases,
women were creditors trying to collect alimony and child support from
their bankrupt ex-husbands and others. In about half of these cases,
women were forced to file for bankruptcy themselves as they tried to
stabilize their post divorce economic condition. In the past five
years, well over a million women collecting alimony and child support
have been involved in bankruptcy cases.
In 1994, one in every four children lived in a family with only one
parent present in the home. Half of all children in the United States
spend at least a portion of their childhood in single-parent homes.
While these figures are truly striking in their own right, we cannot
begin to truly understand their impact on our nation's children without
considering the fact that half of the 18.7 million children living in
single-parent homes in 1994 were poor, and 70 percent of African
American children growing up in a single parent household lived at or
below the poverty line. Poor children in single-parent families rely on
child support from their non-custodial parent as a crucial source of
income.
In 1997, I co-sponsored H.R. 2487, the Child Support Incentive Act,
legislation which reformed the child support incentive payment plan and
improved state collection performance. And today, I am speaking before
you because children's access to child support is once again being
threatened. We need to keep our children a priority.
According to records from the U.S. Department of Health and Human
Services, 31 million children are currently owed over 41 billion
dollars in unpaid child support. When credit card companies and
children compete for the same money, we know that it is likely that the
most aggressive and powerful creditors will succeed.
We must counter this potential disaster to children relying on their
parent's continued support. We need to maintain the priority of those
parents seeking to collect owed child support from a bankrupt debtor.
This can be done without removing the tools needed for credit card
companies to effectively root out fraudulent debtors. Our children are
our future and when it comes to paying off debt, children and women
should come first, and we must remember this when we are voting today.
Mr. GEKAS. Mr. Chairman, I yield 2 minutes to the gentleman from Ohio
(Mr. Chabot). I am glad to do that. The gentleman from Ohio (Mr.
Chabot) has produced innovative and powerful concepts in the work of
the Committee on the Judiciary over a period of years, and I am glad to
have his support on this legislation.
(Mr. CHABOT asked and was given permission to revise and extend his
remarks.)
Mr. CHABOT. Mr. Chairman, I would first like to thank the gentleman
from Illinois (Mr. Hyde) and the gentleman from Pennsylvania (Mr.
Gekas) for their hard work and leadership in putting this bipartisan,
and it clearly is bipartisan, legislation together and moving it forth
so expeditiously.
This important legislation will protect consumers and businesses from
creditors who are capable of paying their debts but who choose to hide
behind bankruptcy protection instead of paying. In particular, this
legislation would reestablish the link between one's ability to pay and
one's ability to discharge debt by instituting a needs-based reform in
the bankruptcy system.
In a time of solid economic growth and low inflation and low
unemployment, it is absolutely astounding that there were a record 1.4
million consumer bankruptcies in 1997. This represents a sevenfold
increase in the number of consumer bankruptcies since 1978 when the
bankruptcy laws were last reformed. These numbers are expected to
increase even further this year.
The primary culprit for this dramatic increase in the number of
consumer bankruptcies is a system that discourages personal
responsibility. Our current bankruptcy laws often allow those who can
afford to pay their bills to, instead, declare bankruptcy and walk away
debt free.
When someone who can afford to pay their bills does not and they file
bankruptcy, who pays? We all do. We all pay for it at about $400 a year
per American family in higher prices; and it is, in essence, a tax on
the American public, a tax on debt.
Mr. Chairman, I believe that H.R. 3150 makes significant steps in
ending this practice, and I hope the President will sign this
legislation quickly, although one never knows, so that we can give
hardworking American families protection from those who abuse the
bankruptcy system and leave others holding the bill. There clearly are
many instances in which people truly need bankruptcy. But let us stop
the abuses. That is what this legislation does.
Mr. NADLER. Mr. Chairman, could I inquire how much time I have
remaining?
The CHAIRMAN. The gentleman from New York (Mr. Nadler) has 2 minutes
remaining, and the gentleman from Pennsylvania (Mr. Gekas) has 3\1/2\
minutes remaining.
Mr. GEKAS. Mr. Chairman, I yield 1 minute to the gentlewoman from
California (Mrs. Tauscher), but with the invitation to return to the
floor later for an additional period of time.
Mrs. TAUSCHER. Mr. Chairman, I accept the gentleman's invitation.
Mr. Chairman, I rise to strongly support this legislation to reform
bankruptcy. This legislation would change bankruptcy laws to promote
personal responsibility, ensure that more of the people who file for
bankruptcy repay at least a portion of what they owe.
If, after accounting for all reasonable household expenses each
month, the filer has enough money to pay some of his debt, he will be
required to do so. This fair and reasonable test protects the most
needy while it insists on repayment by the most irresponsible.
The stigma that was once attached to bankruptcy has disappeared. The
growing number of filers indicates that people today are less concerned
about the social implications of bankruptcy. It is our job to replace
that social stigma with legislation that fills the gaps in bankruptcy
law and demands responsible behavior by individuals.
I urge my colleagues to support this important legislation.
Mr. GEKAS. Mr. Chairman, I must at the risk of boring the Chair ask
how much time is remaining.
The CHAIRMAN. The gentleman from Pennsylvania (Mr. Gekas) has 2\1/2\
minutes remaining. The gentleman from New York (Mr. Nadler) has 2
minutes remaining.
Mr. NADLER. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, everyone should remember that the debate in this House
today is not over personal responsibility. The debate is not over
whether people who can pay their debts should pay their debts. Everyone
agrees to that.
The debate, Mr. Chairman, is over the measure of the test. That is
the first debate. Should it be, as the bill
[[Page H4368]]
before us has it, an automatic test with no judge there? Should it be a
test that looks not at actual expenses and actual facts, but at what
the Internal Revenue Service says in its guidelines might be the facts,
not at what your rent is, what your child expenses are, but what the
Internal Revenue Service says that for an average person in the
Northeast and Southwest of the country it might be?
I submit that this bill does not make sense in saying that we are
going to decide how much someone can afford to pay off on his debts by
looking at theories as to what his rent might be, what his child
expenses might be instead of what they actually are. That is the first
question.
The second question is that this bill jumps the line. It takes credit
cards and puts them in preference to other debtors, says you cannot
have a Chapter 13 plan confirmed unless you can pay $50 minimum for the
credit cards. It puts it in preference in practical terms over the
child support, over the victims, over the secured debt. It makes no
sense except as a reflection of the lobbying and the campaign
contributions by the banks and the credit card companies; and that is
not the way we ought to distort the law.
Mr. Chairman, I would remind my colleagues that every bankruptcy
association, the Bankruptcy College, the Bankruptcy Institute, the
trustees, the Chapter 13 trustees, the judges, they all tell us this
bill should be rethought and makes no sense.
I would also remind my colleagues the CBO says this is an unfunded
mandate in the private sector between $260 million and $1.3 billion and
on the public sector of $214 million.
I urge my colleague to think better of it and to vote against this
bill.
The CHAIRMAN. The time of the gentleman from New York (Mr. Nadler)
has expired.
The gentleman from Pennsylvania (Mr. Gekas) has 2\1/2\ minutes
remaining.
Mr. GEKAS. Mr. Chairman, I yield 1 minute to the gentleman from
Tennessee (Mr. Bryant), who has been, whether he knows it or not, an
unofficial consultant to me personally on the issues surrounding
bankruptcy in all its phases.
{time} 1515
Mr. BRYANT. Mr. Chairman, I thank the chairman for yielding time to
me.
Mr. Chairman, on this issue of child support, let me reference a
letter from the California Family Support Council which speaks directly
to this point.
I have been informed that there is some opposition to H.R.
3150 based on the premise that support creditors would be
worse off if certain credit card debts were made
nondischargeable and credit card creditors and support
creditors were in competition for the same post-discharge
assets.
I can only say that we are in competition with those
creditors prior to bankruptcy now. We do not see debts as
impairing our ability to collect support, especially in view
of the advantages child support creditors have under current
State and Federal laws as outlined above. Our problems stem
not from the competition with credit card creditors outside
bankruptcy, but from the disadvantages we incur as collectors
of support under current bankruptcy law during bankruptcy.
Your proposed amendments would give support creditors an
enormous advantage over other creditors during bankruptcy and
greatly aid us in the discharge of our support enforcement
responsibilities.
Mr. Chairman, I urge support of this bankruptcy reform.
Mr. GEKAS. Mr. Chairman, I yield the remainder of my time to the
gentleman from Michigan (Mr. Smith), and he and I will engage in a
colloquy.
The CHAIRMAN. The gentleman from Michigan (Mr. Smith) is recognized
for 1\1/2\ minutes.
Mr. SMITH of Michigan. Mr. Chairman, I thank the gentleman for his
efforts to pass comprehensive and common sense bankruptcy reform that
will greatly benefit our economy and our taxpayers by lowering interest
rates and increasing availability.
On a particular issue, many States such as my home State of Michigan
have experienced a sharp increase in the number of long-term placements
of children by court order. Tom Robison, the Eaton County, Michigan,
probate court administrator, tells me that the cost of just one
placement can be as high as $50,000 per year.
Federal courts have determined that when parents declare bankruptcy,
they are currently allowed to discharge the debts owed to that
particular court and the taxpayer for the costs of this long-term
placement.
I introduced H.R. 3711 last April to specifically state in law that
such expenses of caring for children could not be discharged by
bankruptcy. I thank the chairman for agreeing to this provision we have
asked for to make sure that debts owed to the State and municipality or
State court of proper jurisdiction for this purpose are not
dischargeable.
I wanted to clarify, however, that the definition of ``municipality''
is meant to include probate courts and other local governmental units
that have to pay the cost of this care. For that purpose, I would like
to enter into this colloquy with the distinguished chairman of the
subcommittee, the gentleman from Pennsylvania (Mr. Gekas).
Mr. Chairman, I would ask the gentleman from Pennsylvania (Mr.
Gekas), if the term ``municipality'' as defined by section 101 of the
Bankruptcy Code includes State courts?
Mr. GEKAS. Mr. Chairman, will the gentleman yield?
Mr. SMITH of Michigan. I yield to the gentleman from Pennsylvania.
Mr. GEKAS. I thank the gentleman, Mr. Chairman, for bringing this
issue to full debate here on the floor, and this colloquy. I agree that
that is a correct interpretation of the law, and commend the gentleman
for bringing the issue as far as it has come. We will work together to
consider the full ramifications of the issue before conference.
Mr. SMITH of Michigan. Mr. Chairman, I thank the gentleman.
Mr. DAVIS of Florida. Mr. Chairman, I rise in support of H.R. 3150,
the Bankruptcy Reform Act, which, although not perfect, is a strong
step in the right direction. The principle behind this legislation is
simple. If you can afford to repay some of your debts, you should be
required to do so. The fact that in this booming economy there has been
a meteoric rise in bankruptcy filings is simply unacceptable. Yes,
there are credit companies which unscrupulously dangle credit in front
of high-risk consumers; however, the individual must ultimately take
responsibility for his or her spending habits.
Protecting the status quo is tantamount to telling all consumers,
including low and moderate income families struggling hard to pay their
bills, that they will have to continue to pay for the unpaid debts of
others, even if those filing for bankruptcy are more affluent and
actually capable of paying off some of those debts. Last year, a total
of $44 billion in consumer debt was erased through bankruptcy filings.
Of course, erasing these debts means transfering that burden to every
other consumer--a burden which amounts to roughly $400 for every
American household.
While I have concerns over certain provisions included in this
legislation, such as the preemption of my home state's constitution
with respect to the homestead exemption, I believe it is important to
move this process forward and work with the Senate to craft a strong
bi-partisan bankruptcy reform bill which returns a sense of personal
responsibility to our Nation's bankruptcy system.
Mr. WOLF. Mr. Chairman. I want to express my extreme disappointment
with this rule. Representative Nadler had an amendment to this bill
which was not made in order. That amendment would have eliminated
bankruptcy claims on debts incurred in or adjacent to gambling
facilities, or debts that the creditor should have known were intended
to be used by the debtor for gambling purposes.
A 1997 SMR Research Corporation study on personal bankruptcy, which I
will include for the record, examined the high-risk activities which
contribute to bankruptcy. The report reviewed three serious addiction
problems in America--drugs, alcohol and gambling--and their effects on
personal bankruptcies. Of gambling, the report said, ``It now appears
that gambling may be the single-fastest growing driver of bankruptcy.''
It also showed a definite correlation between the presence of gambling
facilities and a growth in personal bankruptcies.
The report made a number of recommendations for dealing with the
rapid increase in personal bankruptcies related to gambling. The first
was, ``Make it tougher for customers to obtain cash advances at
gambling casinos.''
Mr. Chairman, Mr. Nadler's amendment would have been a very important
step in stemming the tide of gambling-related bankruptcy. But since it
was not made in order, we have been denied the full and open debate
that is crucial to better understanding this problem. Therefore, I will
vote against this rule.
[[Page H4369]]
The Personal Bankruptcy Crisis, 1997
demographics, causes, implications, & solutions
Wild Growth In Filings: More Bad News Ahead.
Age, Income, Education, Population Density, & Geography.
Lawyer Advertising & The Loss Of Stigma.
Why The Tide Of Financial Catastrophes Is Rising.
New Ideas To Reduce Bankruptcy Losses.
the purpose of this study
In 1996, SMR Research issued a 56-page study on the causes
of wildly rising personal bankruptcy filings. We knew the
subject was timely, but little did we imagine the media
coverage that would follow.
The 1996 study was mentioned in major newspapers and
magazines across the land, on television, and even became the
subject of two stories in the Wall Street Journal.
Fate is strange. Publicity is nice, but the 1996 study was
not exactly a typical SMR production. The explosion in
bankruptcies had caused a lot of demand for information from
our lending industry clients, especially unsecured lenders.
We put together the 56-page piece as a section of our 1996
annual credit card market study, and later offered the
bankruptcy section by itself to non-credit card issuers.
Although 56 pages might look big to some folks, it was the
shortest research study we have done since 1985. We found
ourselves making conclusions in the 1996 study with some
statistical backing, but not always definitive proof.
This study, by contrast, is indeed a standard SMR Research
work. The scope is much greater, and allows us to cover the
subject completely, with a meaty section on solving (or at
least mitigating) the personal bankruptcy dilemma. Where the
1996 study focused solely on some of the core causes of
bankruptcy, this study covers the full nature of the problem.
We look at the common misperceptions about bankruptcy and
provide the statistics that show why they are such vast over-
statements. Unemployment is not the primary driver of
bankruptcy, nor is the overall consumer debt load. Lender
marketing and easy credit also are not the prime cause.
In fact, there is no single prime cause of bankruptcy. In
this study, you'll see coverage of many things that result in
bankruptcy, with some quantification of which ones are the
worst. The additional space allows us to cover things we
couldn't cover last year, like the connection between
bankruptcy and gambling--perhaps the fastest-growing problem
of all.
In addition, this study, for the first time we know of,
shows the demographics of bankruptcy, using our county-level
statistical database that goes back to 1989.
Regarding solutions to the problem, they are not easy. The
bankruptcy spike is based at least in part on serious,
intransigent, worsening socio-economic problems. This
underlying core puts upward pressure on filings, and the
upward pressure really explodes when you throw lawyer
advertising and bankruptcy's loss of social stigma into the
mix.
Still, we are quite confident that there are steps
available to creditors to help control their own bankruptcy
loss exposure. We think the best solution of all may be the
most radical, which is for creditors to adopt some of the
risk-control techniques of the insurance industry. This would
mean using actual geographic loss statistics as a
supplemental aid in credit scoring, pricing, and marketing.
This material appears starting on Page 157.
SMR has been following the bankruptcy subject, and has been
building its databases of filings, for eight years. After all
that time, we finally have created a research study that we
believe addresses all the central issues in the bankruptcy
crisis.
We appreciate your patronage and hope you get good value
from the research.
Stu Feldstein,
President.
discounted additional copies of this study
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discount programs.
We will ship all the additional copies you want at $292.50
(85% off the original copy price) as long as supplies last.
Or, clients can make their own copies of the study on their
own premises for a copyright licensing fee of $100 per copy
you wish to make. To take advantage of this program, just
decide how many copies you wish to make and call us at 908-
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Additional copies at discount prices are available only for
distribution within your organization, not for unauthorized
resale or distribution outside your company. We appreciate
your cooperation. Research of this kind is expensive to
undertake, and we must be able to sell enough of it ourselves
to continue the work in the future.
gambling and bankruptcy
It now appears that gambling may be the single fastest-
growing driver of bankruptcy.
Once limited to Nevada and New Jersey, casino gambling has
spread very rapidly through many states. Indian reservation
casinos have been one new mode for this growth, and riverboat
and coastal gambling boats have added more.
If you have not been tracking the spread of gambling, you
may be in a shock about how pervasive gambling facilities
have become.
Note that in the state of Nevada, there are only 17
counties (most of them very large). But across the nation,
there are now 298 counties that have at least one major legal
gambling facility; a casino, a horse or dog racing track, or
a jai alai game. That's the count in one recent guide to U.S.
gambling facilities, and it does not include such things as
places where state lotteries or bingo parlors are available.
The lotteries and bingo parlors tend to involve small-ticket
gambling, whereas the other facilities obviously involve the
larger dollars per customer.
the three additions & changed mores
When we published our shorter study on the causes of
bankruptcy in 1996, we had suspicions about gambling. But we
had not yet put together enough solid data and information to
make conclusions, therefore we said little about the subject.
Actually, since we were looking at events that can cause
insolvency, we were suspicious in 1996 about all three of the
serious addiction problems in America: alcoholism and drug
and gambling addiction. We remain suspicious about all three
of those problems. But of the three, it's quite clear that
gambling is the fastest-growing phenomenon.
For those who make and supply alcohol, drugs, and gambling,
all are very large businesses. But you don't have to be a
sociologist to see that societal mores are changing most
rapidly on gambling. Over the last 20 years, state
governments themselves have entered the gambling business
with lotteries. We see no states as yet that have gone into
the heroin trade or where the government itself advertises
Jim Beam. So, the concept of gambling now has the tacit
blessing of government.
Meanwhile, private entrepreneurs have created dazzling and
sophisticated facilities that have eliminated the ``sleaze''
from gambling and turned it into a recreation. Las Vegas is
now a city-sized adult theme park with attractions for the
kids, too. American Indians, operating on reservations beyond
the authority of state laws, have seized on casinos as a new
method to generate cash and improve their standard of living.
Cruise ships of all sorts have set up table games and slot
machines.
Hard-bitten gamblers of old played poker at tables in a
friend's kitchen or sat in cold bleachers to watch the
horses. Today's gamblers enjoy the finest food, free drinks,
the best entertainment, super-quality hotels, and the widest
variety of gambling adventures that have ever been available.
And, of course, all of this now happens at places much closer
to most of the larger population centers. Gambling can indeed
be fun these days--but some smallish percentage of gamblers
do develop problems that translate into bankruptcy.
statistics, gambling, and bankruptcy
As in so many aspects of bankruptcy, perfect data related
to the gambling problem don't exist. No one has asked all the
bankruptcy filers if gambling contributed to their financial
problems, and we strongly suspect that if filers were asked
that question, many would be too embarrassed to answer
honestly.
But we can look at evidence in many other ways. Recently,
for example, we input into our county-level records the
numbers of gambling places that exist in each county, if any.
We obtained the information, covering more than 800 casinos,
race tracks, and jai alai ``frontons'' from the 1997 edition
of The Gaming Guide: Where to Play in the US of A, published
by Facts on Demand Press of Tempe, AZ. The directory provides
street addresses and zip codes for the gaming establishments.
We used the zips against SMR's Zip Code/County Matching
database to put the right numbers of facilities in the right
counties.
Then, we aggregated the bankruptcy rates of those places
and compared them to those of counties that have no gambling
at all. The bankruptcy rate was 18% higher in counties with
one gambling facility and it was 35% higher in counties with
five or more gambling establishments.
This exercise probably understates the seriousness of the
problem, since many counties that have gambling facilities
also have very small populations and actually draw their
customers from other places.
So, when we look only at counties with more sizeable
resident populations and gambling facilities, we see even
greater evidence of the problem.
a look at the map
The effect of gambling on bankruptcy seems quite clear when
you look at a map. Among all the counties in Nevada, for
instance, we find that the closer you come to Las Vegas and
Reno, the higher the bankruptcy rate.
In New Jersey, casinos are permitted only in Atlantic
City--and that's also where the resident population has by
far the highest bankruptcy rate. Generally speaking, the
closer you come to Atlantic City, the higher the bankruptcy
rate in New Jersey. One exception to this rule is Cape May
County, just south of Atlantic City, where the bankruptcy
rate is not so high. But Cape May also is a big retirement
place with a high average age in the population. As shown in
our demographics section, high-age populations do not have
high bankruptcy rates.
In California, the two counties with the highest bankruptcy
rates are Riverside and San Bernardino. They also happen to
be the two counties closest to Las Vegas. The
[[Page H4370]]
fourth-highest bankruptcy rate in California is in
Sacramento County, which is closest to Reno.
In Connecticut, the map hardly matters. Connecticut is so
tiny that everyone has access to the gambling parlors in the
middle of the state. This is a state that used to have a
bankruptcy rate far below the national average. But Indian
casino gambling is now huge and well-entrenched. The smaller
of the Indian casinos, the Mohican Sun in Uncasville, boasts
3,000 slot machines. In Connecticut, the bankruptcy rate per
capita has risen more than twice as fast as the national rate
of increase since 1990.
what the experts say: scope of the problem, and the credit card
connection
Aside from these observations, we set out this year to
interview many of the leading U.S. experts on gambling,
gambling addition, and the financial impact of gambling.
Their studies have suggested, fairly consistently, that
more than 20% of compulsive gamblers have filed for
bankruptcy as a result of their gambling losses. They also
show that upwards of 90% of compulsive gamblers had used
their credit card lines to obtain funds for gambline and then
lost. The same studies show that problem gamblers have a lot
of credit cards on which to draw.
``One of the things we know about problem gamblers is that
they tend to have lots and lots of credit cards and those
credit cards have been maxed out in terms of their credit
limits,'' said Rachel Volberg, one of the leading researchers
into problem gambling in the U.S. and internationally.
Volberg is president of Gemini Research, a consulting firm in
Roaring Spring, PA. She is a frequent ``expert witness'' on
the problem in state legislative hearings and has done
research under contract for various government units in
Oregon, Colorado, New York, California, Michigan,
Mississippi, Georgia, Louisiana, Iowa, Connecticut, and
Canadian provinces.
Volberg is not the only researcher to note the connection
with credit cards. ``It's not unusual for problem gamblers to
have eight to 10 credit cards,'' adds Henry Lesieur,
professor of criminal justice at the University of Illinois,
Normal, another leading authority on compulsive gambling.
The amount gamblers owe is quite large. According to
studies of Gamblers Anonymous members in Illinois conducted
in 1993 and 1995 by Lesieur, the median average lifetime
gambling debt of those surveyed was $45,000, and the median
amount owed at the time they entered GA was $18,000. The
median is the midpoint of a list of numbers, with 50% of the
numbers being higher and the other 50% being lower.
However, the mean average debts of problem gamblers were
far higher than the median amounts. The mean average lifetime
gambling debt of those surveyed was $215,406, with three
people saying they owed $1 million or more. The mean debt
upon entering GA was $113,640, including one person who said
he owed $1 million and another admitting to owing an
incredible $7.5 million.
In another study dated April 1996 by the University of
Minnesota Medical School, a survey of problem gamblers in
Minnesota found the average lifetime gambling debt was
$47,855, although individual amounts ran into the hundreds of
thousands of dollars. The median amount was $19,000. Recent
debts--those accumulated in the past six months--averaged
$10,008, while the median amount was $4,500.
In late 1995, the Minneapolis Star Tribune examined 105
bankruptcy filings made in that city in which it was
determined that gambling was a factor. The results of the
study appeared in a five-part series that ran in the paper in
December 1995.
The newspaper found that of the $4.2 million of total debt
declared by the 105 filers, $1.14 million--or 27%--was
comprised of gambling losses. Almost half of the 105
filiers--52, to be exact--claimed they had gambling losses.
Their average debt was $40,066, which was more than the
average annual income of $35,244. The average gambling loss
was more than $22,000. Filers carried an average of eight
credit cards, although many had 10 or 15 cards and one person
had 25. And heavy debts were being carried on each card.
counties with gambling have higher bankruptcy rates
Let's return to the county-level data. In the table that
follows, we divided up the country amount counties with
gambling facilities and those without. The differences in
bankruptcy rates between them are striking. It's quite clear
that those counties with legal big-ticket gambling have
higher bankruptcy rates than those counties that don't have
gambling, and those counties with many gambling houses have
higher bankruptcy rates than those places with just a few.
We examined more than 3,100 counties. For the entire United
States, the personal bankruptcy filing rate per 1,000
population in 1996 was 4.20. But the national rate for
purposes of comparison to counties was 4.22 (using 1996
bankruptcies divided by 1995 populations; the 1996 county
populations were not available when we did this analysis).
For the 2,844 counties without gambling, the bankruptcy rate
was lower, at 3.96.
According to The Gaming Guide, there were 298 counties that
had legalized gambling within their borders. In these
counties, the bankruptcy filing rate in 1996 was 4.67, or 18%
higher than for those counties with no gambling. When we
subdivide the universe of counties with gambling between
those with five or more locations and those with four or
less, we learn more. The places with the most gambling
facilities have a much higher bankruptcy rate.
Of the 298 counties with gambling, 275 had only one to four
facilities. Their combined 1996 bankruptcy filing rate was
4.53 per 1,000 residents, or 14% greater than the 3.96 rate
among counties without gambling. However, in the 23 other
counties with five or more gambling facilities, the combined
bankruptcy rate was 4.33, a whopping 26% higher than the 4.22
national bankruptcy rate and 35% higher than at counties with
no gambling at all. Many of these counties with 5+ gambline
facilities are in Nevada, but most of them are not.
BANKRUPTCY FILING RATES IN U.S. COUNTIES WITH GAMBLING FACILITIES VERSUS COUNTIES WITH NO GAMING ESTABLISHMENTS
[Gambling facilities include land, tribal, and boat casinos; dog, horse, and harness race tracks, and jai alai
frontons]
----------------------------------------------------------------------------------------------------------------
1996 1996
No. of Aggregate bankruptcy filings per
counties population filings 1000
----------------------------------------------------------------------------------------------------------------
All Counties with Gaming Facilities...................... 298 97,385,935 454,384 4.67
Counties with 5+ Gaming Facilities....................... 23 16,391,661 87,435 5.33
Counties with 1-4 Gaming Facilities...................... 275 80,994,274 366,949 4.53
Counties with No Gaming Facilities....................... 2,844 166,526,572 658,724 3.96
All U.S. Counties........................................ 3,142 263,912,507 1,113,108 4.22
----------------------------------------------------------------------------------------------------------------
Again, these data tell only part of the story, since some
gambling parlors (especially tribal casinos) are located in
thinly populated places and draw almost all their customers
from other places.
So, it's important to also look at more populous areas
located very near to gaming facilities. Indeed, not only do
many gambling facilities draw from other nearby population
centers within the U.S., but in addition there are many legal
casinos in several Canadian provinces. These often are
located just beyond the U.S. border and cater to American
gamblers in the Detroit area, upstate New York, and other
northern states.
Thus, we believe many counties have high bankruptcy rates
tied in part to gambling, yet the county doesn't register in
our table as a ``gambling'' county. If we included counties
contiguous to those places with legalized gambling, we're
sure the numbers would show an even stronger correlation
between high bankruptcy rates and gambling. The following
mini study of the Memphis, TN, area illustrates our point.
las vegas east: would you believe it's tunica county, ms?
In the table below, we show the 24 counties in the U.S.
with the worst U.S. bankruptcy filing rates in 1996 (10.0 or
more filings per thousand residents) and where the population
is greater than 25,000.
A significant number of these worst places share one
trait--all are within easy reach of major gambling casinos.
This is true of just about all of the counties on the list
that are located in Tennessee, Mississippi, and Arkansas.
Neither Tennessee nor Arkansas has legal casino gambling
within its borders. In fact, neither state even has a
lottery, for that matter. Yet, several of their biggest
counties are located near the 10 major riverboat casinos in
Tunica County, MS. Tunica is located in the extreme northwest
corner of Mississippi, just south of Memphis, TN. According
to The Gaming Guide, Mississippi has the largest amount of
``gaming area''--that is, square feet of casino gambling--in
any state outside Nevada. And most of that gaming is centered
in Tunica County. Major casinos are also located in the
Biloxi-Gulfport area on the Gulf of Mexico.
The profusion of super-high bankruptcy rates among the
counties located near the Mississippi River casinos in Tunica
County is quite remarkable. Indeed, the counties in the
tristate area within the Memphis metropolitan area have some
of the highest personal bankruptcy rates in the nation. We
view their close proximity to the Tunica casinos as very
meaningful.
Shelby County, TN, where Memphis is situated, easily had
the highest county bankruptcy rate in the nation in 1996, at
17.28 per 1,000 population--more than four times the national
average. It's also by far the biggest county in terms of
population among the most bankrupt counties. Memphis also
happens to be the headquarters of Harrah's, one of the
biggest casino operators.
Also on the list of worst counties are two Mississippi
counties. DeSoto, with a December 1996 filing rate of 10.65,
borders Tunica County. Marshall County, at 11.47, is adjacent
to DeSoto. Tunica County itself, the
[[Page H4371]]
likely source of some of this trouble, has a population of
just 8,132 souls, and a bankruptcy rate of just 5.78, less
than the state average of 6.16.
Also high on the list of most bankrupt counties is
Crittenden County, AR, at 11.16. It's the county located just
across the Mississippi River from Shelby County. Tipton
County, TN, at 10.96, is adjacent to Shelby County on the
north. Madison County, TN, at 10.73, is located just east of
Shelby. But other counties located near Shelby in Tennessee
sport high bankruptcy rates, including Haywood, Lauderdale,
Fayette, and Crockett, to name a few. These counties don't
appear on our list of worst counties because their
populations were less than 25,000.
The Tunica casinos aren't the only ones catering to
Tennessee residents. There's also a casino located upriver in
Caruthersville, MO, in the state's southeastern panhandle. It
may be part of the reason for the 10.56/1,000 bankruptcy rate
in Dyer County, TN, which is located just across the river.
Also, Gibson County, TN, just east of Dyer, has a bankruptcy
filing rate of 10.12. It's worth mentioning that both Dyer
and Gibson Counties are also both within a two-hour drive of
the Tunica casinos.
The next table shows that 9 of the 24 U.S. counties with
the highest bankruptcy rates in 1996 also were places located
very close to three gambling sites.
COUNTIES WITH HIGHEST BANKRUPTCY FILING RATES, 1996
[Minimum population 25,000]
----------------------------------------------------------------------------------------------------------------
Filings per
County name Code Population Filings 1000
----------------------------------------------------------------------------------------------------------------
Shelby County, TN............................................... \1\ 865,058 14,952 17.28
Coffee County, GA............................................... ....... 32,697 432 13.21
Jefferson County, AL............................................ ....... 657,827 8,124 12.35
Bibb County, GA................................................. ....... 135,066 1,912 12.33
Troup County, GA................................................ ....... 57,882 705 12.18
Walker County, GA............................................... ....... 60,654 705 11.62
Marshall County, MS............................................. \1\ 32,078 368 11.47
Crittenden County, AR........................................... \1\ 49,889 557 11.16
Clayton County, GA.............................................. ....... 198,551 2,209 11.13
Liberty County, GA.............................................. ....... 58,749 650 11.06
Coweta County, GA............................................... ....... 72,021 789 10.96
Tipton County, TN............................................... \1\ 43,423 476 10.96
Murray County, GA............................................... ....... 30,032 325 10.82
Madison County, TN.............................................. \1\ 83,715 898 10.73
Baldwin County, GA.............................................. ....... 41,854 448 10.70
DeSoto County, MS............................................... \1\ 83,567 890 10.65
Dyer County, TN................................................. \2\ 35,900 379 10.56
Manassas city, VA............................................... ....... 32,657 333 10.20
Gibson County, TN............................................... \2\ 47,728 483 10.12
Scott County, MS................................................ \3\ 25,042 253 10.10
Rhea County, TN................................................. ....... 26,833 271 10.10
Talladega County, AL............................................ ....... 76,737 774 10.09
Spalding County, GA............................................. ....... 57,306 575 10.03
Ware County, GA................................................. ....... 35,589 357 10.03
----------------------------------------------------------------------------------------------------------------
Key to Codes: \1\ Located near casinos in Tunica County, MS; \2\ Located near casino in Caruthersville, MO; and
\3\ Located near casino in Philadelphia, MS.
more examples
Of course, scenarios like this can be seen in other areas
of the country. Atlantic County, NJ, is a leading example. It
is home to all of that state's legalized gambling casinos,
and the 1996 bankruptcy rate was 7.10 filings per 1,000
residents. That was 71% higher than the state average
bankruptcy rate of 4.16. And most of the time, counties
located closest to Atlantic had higher bankruptcy rates than
others further away.
Of course, Atlantic City draws customers from all kinds of
places, including many from New York City. Our point is that
the resident population in a gambling county has the easiest
and most frequent opportunity to use the facilities,
therefore we should expect to see some result in the per
capita bankruptcy rate.
Similarly, the 1996 bankruptcy rate in Nevada is more than
50% higher than the national average. In Clark County, where
Las Vegas is located and where more than half of the state's
more than 300 casinos are based, we see the highest
bankruptcy rate within the state. Nor is it surprising that
the two counties with the highest bankruptcy rates in
California are those just across the border from Las Vegas,
San Bernardino (7.04) and Riverside (6.77). Those two
counties also now have tribal casinos of their own.
Moving to Maryland, Prince Georges County has by far the
highest bankruptcy rate among counties in that state--6.72
filings per 1,000 population in 1996, almost 50% higher than
the state average of 4.57. By way of comparison, the next
highest county bankruptcy rate in Maryland is 5.27, a
significantly lower figure. What's going on in Prince
Georges?
The answer is that Prince Georges is the only county in
Maryland where casino gambling is legal. Legal casinos are
located at charitable organizations, such as Elks and Knights
of Columbus halls and volunteer fire departments. These
casinos have strict limits on operating hours and betting and
don't have the glitz of Las Vegas or Atlantic City, yet they
do now exist and the casinos are used. Prince Georges County
also has harness racing.
gambling & low-bankruptcy states: would they be even better without it?
All of the prior information is highly suggestive that
gambling influences bankruptcy. Yet, as all the rest of this
study shows, there are many other bankruptcy drivers.
Therefore, the correlation between bankruptcy and the
physical location of gambling facilities is certainly
imperfect.
There are some states, for instance, where there are
gambling facilities, yet the bankruptcy rates are reasonably
low. These states include South Dakota, Minnesota, and Iowa--
all located in the moderate bankruptcy ``corridor'' of the
upper Midwest.
It's hard to tell in these areas whether gambling has no
effect on bankruptcy, or if, on the other hand, bankruptcy
would be even less of a problem without the casinos. The
Minnesota university study referenced earlier in this section
suggests that bankruptcies in that state are caused at times
by gambling.
Indeed, the notion that gambling is a major negative for
bankruptcy in all geographies is supported by information
from our interviews and from a lot of local newspaper
articles we have reviewed. The actual gambling debts may have
become credit card debts prior to the filer entering
bankruptcy court, but that doesn't change the cause of the
financial trouble. The following material will add more from
this review of experts and news articles.
quantifying the problem: 10 percent of filings might be linked to
gambling; 20 percent of problem gamblers go bankrupt
Articles we studied, often quoting attorneys who specialize
in personal bankruptcy, suggested that about 10% of
bankruptcy filings are linked to gambling losses. That figure
could be higher depending on location. Most of the debt is
racked up on credit cards.
According to the experts on compulsive gambling with whom
we talked, no comprehensive national study on problem
gambling has been conducted in the U.S. since the early
1970s. However, several state studies have been done, all
concluding that 20% or more of compulsive gamblers were
forced to file for bankruptcy protection because of the
losses they had incurred.
In the April 1996 study of compulsive gamblers in Minnesota
conducted by two professors at the University of Minnesota
Medical School, the researchers reported that 21% of the
people in the study had filed for bankruptcy. In addition, a
disturbing 94% said they had at least one gambling-related
financial problem in their lifetime. Furthermore, 9 out of 10
of the subjects said they had borrowed from banks, credit
cards, and loan companies to finance their gambling. And, 77%
said they had written bad checks to finance gambling sprees.
The University of Illinois in Normal conducted two surveys
of members of Gamblers Anonymous in 1993 and 1995. The
combined results found that 21% had filed for bankruptcy, and
that another 17% had been sued for gambling-related debts.
Additionally, 16% said their gambling led to divorce--another
big driver of bankruptcy filings--and another 10% said it led
to separation. Compulsive gamblers also have very high rates
of attempted suicides, higher even than for drug addicts, the
experts said.
Rachel Volberg, the Pennsylvania-based compulsive gambling
consultant we referenced earlier, told us that a study in
Wisconsin had found that 23% of compulsive gamblers had filed
for bankruptcy, and that 35% of the gamblers said they had
used credit cards for gambling money. She also said a study
conducted in the Canadian province of Quebec found that 28%
of problem gamblers there had sought bankruptcy protection.
One of the really scary things about these studies is that
they are conducted only with people who had sought out
professional help for gambling addiction. So, there may be
other problem gamblers at risk, too.
According to several lawyers specializing in bankruptcy who
were quoted in newspaper articles that we studied, 10% to 20%
of their clients did so due to gambling debts they couldn't
pay. These lawyers were located in
[[Page H4372]]
areas near casinos, so the 10% to 20% figures probably
doesn't hold for the U.S. population at large. Nevertheless,
its probably not a stretch to say that at least in those
areas near major casinos, gambling-related bankruptcies
account for a good 10% to 20% of the filings.
the explosion in iowa
It's also not a stretch to say that the number of people
with financial problems stemming from gambling is on the
rise, tracking the spread of legalized gambling.
Tom Coates, executive director of the nonprofit Consumer
Credit Counseling Service of Des Moines, IA, told us that 10%
to 15% of the people his agency counsels have financial
problems ``directly related to gambling.'' That's up
dramatically from 2-3% when the agency opened its doors 10
years ago, before casino gambling was legalized in Iowa.
Coates also told us that his service's business is up 30-40%
over a year ago, at a time when Iowa's unemployment rate is
at an all-time low and its economy stronger than the nation's
at large. He blames gambling for much of the surge.
Probably, much of what we've reported about problem
gamblers will not surprise the experienced credit executive.
People with gambling addiction are rather obviously at risk
to lose a lot of money. But how many such people exist? And
how many gamble occasionally? Let's take a look at the
numbers, below.
2.6 million adults may have a gambling problem
According to the most recent statistics released by the
American Gaming Association, the casino industry's trade
group, U.S. households made 154 million visits to casinos in
1995. That number was up 23% from the previous year and up an
astounding 235% from 1990.
The AGA said 31% of U.S. households gambled at a casino in
1995, up from just 17% in 1990. ``Gaming households,'' as the
AGA calls them, also made an average 4.5 trips to casinos in
1995, up from 3.9 times the year before and 2.7 in 1990.
Of course, it is difficult to pinpoint how many of these
people have a problem or compulsion--terms that can be a
matter of degree or interpretation. Most estimates range from
1% of the adult population to as high as 7%.
The University of Minnesota study estimated that 1% of the
state's entire population were ``problem pathological
gamblers,'' meaning that they lose control and continue
gambling in spite of adverse consequences. If this 1% figure
were true for the entire U.S. population, it would represent
about 2.7 million people at risk.
The gaming industry itself says that 2% to 4% of practicing
gamblers develop compulsion problems. Since 31% of households
gambled at a casino in 1995, the 2% to 4% range would yield
numbers very similar to the Minnesota study. (31% of 265
million people = 82.15 million 3% = 2.5 million compulsive
gamblers.)
Needless to say, people don't become compulsive gamblers
until they're first exposed to gambling. Therefore, the rapid
spread of casino gambling right now is a major concern.
Coates, the credit consultant, told us that Iowa
commissioned a study of problem gambling in 1989, two years
before the state's first riverboat and Indian casinos opened.
In that study, it was estimated that 1.7% of the state's
adult population were compulsive gamblers.
In 1995, by which time many casinos had dotted the state,
Iowa did a similar study. Using the same methodology, the
second study found that 5.4% of the state's entire adult
population--not just the population that gambles--were
problem or compulsive gamblers, a more than tripling of the
rate in just six years.
losing everything is common
For creditors, another problem with gambling-driven
bankruptcy is that it is highly likely to result in total
loss.
Even though most bankruptcy filings will represent near-
total loss of amounts owed to unsecured creditors, the
gambling-driven bankruptcies may be the worst. That's because
addicted gamblers tend to ``tap out'' completely on debt and
deplete savings, leading them into Chapter 7 liquidation.
These are logical observations, but also are supported by
findings in a July 1996 study conducted in Wisconsin. We
reviewed this study.
dealing with the gambling issues
Like so many of the drivers of bankruptcy, gambling is a
frustratingly tough problem to solve.
Casino gambling is spreading rapidly in part because so
many people enjoy it. Most gamblers also are responsible and
know their limits. People like gambling and most do it
safely, so how do you argue against the further spread of
casinos?
The central problem for bankruptcy is that gambling adds
another socio-economic minority group to the high-risk mix.
Bankruptcy is always driven by socio-economic and
demographic minority groups. Most people have health
insurance, but the 40 million Americans who don't are a large
high-credit-risk minority. Most people don't get divorced,
but the 10% of adults who are divorced are a sizable at-risk
minority. If there also are 2.6 million compulsive gamblers,
this is just another high-risk group to throw in--and perhaps
the most rapidly growing group. Bankruptcies are rising in
part because, when you add up all these at-risk minority
groups, you end up with a very large number that's no longer
minor.
Still, we believe that much could be done by active
creditors to combat the level of the risk. At the moment, if
anything, creditors enable and even encourage the problem
gambler to go too far. And some state governments seem even
more eager than the casinos themselves to encourage
irresponsible gambling behavior--as we'll see in a moment in
New Jersey.
Here are some of out thoughts on combating the gambling/
bankruptcy problem:
1. Make it tougher for customers to obtain cash advances at
gambling casinos.
According to the gaming industry itself, more than half of
the money that gamblers play with at casinos is not money
they brought with them. It is money they obtained inside the
casino or close by from automated teller machines, cash
advances from credit terminals, and the like.
``It is no secret in the casino industry that patrons will
continue to play a game until their cash runs out. What some
operators have discovered, however, is if a consumer is
provided with efficient and easy ways to access cash, often a
`last time' player will wager for longer than he or she
originally planned,'' states a recent article about cash
advances in International Gambling and Wagering Business, a
gaming industry monthly magazine. In addition, the article
says, ``credit customers tend to be more liberal money-
users.''
Credit card issuers have been very accommodating to
gamblers, making it easy for them to get their hands on large
sums of money very quickly. And it may well be that most of
this business is profitable for the card issuers. But that
may be changing now. In an era of very rapidly increasing
bankruptcies, it does not take long for the net losses from
bankruptcy filers to exceed the profits from gamblers who
responsibly use their cash advances.
Here is some admittedly over-simplified card issuer math:
Let's hypothesize that 1,000 gamblers have used credit card
cash advances to obtain $1,000 each. Total receivables for
this group will be $1 million. At a 1.5% return on assets,
this $1 million will generate $15,000 of net income.
But the gaming industry itself says that 2% to 4% of these
gamblers have an addiction problem. If the average is 3%,
then 3% of the 1,000 gamblers we've just looked at are very
high risk. This will be 30 people. If, as the earlier data
suggests, 20% of these 30 people will file for bankruptcy,
then 6 of the original 1,000 gamblers will wind up in
bankruptcy court. Against the $15,000 of net income, what
will the loss be from the 6 bankrupt compulsive gamblers?
Probably, it will be more than $15,000--or at least close
enough to make this little piece of the credit card business
insufficiently profitable.
This tells us that card issuers and the ATM associations
they partially control may want to reconsider their placement
of so many cash machines in casino hotels. Or, at least, card
issuers may need to institute new early warning indicators
specific to those locations. The heavy users of casino hotel
cash machines should be the ones stopped sooner.
``If I were a credit guy, I would check better on the ATM
transactions,'' said Edward Looney, executive director of the
Council on Compulsive Gambling of New Jersey. ``Banks ought
to immediately pick up on someone in trouble. You can tell
just from the transactions.'' Coates was quoted in the Des
Monies Register newspaper in late 1995 claiming that banking
sources told him that eight of the 10 busiest ATMs in Iowa
were located at the casinos.
2. Help defeat actions in states that would make it easier
for gamblers to get credit card cash advances on casino
floors.
Here is perhaps the craziest credit risk story yet.
In New Jersey last September, the state Casino Control
Commission passed a regulation that would allow casino
patrons to utilize ATM and credit card cash advance machines
placed right at the Atlantic City gaming tables.
Previously, customers had to walk to a different part of
the building to use these machines. Under the new proposal,
borrowing for blackjack would be faster than ordering a drink
from a cocktail waitress. Not even Las Vegas casinos allow
this. And, the Atlantic City casinos themselves don't support
the measure, which they believe would lead to increased
gambling compulsion and would tarnish the industry's
reputation.
In other words, the state government is more eager to push
money into the gambler's hands than the casinos who would
profit most in the short run. What's wrong with the New
Jersey regulators--and why didn't the banking industry
object?
So far, no Atlantic City casino has taken advantage of the
rule change, nor is any likely to in the future, said Keith
Whyte, director of research at the American Gaming
Association, the industry's trade group.
``We definitely opposed in principle New Jersey's
regulatory rule change that would let casinos put ATM card
swipes right at the table. And in fact no casinos are doing
that, and none will, I can almost guarantee you.'' Whyte told
us. ``It wasn't a casino-initiated thing. Everybody [in the
industry] realized that is probably not a step we would want
to take.''
According to Looney, the New Jersey Compulsive Gambling
Council chief, not a single credit card or banking industry
representative raised any objection to this rule when it
[[Page H4373]]
was being debated. Yet, Atlantic City has the highest
concentration of big casinos outside Las Vegas and serves
millions of gamblers per year. You get the feeling no one in
the credit community is paying close attention to gambling's
effect on bankruptcy.
3. Maybe cash machines should be move out of the casino
hotels entirely.
Many of the experts we talked to for this study agreed that
the worst thing for a compulsive gambler to have is immediate
access to cash when he's on a binge. To the extent that banks
control or influence where cash machines are placed, it may
be time to reconsider their currently wide availability
around the casino hotels.
If the gambler had to walk down the street to get cash, no
doubt some would. But some of the people we interviewed
strongly contend that the walk itself would impose a
``cooling off' period that would stop some compulsive
gambling losses.
``It's a vulnerable thing for a compulsive gambler to get
credit,'' said Looney of the New Jersey council and himself a
recovering gambling addict. ``They will be so focused on
their gambling that they will gamble everything they can,
including all the credit cards they have in their possession.
It is important to have ATM and credit card terminal at least
some distance form where gambling actually takes place. To
some this might seem a small point, but to those of us who
deal with compulsive gamblers, this is huge. For many
compulsive gamblers, just being forced to walk a couple of
hundred feet away from where the gambling is actually taking
place is sufficient time for them to rethink whether they
really want to gamble any further. That break from gambling
is a crucial time for many.''
4. Challenge more aggressively those bankruptcy filings where
it appears that gambling losses are the main reason why the
person is filing.
Inside the bankruptcy court, at least some folks contend,
creditors should be even tougher on gamblers than they
already are.
``I think lenders should push for slightly different
treatment [in bankruptcy court] for someone who has been
shown to run up his debts for gambling,'' said Tom Coates,
the Des Moines credit counselor. Credit card lenders would
not only be helping themselves but doing the problem gambler
a favor, too, he noted.
Coates, who recently testified before the National
Bankruptcy Commission, tried to impress on the panel that
discharging gambling debts through a bankruptcy filing
doesn't do the gambler any good. ``I tried to impress on the
Commission that the compulsive, problem gambler is living in
a fantasy world and to go ahead and discharge this debt in
bankruptcy court continues to propagate this atmosphere of
fantasy land. It will abort the recovery process for that
individual. The process of recovery is to bring that person
our of their fantasy world into the world of reality, and by
discharging those debts, none of it seems real to them.''
Indeed, in a recent article in the St. Louis Post-Dispatch
about gambling and bankruptcy, one gambler was quoted
counseling another with money troubles: ``Go file bankruptcy.
Then you'll have money to gamble with.''
U.S. credit card issuers should consider lobbying to change
U.S. bankruptcy laws to make it illegal for people to
discharge gambling debts in bankruptcy court. That is the
current law in Australia, according to Henry Lesieur, the
University of Illinois professor. Of course, the care issuers
would have to be able to prove that a card cash advance was
used for gambling purposes, which might often be difficult.
On the other hand, if the law were changed, perhaps filers
who lie about gambling losses would risk penalties, so at
least some might be honest.
5. Finance research into problem gambling and finance help
for compulsive gamblers.
From time to time, creditors provide funds to all sorts of
charitable outfits. If they helped finance research into
compulsive gambling, such spending would play a dual role. It
would be a public contribution, and it would help creditors
learn more about the seriousness of the tie between gambling
and bankruptcy.
Quite a bit of money is spent on alcohol and drug addiction
research and rehabilitation. Both of those problems are
viewed (at least by some people) as medical. Apparently, the
public view toward gambling addiction is quite different.
There's no drug involved, and little is spent on research or
rehab. Yet, gambling addiction can indeed be viewed as a form
of emotional or mental illness--and it's the one addiction
that is growing most quickly in its impact on creditors.
In our research for this study, we found very little new
research being conducted on compulsive gambling. The experts
we interviewed said that no national survey of compulsive
gamblers has been done in more than 20 years; only a handful
of studies have been done by various states from time to
time. Much of the available research has been done in
academia with modest financial support, and it gets little
followup attention.
Card issuers spend millions on sporting events, the
Olympics, and even on the Smithsonian museums (Discover
Card). These expenditures have a marketing value. A
fractional amount diverted to gambling research could have an
even better bottom line impact.
Ms. KILPATRICK. Mr. Chairman, I rise today in strong opposition to
H.R. 3150, the Bankruptcy Reform Act of 1998. This legislation does
nothing to address the aggressive marketing of credit cards, home
equity loans, and other forms of credit to consumers. While we all
support individual responsibility, this bill makes it even tougher for
persons to eradicate their debts and get started on a new financial
slate.
First of all, I must inform my colleagues that, many, many years ago,
I had to file for bankruptcy. For me, the debate on the floor today is
no hypothetical, nor theoretical, exercise. Fortunately, I was able to
repay my creditors and get back into excellent fiscal standing. But
having to go through the wringer of bankruptcy has helped me better
form an opinion on how we can better serve both debtors and creditors.
H.R. 3150 is not that bill. Among other things, H.R. 3150 includes a
means-test to determine whether a family can file for bankruptcy
protection that eliminates debts and gives families a fresh, new
financial start, commonly referred to as ``Chapter Seven,'' or whether
the family must enter into a stringent repayment plan, referred to as
``Chapter 13.'' Most of our constituents who have to file for
bankruptcy will have this fact listed on their credit report for at
least seven years. Although a family may have their debts eliminated,
for the next seven years it is difficult, if not impossible, to rent a
car, rent a house or apartment, buy a business, or sometimes get a job.
Having a bankruptcy filing listed on your credit report is tough to
remove and tough to live with.
During House Rules Committee consideration of this bill, I offered an
amendment that was not made part of this debate. My amendment would
have allowed consumers to keep those electronic entertainment items
that were purchased three months before the filing of a bankruptcy, and
has a value of $500.00 or less. Certainly, a person knows at least
three months in advance of a bankruptcy filing that he or she is in
severe financial straits. My amendment would have also allowed for the
disposition to creditors of recently-purchased electronic entertainment
goods that have a higher value. While my amendment did not recognize
fax machines or personal computers into this equation, we certainly
know the volatility of the prices of these electronic goods. A computer
that was purchased a year ago for $3,000 is now worth less that half
that. Along those same lines, computers purchased years ago are now
worth less than $1,000, and in many instances, you cannot even give
them away. My amendment sets a limit of $500 to be consistent with the
rest of current bankruptcy law. Unfortunately, it was not accepted by
the House Rules Committee.
Bankruptcy is a very personal, dehumanizing, and emotionally draining
experience. Despite the great strides that our economy, in general, has
made with record unemployment and a stock market soaring into the
stratosphere, bankruptcies are hitting all-time highs. It is important
that we protect consumers and creditors. Unfortunately, the Bankruptcy
Reform Act of 1998 does not protect consumers or creditors, and the
wisdom of Congress should prevail in the defeat of this onerous bill.
Mr. POMEROY. Mr. Chairman, my vote today on behalf of H.R. 3150 is a
vote to advance the process of bankruptcy reform in this Congress. I
strongly believe that there is a need to reform our nation's bankruptcy
laws. Passage of H.R. 3150 will allow bankruptcy reform efforts to
proceed in the Senate and will move us toward our ultimate goal of
sensible, responsible bankruptcy reform. I am disappointed that my vote
does not also represent wholehearted support for the bill before us,
but I believe that a number of the provisions of H.R. 3150 are flawed
and must be revisited as the process continues. If these flaws are not
remedied in our negotiations with the Senate, I will be unable to
support a final conference agreement.
My primary concern with H.R. 3150 is that it would endanger the
payment of child support and alimony by those who have declared
bankruptcy. While the bill does not directly reduce the priority of
child support obligations, it does increase the rights of other
creditors such as credit card lenders, setting up a competition for
scarce resources between mothers and children owed support and
commercial credit card companies. Under Chapter 7 proceedings, mothers
and children entitled to alimony and child support will have to compete
with new categories of nondischargeable debt. Under Chapter 13
proceedings, these individuals will have to compete with the required
$50 monthly payment to non-priority unsecured creditors such as credit
card companies. I fear that mothers and children will lose out in these
contests.
Mr. Chairman, H.R. 3150 appropriately steps up the degree of personal
responsibility that must be expected from those who engage in reckless
spending and who seek to misuse the bankruptcy laws to escape the
consequences of this conduct. I am concerned, however, that this
legislation does not at the same time step up the degree of
responsibility that must be expected from the credit card companies who
today often facilitate this spending through aggressive marketing of
[[Page H4374]]
their cards. While we must ask individuals to be prudent with respect
to their credit and spending behavior, we must also ask credit card
companies to be prudent with respect to their lending behavior. These
companies possess credit histories for those to whom they market and
they should simply not be extending credit to individuals who they know
to be financially overextended. I believe we must encourage credit card
companies to exercise responsibility by making dischargeable credit
card debt extended under these circumstances.
Mr. Chairman, it is my sincere hope that these issues will be
remedied in the Senate and during any conference committee so that this
Congress can truly achieve the goal of sensible, responsible bankruptcy
reform.
Ms. CHRISTIAN-GREEN. Mr. Chairman, I rise today in opposition to H.R.
3150, the Bankruptcy Reform Act of 1998 because it supports creditors
at the expense of the interest of women and children.
My colleagues, the Leadership Conference on Civil Rights in
commenting on this bill points out, I think quite correctly, that it is
economic discrimination which is suffered by disadvantaged groups in
our society that often is the reason why such groups are forced to file
bankruptcy.
In the case of women, for example, the cumulative effects of lower
wages, reduced access to health insurance, the devastating economic
consequences of divorce and the disproportionate financial strain of
rearing children alone is often why women heads of households find
themselves in bankruptcy.
Additionally, African-Americans and Hispanic families also suffering
from discrimination in home mortgage lending and housing purchases and
facing inequity in hiring opportunities, wages, and health insurance
coverage, also turn to bankruptcy to stabilize their economic
circumstances and protect the middle class lives they have struggled so
hard to achieve.
Mr. Speaker, H.R. 3150 should be opposed because it would have a
significant negative impact on these groups of economically
disadvantaged Americans, all to the benefit of the credit industry. It
is ironic that as the credit industry waged a high-profile campaign to
rush this bill, which would punish debtors, to the floor of the House,
total credit card profitability has grown. According to the Federal
Reserve Board, credit card lending is now twice as profitable as all
other lending activities.
H.R. 3150 should also be opposed, Mr. Speaker, because it places in
jeopardy the ability of women and children who file for bankruptcy to
receive child support and alimony payments. This will be devastating to
children and women who rely on child care and alimony.
As a new member of the Small Business Committee I am particularly
troubled that the Bankruptcy Reform Act of 1998 would also make it
difficult for small businesses who are experiencing financial
difficulties to get a fresh start. The small business provisions of the
bill will impose massive new legal and paperwork burdens on small
business and real estate concerns thereby increasing the potential for
job loss.
Mr. Speaker, this isn't reform its deform. I urge my colleagues to
join the Clinton Administration, the AFL-CIO, the National Bankruptcy
Conference, the Leadership Conference on Civil Rights and countless
other organizations in opposition to this bill.
Mr. BARCIA. Mr. Chairman, H.R. 3150, the Bankruptcy Reform Act of
1998, is not a perfect bill and I have reservations about the specific
language. However, I am voting for the legislation because I strongly
believe that people must take responsibility for their financial
decisions.
Last year more than 1.33 million households filed for bankruptcy
which amounted to over $44 billion. And when these consumers file for
bankruptcy, the rest of us pay for it. We pay in the form of higher
interest rates. We pay in the form higher credit card fees. We pay
through a growing number of penalty charges for late payment even when
the ``late payment'' is more the fault of the postal service than that
of the consumer. I share my colleagues concerns about giving families a
new beginning if they incurred debt beyond their control, such as high
medical costs from an accident or recovery from a disaster. But when
the reason for financial difficulty is a lack of personal financial
responsibility and bankruptcy is viewed as an ``easy way out'' then the
system has failed.
Our nation's bankruptcy laws play an important and necessary role in
our society. We must ensure that our bankruptcy system does not
unintentionally encourage those who can take responsibility for their
financial obligations not to do so. Such an abuse of our bankruptcy
laws is fundamentally unfair to those who play by the rules and take
responsibility for their personal obligations.
As I said, this is not a perfect bill. As this bill progresses
through the legislative process I will do all that I can to protect the
innocent people from being caught up in the system and ensure that
others are not taking advantage of an easy way out.
Mr. FILNER. Mr. Chairman, rather than reining in their own policies
of ``easy credit,'' big banks and credit card companies want to come
down on families who took their bait, and in many instances, began to
rely on credit cards to pay for basic living expenses. This legislation
before us would even allow credit card companies to make tragic victims
of those who did not even rack up credit card debt--women and children
who depend on alimony and child support payments to live.
There are many problems with this bill. The first is a rigid and
arbitrary means test that would bounce many families into Chapter 13
without allowing judges to rule on the specifics of their cases,
exposing their families to the potential of losing their family homes.
Just as inhumane are the provisions that would make credit card debt
non-dischargeable. This would place credit card debt on the same plane
as child support and alimony payments and force women to fight credit
card companies to maintain their right to receive payments for their
families' sustenance.
H.R. 3150 would absolve credit card companies of problems largely of
their own making. It would turn the bankruptcy system into a debt
collection agency for credit companies--with taxpayers footing the
bill! Our families, particularly women and children, deserve the right
to fair bankruptcy laws, laws interpreted on a case by case basis by
judges who currently have the power to ensure that children's needs are
met first while the other debts are being repaid.
The CHAIRMAN. All time for general debate has expired.
Pursuant to the rule, the amendment in the nature of a substitute
printed in the bill shall be considered as an original bill for the
purpose of amendment under the 5-minute rule by title, and each title
shall be considered as read.
No amendment to the committee amendment is in order unless printed in
the House Report 105-573. Each amendment may be offered only in the
order specified, may be offered only by a Member designated in the
report, shall be considered as read, debatable for the time specified
in the report, equally divided and controlled by the proponent and an
opponent, shall not be subject to amendment, and shall not be subject
to a demand for a division of the question.
The chairman of the Committee of the Whole may postpone a request for
a recorded vote on any amendment, and may reduce to a minimum of 5
minutes the time for voting on any postponed question that immediately
follows another vote, provided that the time for voting on the first
question shall be a minimum of 15 minutes.
Mr. GEKAS. Mr. Chairman, I ask unanimous consent that the committee
amendment in the nature of a substitute be printed in the Record and
open to amendment at any point.
The CHAIRMAN. Is there objection to the request of the gentleman from
Pennsylvania?
There was no objection.
The text of the committee amendment in the nature of a substitute is
as follows:
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Bankruptcy
Reform Act of 1998''.
(b) Table of Contents.--The table of contents of this Act
is as follows:
Sec. 1. Short title; table of contents.
TITLE I--CONSUMER BANKRUPTCY PROVISIONS
Subtitle A--Needs-Based Bankruptcy
Sec. 101. Needs-based bankruptcy.
Sec. 102. Adequate income shall be committed to a plan that pays
unsecured creditors.
Sec. 103. Definition of inappropriate use.
Sec. 104. Debtor participation in credit counseling program.
Subtitle B--Adequate Protections for Consumers
Sec. 111. Notice of alternatives.
Sec. 112. Debtor financial management training test program.
Sec. 113. Definitions.
Sec. 114. Disclosures.
Sec. 115. Debtor's bill of rights.
Sec. 116. Enforcement.
Sec. 117. Sense of the Congress.
Sec. 118. Charitable contributions.
Sec. 119. Reinforce the fresh start.
Sec. 119A. Chapter 11 discharge of debts arising from tobacco-related
debts.
Subtitle C--Adequate Protections for Secured Creditors
Sec. 121. Discouraging bad faith repeat filings.
Sec. 122. Definition of household goods.
Sec. 123. Debtor retention of personal property security.
Sec. 124. Relief from stay when the debtor does not complete intended
surrender of consumer debt collateral.
[[Page H4375]]
Sec. 125. Giving secured creditors fair treatment in chapter 13.
Sec. 126. Prompt relief from stay in individual cases.
Sec. 127. Stopping abusive conversions from chapter 13.
Sec. 128. Restraining abusive purchases on secured credit.
Sec. 129. Fair valuation of collateral.
Sec. 130. Protection of holders of claims secured by debtor's principal
residence.
Sec. 131. Aircraft equipment and vessels.
Subtitle D--Adequate Protections for Unsecured Creditors
Sec. 141. Debts incurred to pay nondischargeable debts.
Sec. 142. Credit extensions on the eve of bankruptcy presumed
nondischargeable.
Sec. 143. Fraudulent debts are nondischargeable in chapter 13 cases.
Sec. 144. Applying the codebtor stay only when it protects the debtor.
Sec. 145. Credit extensions without a reasonable expectation of
repayment made nondischargeable.
Sec. 146. Debts for alimony, maintenance, and support.
Sec. 147. Nondischargeability of certain debts for alimony,
maintenance, and support.
Sec. 148. Other exceptions to discharge.
Sec. 149. Fees arising from certain ownership interests.
Sec. 150. Protection of child support and alimony.
Sec. 151. Adequate protection for investors.
Subtitle E--Adequate Protections for Lessors
Sec. 161. Giving debtors the ability to keep leased personal property
by assumption.
Sec. 162. Adequate protection of lessors and purchase money secured
creditors.
Sec. 163. Adequate protection for lessors.
Subtitle F--Bankruptcy Relief Less Frequently Available for Repeat
Filers
Sec. 171. Extend period between bankruptcy discharges.
Subtitle G--Exemptions
Sec. 181. Exemptions.
Sec. 182. Limitation.
TITLE II--BUSINESS BANKRUPTCY PROVISIONS
Subtitle A--General Provisions
Sec. 201. Limitation relating to the use of fee examiners.
Sec. 202. Sharing of compensation.
Sec. 203. Chapter 12 made permanent law.
Sec. 204. Meetings of creditors and equity security holders.
Sec. 205. Creditors' and equity security holders' committees.
Sec. 206. Postpetition disclosure and solicitation.
Sec. 207. Preferences.
Sec. 208. Venue of certain proceedings.
Sec. 209. Period for filing plan under chapter 11.
Sec. 210. Period for filing plan under chapter 12.
Sec. 211. Cases ancillary to foreign proceedings involving foreign
insurance companies that are engaged in the business of
insurance or reinsurance in the United States.
Sec. 212. Rejection of executory contracts affecting intellectual
property rights to recordings of artistic performance.
Sec. 213. Unexpired leases of nonresidential real property.
Sec. 214. Definition of disinterested person.
Subtitle B--Specific Provisions
Chapter 1--Small Business Bankruptcy
Sec. 231. Definitions.
Sec. 232. Flexible rules for disclosure statement and plan.
Sec. 233. Standard form disclosure statements and plans.
Sec. 234. Uniform national reporting requirements.
Sec. 235. Uniform reporting rules and forms.
Sec. 236. Duties in small business cases.
Sec. 237. Plan filing and confirmation deadlines.
Sec. 238. Plan confirmation deadline.
Sec. 239. Prohibition against extension of time.
Sec. 240. Duties of the United States trustee and bankruptcy
administrator.
Sec. 241. Scheduling conferences.
Sec. 242. Serial filer provisions.
Sec. 243. Expanded grounds for dismissal or conversion and appointment
of trustee.
Chapter 2--Single Asset Real Estate
Sec. 251. Single asset real estate defined.
Sec. 252. Payment of interest.
TITLE III--MUNICIPAL BANKRUPTCY PROVISIONS
Sec. 301. Petition and proceedings related to petition.
TITLE IV--BANKRUPTCY ADMINISTRATION
Subtitle A--General Provisions
Sec. 401. Adequate preparation time for creditors before the meeting of
creditors in individual cases.
Sec. 402. Creditor representation at first meeting of creditors.
Sec. 403. Filing proofs of claim.
Sec. 404. Audit procedures.
Sec. 405. Giving creditors fair notice in chapter 7 and 13 cases.
Sec. 406. Debtor to provide tax returns and other information.
Sec. 407. Dismissal for failure to file schedules timely or provide
required information.
Sec. 408. Adequate time to prepare for hearing on confirmation of the
plan.
Sec. 409. Chapter 13 plans to have a 5-year duration in certain cases.
Sec. 410. Sense of the Congress regarding expansion of rule 9011 of the
Federal Rules of Bankruptcy Procedure.
Sec. 411. Jurisdiction of courts of appeals.
Sec. 412. Establishment of official forms.
Sec. 413. Elimination of certain fees payable in chapter 11 bankruptcy
cases.
Subtitle B--Data Provisions
Sec. 441. Improved bankruptcy statistics.
Sec. 442. Bankruptcy data.
Sec. 443. Sense of the Congress regarding availability of bankruptcy
data.
TITLE V--TAX PROVISIONS
Sec. 501. Treatment of certain liens.
Sec. 502. Enforcement of child and spousal support.
Sec. 503. Effective notice to Government.
Sec. 504. Notice of request for a determination of taxes.
Sec. 505. Rate of interest on tax claims.
Sec. 506. Tolling of priority of tax claim time periods.
Sec. 507. Assessment defined.
Sec. 508. Chapter 13 discharge of fraudulent and other taxes.
Sec. 509. Chapter 11 discharge of fraudulent taxes.
Sec. 510. The stay of tax proceedings.
Sec. 511. Periodic payment of taxes in chapter 11 cases.
Sec. 512. The avoidance of statutory tax liens prohibited.
Sec. 513. Payment of taxes in the conduct of business.
Sec. 514. Tardily filed priority tax claims.
Sec. 515. Income tax returns prepared by tax authorities.
Sec. 516. The discharge of the estate's liability for unpaid taxes.
Sec. 517. Requirement to file tax returns to confirm chapter 13 plans.
Sec. 518. Standards for tax disclosure.
Sec. 519. Setoff of tax refunds.
TITLE VI--ANCILLARY AND OTHER CROSS-BORDER CASES
Sec. 601. Amendment to add a chapter 6 to title 11, United States Code.
Sec. 602. Amendments to other chapters in title 11, United States Code.
TITLE VII--MISCELLANEOUS
Sec. 701. Technical amendments.
Sec. 702. Application of amendments.
TITLE I--CONSUMER BANKRUPTCY PROVISIONS
Subtitle A--Needs-Based Bankruptcy
SEC. 101. NEEDS-BASED BANKRUPTCY.
Title 11, United States Code, is amended--
(1) in section 101 as follows:
(A) by inserting after paragraph (10) the following:
``(10A) `current monthly total income' means the average
monthly income from all sources derived which the debtor, or
in a joint case, the debtor and the debtor's spouse, receive
without regard to whether it is taxable income, in the six
months preceding the date of determination, and includes any
amount paid by anyone other than the debtor or, in a joint
case, the debtor and the debtor's spouse on a regular basis
to the household expenses of the debtor or the debtor's
dependents and, in a joint case, the debtor's spouse if not
otherwise a dependent;''; and
(B) by inserting after paragraph (40) the following:
``(40A) `national median family income' and `national
median household income for 1 earner' shall mean during any
calendar year, the national median family income and the
national median household income for 1 earner which the
Bureau of the Census has reported as of January 1 of such
calendar year for the most recent previous calendar year;'';
(2) in section 104(b)(1) by striking ``109(e)'' and
inserting ``subsections (b), (e), and (h) of section 109'';
(3) in section 109(b)--
(A) in paragraph (2) by striking ``or'' at the end;
(B) in paragraph (3) by striking the period and inserting
``; or''; and
(C) by adding at the end the following:
``(4) an individual or, in a joint case, an individual and
such individual's spouse, who have income available to pay
creditors as determined under subsection (h).'';
(4) by adding at the end of section 109 the following:
``(h)(1) An individual or, in a joint case, an individual
and such individual's spouse, have income available to pay
creditors if the individual, or, in a joint case, the
individual and the individual's spouse combined, as of the
date of the order for relief, have--
``(A) current monthly total income of not less than the
highest national median family income reported for a family
of equal or lesser size or, in the case of a household of 1
person, of not less than the national median household income
for 1 earner, as of the date of the order for relief;
``(B) projected monthly net income greater than $50; and
``(C) projected monthly net income sufficient to repay
twenty percent or more of unsecured nonpriority claims during
a five-year repayment plan.
``(2) Projected monthly net income shall be sufficient
under paragraph (1)(C) if, when multiplied by 60 months, it
equals or exceeds 20 percent of the total amount scheduled as
payable to unsecured nonpriority creditors.
``(3) `Projected monthly net income' means current monthly
total income less--
[[Page H4376]]
``(A) the expense allowances under the applicable National
Standards, Local Standards and Other Necessary Expenses
allowance (excluding payments for debts) for the debtor, the
debtor's dependents, and, in a joint case, the debtor's
spouse if not otherwise a dependent, in the area in which the
debtor resides as determined under the Internal Revenue
Service financial analysis for expenses in effect as of the
date of the order for relief;
``(B) the average monthly payment on account of secured
creditors, which shall be calculated as the total of all
amounts scheduled as contractually payable to secured
creditors in each month of the 60 months following the date
of the petition by the debtor, or, in a joint case, by the
debtor and the debtor's spouse combined, and dividing that
total by 60 months; and
``(C) the average monthly payment on account of priority
creditors, which shall be calculated as the total amount of
debts entitled to priority, reasonably estimated by the
debtor as of the date of the petition, and dividing that
total by 60 months.
``(4) In the event that the debtor establishes
extraordinary circumstances that require allowance for
additional expenses or adjustment of current monthly income,
projected monthly net income for purposes of this section
shall be the amount calculated under paragraph (3) less such
additional expenses or income adjustment as such
extraordinary circumstances require.
``(A) This paragraph shall not apply unless the debtor
files with the petition--
``(i) a written statement that this paragraph applies in
determining the debtor's eligibility for relief under chapter
7 of this title;
``(ii) if adjustment of current monthly income is claimed,
an explanation of what income has been lost in the 6 months
preceding the date of determination and any replacement
income that has been offered or secured, or is expected, and
an itemization of such lost and replacement income;
``(iii) if allowance for additional expenses is claimed, a
list itemizing each additional expense which exceeds the
expenses allowances provided under paragraph (3)(A);
``(iv) a detailed description of the extraordinary
circumstances that explain why each loss of income described
under clause (ii) will not be replaced or each additional
expense itemized under clause (iii) requires allowance; and
``(v) a sworn statement signed by the debtor and, if the
debtor is represented by counsel, by the debtor's attorney,
that the information required under this paragraph is true
and correct.
``(B) Until the trustee or any party in interest objects to
the debtor's statement that this paragraph applies and the
court rejects or modifies the debtor's statement, the
projected monthly net income in the debtor's statement shall
be the projected monthly net income for the purposes of this
section. If an objection is filed with the court within 60
days after the debtor has provided all the information
required under subsections (a)(1) and (c)(1)(A) of section
521, the court, after notice and hearing, shall determine
whether such extraordinary circumstances exist and shall
establish the amount of the additional expense allowance, if
any. The burden of proving such extraordinary circumstances
shall be on the debtor.'';
(5) in section 704--
(A) by striking ``and'' at the end of paragraph (8);
(B) by striking the period at the end of paragraph (9) and
inserting ``; and''; and
(C) by adding at the end the following:
``(10) with respect to an individual debtor, review all
materials provided by the debtor under subsections (a)(1) and
(c)(1) of section 521, investigate and verify the debtor's
projected monthly net income and within 30 days after such
materials are so provided--
``(A) file a report with the court as to whether the debtor
qualifies for relief under this chapter under section
109(b)(4); and
``(B) if the trustee determines that the debtor does not
qualify for such relief, the trustee shall provide a copy of
such report to the parties in interest.'';
(6) in section 1302(b)--
(A) in paragraph (4) by striking ``and'' at the end;
(B) in paragraph (5) by striking the period and inserting a
semicolon; and
(C) by adding at the end the following:
``(6) investigate and verify the debtor's monthly net
income and other information provided by the debtor pursuant
to sections 521 and 1322, and pursuant to section 111, if
applicable; and
``(7) file annual reports with the court, with copies to
holders of claims under the plan, as to whether a
modification of the amount paid creditors under the plan is
appropriate because of changes in the debtor's monthly net
income.''.
SEC. 102. ADEQUATE INCOME SHALL BE COMMITTED TO A PLAN THAT
PAYS UNSECURED CREDITORS.
Title 11, United States Code, is amended--
(1) in section 101 by inserting after paragraph (39) the
following:
``(39A) `monthly net income' means the amount determined by
taking the current monthly total income of the debtor less--
``(A) the expense allowances under the applicable National
Standards, Local Standards and Other Necessary Expenses
allowance (excluding payments for debts) for the debtor, the
debtor's dependents, and, in a joint case, the debtor's
spouse if not otherwise a dependent, in the area in which the
debtor resides as determined under the Internal Revenue
Service financial analysis for expenses in effect as of the
date it is being determined;
``(B) the average monthly payment on account of secured
creditors, which shall be calculated as of the date of
determination as the total of all amounts then remaining to
be paid on account of secured claims pursuant to the plan
less any of such amounts to be paid from sources other than
the debtor's income, divided by the total months remaining of
the plan; and
``(C) the average monthly payment on account of priority
creditors, which shall be calculated as the total of all
amounts then remaining to be paid on account of priority
claims pursuant to the plan less any of such amounts to be
paid from sources other than the debtor's income, divided by
the total months remaining of the plan;'';
(2) in section 104(b)(1) by striking ``and 523(a)(2)(C)''
and inserting ``523(a)(2)(C), and 1325(b)(1)'';
(3) by adding after section 110 the following:
``Sec. 111. Adjustment to monthly net income
``(a) Monthly net income for purposes of a plan under
chapter 13 of this title shall be adjusted under this section
when the debtor's extraordinary circumstances require
adjustment as determined herein. Under this section, monthly
net income shall be determined by subtracting therefrom such
loss of income or additional expenses as the debtor's
extraordinary circumstances require as determined under this
section. This section shall not apply unless--
``(1) the debtor files with the court and, in a case in
which a trustee has been appointed, with the trustee at the
times required in subsection (b) a statement of extraordinary
circumstances as follows--
``(A) a written statement that this section applies in
determining the debtor's monthly net income;
``(B) if applicable, an explanation of what income has been
lost in the six months preceding the date of determination
and any replacement income which has been secured or is
expected, and an itemization of such lost and replacement
income;
``(C) if applicable, a list itemizing each additional
expense which exceeds the expense allowance provided in
determining monthly net income under section 101(39A);
``(D) if applicable, a detailed description of the
extraordinary circumstances which explains why each of the
additional expenses itemized under paragraph (C) requires
allowance; and
``(E) a sworn statement signed by the debtor and, if the
debtor is represented by counsel, by the debtor's attorney,
of the amount of monthly net income that the debtor has
pursuant to this subsection and that the information provided
under this subsection is true and correct; and
``(2) until the trustee or any party in interest objects to
the debtor's request that this section be applied and the
court rejects or modifies the debtor's statement, the monthly
net income in the debtor's statement shall be the monthly net
income for the purposes of the debtor's plan. If an objection
is filed with the court within the times provided in
subsection (b), the court, after notice and hearing, shall
determine whether such extraordinary circumstances asserted
by the debtor exist and establish the amount of the loss of
income and such additional expense allowance, if any. The
burden of proving such extraordinary circumstances and the
amount of the loss of income and the additional expense
allowance, if any, shall be on the debtor. The court may
award to the party that prevails with respect to such
objection a reasonable attorney's fee and costs incurred by
the prevailing party in connection with such objection if the
court finds that the position of the nonprevailing party was
not substantially justified, but the court shall not award
such fee or such costs if special circumstances make the
award unjust.
``(b) For the purposes of chapter 13 of this title, the
statement of extraordinary circumstances shall be filed with
the court and served on the trustee on or before 45 days
before each anniversary of the confirmation of the plan in
order to be applicable during the next year of the plan. Any
objection thereto shall be filed 30 days after the statement
is filed with the trustee. Whenever a statement is timely
filed with the trustee, the trustee shall give notice to
creditors that such statement has been filed and the amount
of monthly net income stated therein within 15 days of
receipt of the statement.'';
(4) in section 1322(a)--
(A) by striking ``and'' at the end of paragraph (2);
(B) by striking the period at the end of paragraph (3) and
inserting ``; and''; and
(C) by adding at the end the following:
``(4) state, under penalties of perjury, the amount of
monthly net income, which may be as adjusted under section
111, if applicable, of this title and the amount of monthly
net income which will be paid per month to unsecured
nonpriority creditors under the plan.''; and
(5) by amending section 1325(b)(1)(B) to read as follows:
``(B) the plan provides--
``(i) that payments to unsecured nonpriority creditors who
are not insiders shall equal or exceed $50 in each month of
the plan;
``(ii) that during the applicable commitment period
beginning on the date that the first payment is due under the
plan, the total amount of monthly net income received by the
debtor shall be paid to unsecured nonpriority creditors under
the plan less only payments pursuant to section 1326(b); the
`applicable commitment period' shall be not less than 5 years
if the debtor's total current monthly income is not less than
the highest national median family income reported for a
family of equal or lesser size or, in the case of a household
of 1 person, is not less than the national median household
income for 1 earner, as of the date of confirmation of the
plan and shall be not less than 3 years if the debtor's total
current monthly income is less than the highest national
median family income reported for a family of equal or lesser
size or, in the case of a household of 1 person, is less than
the national median household income for 1 earner, as of the
date of confirmation of the plan;
``(iii) that the amount payable to each class of unsecured
nonpriority claims under the plan
[[Page H4377]]
shall be increased or decreased during the plan
proportionately to the extent the debtor's monthly net income
during the plan increases or decreases as reasonably
determined by the trustee, subject to section 111 of this
title, no less frequently than as of each anniversary of the
confirmation of the plan based on monthly net income as of 45
days before such anniversary; and
``(iv) nothing in subparagraph (i) or (ii) shall prevent
the payment of obligations described in section 507(a)(7) at
the times provided for in the plan, and the plan shall
specify how payments to other creditors under subparagraph
(ii) will be accordingly adjusted.''; and
(6) by striking section 1325(b)(2).
SEC. 103. DEFINITION OF INAPPROPRIATE USE.
Section 707(b) of title 11, United States Code, is amended
to read as follows:
``(b)(1) After notice and a hearing, the court--
``(A) on its own motion or on the motion of the United
States trustee or any party in interest, shall dismiss a case
filed by an individual debtor under this chapter; or
``(B) with the debtor's consent, convert the case to a case
under chapter 13 of this title;
if the court finds that the granting of relief would be an
inappropriate use of the provisions of this chapter.
``(2) The court shall determine that inappropriate use of
the provisions of this chapter exists if--
``(A) the debtor is excluded from this chapter pursuant to
section 109 of this title; or
``(B) the totality of the circumstances of the debtor's
financial situation demonstrates such inappropriate use.
``(3) In the case of a motion filed by a party in interest
other than the trustee or United States trustee under
paragraph (1) that is denied by the court, the court shall
award against the moving party a reasonable attorney's fee
and costs that the debtor incurred in opposing the motion if
the court finds that the position of the moving party was not
substantially justified, but the court shall not award such
fee and costs if special circumstances would make the award
unjust.
``(4)(A) If a trustee appointed under this title or the
United States Trustee files a motion under this subsection
and the case is subsequently dismissed or converted to
another chapter, the court shall award to such party in
interest a reasonable attorney's fee and costs incurred in
connection with such motion, payable by the debtor, unless
the court finds that awarding such fee and costs would impose
an unreasonable hardship on the debtor, considering the
debtor's conduct.
``(B) The signature of the debtor's attorney on any
petition, pleading, motion, or other paper filed with the
court in the case of the debtor shall constitute a
certificate that the attorney has--
``(i) performed a reasonable investigation into the
circumstances that gave rise to the petition and its
schedules and statement of financial affairs or the pleading,
as applicable; and
``(ii) determined that the petition and its schedules and
statement of financial affairs or the pleading, as
applicable, including the choice of this chapter--
``(I) is well grounded in fact; and
``(II) is warranted by existing law or a good-faith
argument for the extension, modification, or reversal of
existing law and does not constitute an inappropriate use of
the provisions of this chapter.
``(C) If the court finds that the attorney for the debtor
signed a paper in violation of subparagraph (B), at a
minimum, the court shall order--
``(i) the assessment of an appropriate civil penalty
against the attorney for the debtor; and
``(ii) the payment of the civil penalty to the trustee or
the United States Trustee.''.
SEC. 104. DEBTOR PARTICIPATION IN CREDIT COUNSELING PROGRAM.
(a) Who May Be a Debtor.--Section 109 of title 11, United
States Code, as amended by section 102, is amended by adding
at the end the following:
``(i)(1) Subject to paragraph (2) and notwithstanding any
other provision of this section, an individual may not be a
debtor under this title unless such individual has, during
the 90-day period preceding the date of filing of the
petition, made a good-faith attempt to create a debt
repayment plan outside the judicial system for bankruptcy law
(commonly referred to as the `bankruptcy system'), through a
credit counseling program offered through credit counseling
services described in section 342(b)(2) that has been
approved by--
``(A) the United States trustee; or
``(B) the bankruptcy administrator for the district in
which the petition is filed.
``(2) The United States trustee or bankruptcy administrator
may not approve a program for inclusion on the list under
paragraph (1) unless the counseling service offering the
program offers the program without charge, or at an
appropriately reduced charge, if payment of the regular
charge would impose a hardship on the debtor or the debtor's
dependents.
``(3) The United States trustee or bankruptcy administrator
shall designate any geographical areas in the United States
trustee region or judicial district, as the case may be, as
to which the United States trustee or bankruptcy
administrator has determined that credit counseling services
needed to comply with this subsection are not available or
are too geographically remote for debtors residing within the
designated geographical areas. The clerk of the bankruptcy
court for each judicial district shall maintain a list of the
designated areas within the district.
``(4) The clerk shall exclude a particular counseling
service from the list maintained under section 342(b)(2) of
this title if the United States trustee or bankruptcy
administrator orders that the counseling service not be
included in the list.
``(5) The court may waive the requirement specified in
paragraph (1) if--
``(A) no credit counseling services are available as
designated under paragraphs (2) and (3);
``(B) the providers of credit counseling services available
in the district are unable or unwilling to provide such
services to the debtor in a timely manner; or
``(C) foreclosure, garnishment, attachment, eviction, levy
of execution, or similar claim enforcement procedure that
would have deprived the individual of property had commenced
before the debtor could complete a good-faith attempt to
create such a repayment plan.
``(6) A debtor who is subject to the exemption under
paragraph (5)(C) shall be required to make a good-faith
attempt to create a debt repayment plan outside the judicial
system in the manner prescribed in paragraph (1) during the
30-day period beginning on the date of filing of the petition
of that debtor.
``(7) A debtor shall be exempted from the bad faith
presumption for repeat filing under section 362(c) of title
11 if the case is dismissed due to the creation of a debt
repayment plan.
``(8) Only the United States trustee may make a motion for
dismissal on the ground that the debtor did not comply with
this subsection.''.
(b) Debtor's Duties.--Section 521 of title 11, United
States Code, as amended by sections 406 and 407, is amended
by adding at the end the following:
``(g)(1) In addition to the requirements under subsection
(a), an individual debtor shall file with the court--
``(A) a certificate from the credit counseling services
that provided the debtor services under section 109(i), or a
verified statement as to why such attempt was not required
under section 109(i) or other substantial evidence of a good-
faith attempt to create a debt repayment plan outside the
bankruptcy system in the manner prescribed in section 109(i);
and
``(B) a copy of the debt repayment plan, if any, developed
under section 109(i) through the credit counseling service
referred to in paragraph (1).
``(2) Only the United States trustee may make a motion for
dismissal on the ground that the debtor did not comply with
this subsection.''.
Subtitle B--Adequate Protections for Consumers
SEC. 111. NOTICE OF ALTERNATIVES.
(a) Section 342(b) of title 11, United States Code, is
amended to read as follows:
``(b)(1) Before the commencement of a case under this title
by an individual whose debts are primarily consumer debts,
the individual shall be given or obtain (as required to be
certified under section 521(a)(1)(B)(viii)) a written notice
that is prescribed by the United States trustee for the
district in which the petition is filed pursuant to section
586 of title 28 and that contains the following:
``(A) A brief description of chapters 7, 11, 12 and 13 of
this title and the general purpose, benefits, and costs of
proceeding under each of such chapters.
``(B) A brief description of services that may be available
to the individual from an independent nonprofit debt
counselling service.
``(C) The name, address, and telephone number of each
nonprofit debt counselling service (if any)--
``(i) with an office located in the district in which the
petition is filed; or
``(ii) that offers toll-free telephone communication to
debtors in such district.
``(2) Any such nonprofit debt counselling service that
registers with the clerk of the bankruptcy court on or before
December 10 of the preceding year shall be included in such
list unless the chief bankruptcy judge of the district, after
notice to the debt counselling service and the United States
trustee and opportunity for a hearing, for good cause, orders
that such debt counselling service shall not be so listed.
``(3) The clerk shall make such notice available to
individuals whose debts are primarily consumer debts.''.
(b) Section 586(a) of title 28, United States Code, is
amended--
(1) in paragraph (5) by striking ``and'' at the end;
(2) in paragraph (6) by striking the period at the end and
inserting ``; and''; and
(3) by adding at the end the following:
``(7) on or before January 1 of each calendar year, and
also within 30 days of any change in the nonprofit debt
counselling services registered with the bankruptcy court,
prescribe and make available on request the notice described
in section 342(b)(1) of title 11 for each district included
in the region.''.
SEC. 112. DEBTOR FINANCIAL MANAGEMENT TRAINING TEST PROGRAM.
(a) Development of Financial Management and Training
Curriculum and Materials.--The Director of the Executive
Office for United States Trustees (in this section referred
to as the ``Director'') shall consult with a wide range of
individuals who are experts in the field of debtor education,
including trustees who are appointed under chapter 13 of
title 11 of the United States Code and who operate financial
management education programs for debtors, and shall develop
a financial management training curriculum and materials that
can be used to educate individual debtors on how to better
manage their finances.
(b) Test--(1) The Director shall select 3 judicial
districts of the United States in which to test the
effectiveness of the financial management training curriculum
and materials developed under subsection (a).
(2) For a 1-year period beginning not later than 60 days
after the date of the enactment of this Act, such curriculum
and materials shall be made available by the Director,
directly or indirectly, on request to individual debtors in
cases filed in such 1-year period under chapter 7 or 13 of
title 11 of the United States Code.
[[Page H4378]]
(3) The bankruptcy courts in each of such districts may
require individual debtors in such cases to undergo such
financial management training as a condition to receiving a
discharge in such case.
(c) Evaluation.--(1) During the 1-year period referred to
in subsection (b), the Director shall evaluate the
effectiveness of--
(A) the financial management training curriculum and
materials developed under subsection (a); and
(B) a sample of existing consumer education programs such
as those described in the Report of the National Bankruptcy
Review Commission (October 20, 1997) that are representative
of consumer education programs carried out by the credit
industry, by trustees serving under chapter 13 of title 11 of
the United States Code, and by consumer counselling groups.
(2) Not later than 3 months after concluding such
evaluation, the Director shall submit a report to the Speaker
of the House of Representatives and the President pro tempore
of the Senate, for referral to the appropriate committees of
the Congress, containing the findings of the Director
regarding the effectiveness of such curriculum, such
materials, and such programs.
SEC. 113. DEFINITIONS.
(a) Definitions.--Section 101 of title 11, United States
Code, is amended--
(1) by inserting after paragraph (3) the following:
``(3A) `assisted person' means any person whose debts
consist primarily of consumer debts and whose non-exempt
assets are less than $150,000;'';
(2) by inserting after paragraph (4) the following:
``(4A) `bankruptcy assistance' means any goods or services
sold or otherwise provided to an assisted person with the
express or implied purpose of providing information, advice,
counsel, document preparation or filing, or attendance at a
creditors' meeting or appearing in a proceeding on behalf of
another or providing legal representation with respect to a
proceeding under this title;''; and
(3) by inserting after paragraph (12A) the following:
``(12B) `debt relief counselling agency' means any person
who provides any bankruptcy assistance to an assisted person
in return for the payment of money or other valuable
consideration, or who is a bankruptcy petition preparer
pursuant to section 110 of this title, but does not include
any person that is any of the following or an officer,
director, employee or agent thereof--
``(A) any nonprofit organization which is exempt from
taxation under section 501(c)(3) of the Internal Revenue Code
of 1986;
``(B) any creditor of the person to the extent the creditor
is assisting the person to restructure any debt owed by the
person to the creditor; or
``(C) any depository institution (as defined in section 3
of the Federal Deposit Insurance Act) or any Federal credit
union or State credit union (as those terms are defined in
section 101 of the Federal Credit Union Act), or any
affiliate or subsidiary of such a depository institution or
credit union;''.
(b) Conforming Amendment.--In section 104(b)(1) by
inserting ``101(3),'' after ``sections''.
SEC. 114. DISCLOSURES.
(a) Disclosures.--Subchapter II of chapter 5 of title 11,
United States Code, is amended by adding at the end the
following:
``Sec. 526. Disclosures
``(a) A debt relief counselling agency providing bankruptcy
assistance to an assisted person shall provide the following
notices to the assisted person:
``(1) the written notice required under section 342(b)(1)
of this title; and
``(2) to the extent not covered in the written notice
described in paragraph (1) of this section and no later than
three business days after the first date on which a debt
relief counselling agency first offers to provide any
bankruptcy assistance services to an assisted person, a clear
and conspicuous written notice advising assisted persons of
the following--
``(A) all information the assisted person is required to
provide with a petition and thereafter during a case under
this title must be complete, accurate and truthful;
``(B) all assets and all liabilities must be completely and
accurately disclosed in the documents filed to commence the
case, and the replacement value of each asset as defined in
section 506 of this title must be stated in those documents
where requested after reasonable inquiry to establish such
value;
``(C) current monthly total income, projected monthly net
income and, in a chapter 13 case, monthly net income must be
stated after reasonable inquiry; and
``(D) that information an assisted person provides during
their case may be audited pursuant to this title and that
failure to provide such information may result in dismissal
of the proceeding under this title or other sanction
including, in some instances, criminal sanctions.
``(b) A debt relief counselling agency providing bankruptcy
assistance to an assisted person shall provide each assisted
person at the same time as the notices required under
subsection (a)(1) with the following statement, to the extent
applicable, or one substantially similar. The statement shall
be clear and conspicuous and shall be in a single document
separate from other documents or notices provided to the
assisted person:
`` `IMPORTANT INFORMATION ABOUT BANKRUPTCY ASSISTANCE
SERVICES FROM AN ATTORNEY OR BANKRUPTCY PETITION PREPARER
`` `If you decide to seek bankruptcy relief, you can
represent yourself, you can hire an attorney to represent
you, or you can get help in some localities from a bankruptcy
petition preparer who is not an attorney. THE LAW REQUIRES AN
ATTORNEY OR BANKRUPTCY PETITION PREPARER TO GIVE YOU A
WRITTEN CONTRACT SPECIFYING WHAT THE ATTORNEY OR BANKRUPTCY
PETITION PREPARER WILL DO FOR YOU AND HOW MUCH IT WILL COST.
Ask to see the contract before you hire anyone.
`` `The following information helps you understand what
must be done in a routine bankruptcy case to help you
evaluate how much service you need. Although bankruptcy can
be complex, many cases are routine.
`` `Before filing a bankruptcy case, either you or your
attorney should analyze your eligibility for different forms
of debt relief made available by the Bankruptcy Code and
which form of relief is most likely to be beneficial for you.
Be sure you understand the relief you can obtain and its
limitations. To file a bankruptcy case, documents called a
Petition, Schedules and Statement of Financial Affairs, as
well as in some cases a Statement of Intention need to be
prepared correctly and filed with the bankruptcy court. You
will have to pay a filing fee to the bankruptcy court. Once
your case starts, you will have to attend the required first
meeting of creditors where you may be questioned by a court
official called a ``trustee'' and by creditors.
`` `If you select a chapter 7 proceeding, you may be asked
by a creditor to reaffirm a debt. You may want help deciding
whether to do so.
`` `If you select a chapter 13 proceeding in which you
repay your creditors what you can afford over three to seven
years, you may also want help with preparing your chapter 13
plan and with the confirmation hearing on your plan which
will be before a bankruptcy judge.'
`` `If you select another type of proceeding under the
Bankruptcy Code other than chapter 7 or chapter 13, you will
want to find out what needs to be done from someone familiar
with that type of proceeding.
`` `Your bankruptcy proceeding may also involve litigation.
You are generally permitted to represent yourself in
litigation in bankruptcy court, but only attorneys, not
bankruptcy petition preparers, can represent you in
litigation.'.
``(c) Except to the extent the debt relief counselling
agency provides the required information itself after
reasonably diligent inquiry of the assisted person or others
so as to obtain such information reasonably accurately for
inclusion on the petition, schedules or statement of
financial affairs, a debt relief counselling agency providing
bankruptcy assistance to an assisted person shall provide
each assisted person at the time required for the notice
required under subsection (a)(1) reasonably sufficient
information (which may be provided orally or in a clear and
conspicuous writing) to the assisted person on how to provide
all the information the assisted person is required to
provide under this title pursuant to section 521, including--
``(1) how to value assets at replacement value, determine
current monthly total income, projected monthly income and,
in a chapter 13 case, net monthly income, and related
calculations;
``(2) how to complete the list of creditors, including how
to determine what amount is owed and what address for the
creditor should be shown; and
``(3) how to determine what property is exempt and how to
value exempt property at replacement value as defined in
section 506 of this title.
``(d) A debt relief counselling agency shall maintain a
copy of the notices required under subsection (a) of this
section for two years after the later of the date on which
the notice is given the assisted person.''.
(b) Conforming Amendment.--The table of section for chapter
5 of title 11, United States Code, is amended by inserting
after the item relating to section 525 the following:
``526. Disclosures.''.
SEC. 115. DEBTOR'S BILL OF RIGHTS.
(a) Debtor's Bill of Rights.--Subchapter II of chapter 5 of
title 11, United States Code, as amended by section 114, is
amended by adding at the end the following:
``Sec. 527. Debtor's bill of rights
``(a) A debt relief counselling agency shall--
``(1) no later than three business days after the first
date on which a debt relief counselling agency provides any
bankruptcy assistance services to an assisted person, execute
a written contract with the assisted person specifying
clearly and conspicuously the services the agency will
provide the assisted person and the basis on which fees or
charges will be made for such services and the terms of
payment, and give the assisted person a copy of the fully
executed and completed contract in a form the person can
keep;
``(2) disclose in any advertisement of bankruptcy
assistance services or of the benefits of bankruptcy directed
to the general public (whether in general media, seminars or
specific mailings, telephonic or electronic messages or
otherwise) that the services or benefits are with respect to
proceedings under this title, clearly and conspicuously using
the following statement: `We are a debt relief counselling
agency. We help people file Bankruptcy petitions to obtain
relief under the Bankruptcy Code.' or a substantially similar
statement. An advertisement shall be of bankruptcy assistance
services if it describes or offers bankruptcy assistance with
a chapter 13 plan, regardless of whether chapter 13 is
specifically mentioned, including such statements as
`federally supervised repayment plan' or `Federal debt
restructuring help' or other similar statements which would
lead a reasonable consumer to believe that help with debts
was being offered when in fact in most cases the help
available is bankruptcy assistance with a chapter 13 plan;
and
``(3) if an advertisement directed to the general public
indicates that the debt relief counselling agency provides
assistance with respect to credit defaults, mortgage
foreclosures, lease eviction proceedings, excessive debt,
debt collection pressure, or inability to pay any consumer
[[Page H4379]]
debt, disclose conspicuously in that advertisement that the
assistance is with respect to or may involve proceedings
under this title, using the following statement: ``We are a
debt relief counselling agency. We help people file
Bankruptcy petitions to obtain relief under the Bankruptcy
Code.'' or a substantially similar statement.
``(b) A debt relief counselling agency shall not--
``(1) fail to perform any service which the debt relief
counseling agency has told the assisted person or prospective
assisted person the agency would provide that person in
connection with the preparation for or activities during a
proceeding under this title;
``(2) make any statement, or counsel or advise any assisted
person to make any statement in any document filed in a
proceeding under this title, which is untrue or misleading or
which upon the exercise of reasonable care, should be known
by the debt relief counselling agency to be untrue or
misleading;
``(3) misrepresent to any assisted person or prospective
assisted person, directly or indirectly, affirmatively or by
material omission, what services the debt relief counselling
agency can reasonably expect to provide that person, or the
benefits an assisted person may obtain or the difficulties
the person may experience if the person seeks relief in a
proceeding pursuant to this title; or
``(4) advise an assisted person or prospective assisted
person to incur more debt in contemplation of that person
filing a proceeding under this title or in order to pay an
attorney or bankruptcy petition preparer fee or charge for
services performed as part of preparing for or representing a
debtor in a proceeding under this title.''.
(b) Conforming Amendment.--The table of section for chapter
5 of title 11, United States Code, as amended by section 114,
is amended by inserting after the item relating to section
526, the following:
``527. Debtor's bill of rights.''.
SEC. 116. ENFORCEMENT.
(a) Enforcement.--Subchapter II of chapter 5 of title 11,
United States Code, as amended by sections 114 and 115, is
amended by adding at the end the following:
``Sec. 528. Debt relief counselling agency enforcement
``(a) Assisted Person Waivers Invalid.--Any waiver by any
assisted person of any protection or right provided by or
under section 526 or 527 of this title shall be void and may
not be enforced by any Federal or State court or any other
person.
``(b) Noncompliance.--
``(1) Any contract between a debt relief counselling agency
and an assisted person for bankruptcy assistance which does
not comply with the requirements of section 526 or 527 of
this title shall be treated as void and may not be enforced
by any Federal or State court or by any other person.
``(2) Any debt relief counselling agency which has been
found, after notice and hearing, to have--
``(A) failed to comply with any provision of section 526 or
527 with respect to a bankruptcy case or related proceeding
of an assisted person;
``(B) provided bankruptcy assistance to an assisted person
in a case or related proceeding which is dismissed or
converted in lieu of dismissal under section 707 of this
title or because of a failure to file bankruptcy papers,
including papers specified in section 521 of this title; or
``(C) negligently or intentionally disregarded the
requirements of this title or the Federal Rules of Bankruptcy
Procedure applicable to such debt relief counselling agency
shall be liable to the assisted person in the amount of any
fees and charges in connection with providing bankruptcy
assistance to such person which the debt relief counselling
agency has already been paid on account of that proceeding
and if the case has not been closed, the court may in
addition require the debt relief counselling agency to
continue to provide bankruptcy assistance services in the
pending case to the assisted person without further fee or
charge or upon such other terms as the court may order.
``(3) In addition to such other remedies as are provided
under State law, whenever the chief law enforcement officer
of a State, or an official or agency designated by a State,
has reason to believe that any person has violated or is
violating section 526 or 527 of this title, the State--
``(A) may bring an action to enjoin such violation;
``(B) may bring an action on behalf of its residents to
recover the actual damages of assisted persons arising from
such violation, including any liability under paragraph (2);
and
``(C) in the case of any successful action under
subparagraph (A) or (B), shall be awarded the costs of the
action and reasonable attorney fees as determined by the
court.
``(4) The United States District Court for any district
located in the State shall have concurrent jurisdiction of
any action under subparagraph (A) or (B) of paragraph (3).
``(c) Relation to State Law.--This section and sections 526
and 527 shall not annul, alter, affect or exempt any person
subject to those sections from complying with any law of any
State except to the extent that such law is inconsistent with
those sections, and then only to the extent of the
inconsistency.''.
(b) Conforming Amendment.--The table of section for chapter
5 of title 11, United States Code, as amended by sections 114
and 115, is amended by inserting after the item relating to
section 527, the following:
``528. Debt relief counselling agency enforcement.''.
SEC. 117. SENSE OF THE CONGRESS.
It is the sense of the Congress that States should develop
curricula relating to the subject of personal finance,
designed for use in elementary and secondary schools.
SEC. 118. CHARITABLE CONTRIBUTIONS.
(a) Definitions.--Section 548(d) of title 11, United States
Code, is amended by adding at the end the following:
``(3) In this section, the term `charitable contribution'
means a charitable contribution as defined in section 170(c)
of the Internal Revenue Code of 1986, if such contribution--
``(A) is made by a natural person; and
``(B) consists of--
``(i) a financial instrument (as defined in section
731(c)(2)(C) of the Internal Revenue Code of 1986); or
``(ii) cash.
``(4) In this section, the term `qualified religious or
charitable entity or organization' means--
``(A) an entity described in section 170(c)(1) of the
Internal Revenue Code of 1986; or
``(B) an entity or organization described in section
170(c)(2) of the Internal Revenue Code of 1986.''.
(b) Treatment of Prepetition Qualified Charitable
Contributions.
(1) In general.--Section 548(a) of title 11, United States
Code, is amended--
(A) by inserting ``(1)'' after ``(a)'';
(B) by striking ``(1) made'' and inserting ``(A) made'';
(C) by striking ``(2)(A)'' and inserting ``(B)(i)'';
(D) by striking ``(B)(i)'' and inserting ``(ii)(I)'';
(E) by striking ``(ii) was'' and inserting ``(II) was'';
(F) by striking ``(iii)'' and inserting ``(III)''; and
(G) by adding at the end the following:
``(2) A transfer of a charitable contribution to a
qualified religious or charitable entity or organization
shall not be considered to be a transfer covered under
paragraph (1)(B) in any case in which--
``(A) the amount of such contribution does not exceed 15
percent of the gross annual income of the debtor for the year
in which the transfer of the contribution is made; or
``(B) the contribution made by a debtor exceeded the
percentage amount of gross annual income specified in
subparagraph (A), if the transfer was consistent with the
practices of the debtor in making charitable
contributions.''.
(2) Trustee as lien creditor and as successor to certain
creditors and purchasers.--Section 544(b) of title 11, United
States Code, is amended--
(A) by striking ``(b) The trustee'' and inserting ``(b)(1)
Except as provided in paragraph (2), the trustee''; and
(B) by adding at the end the following:
``(2) Paragraph (1) shall not apply to a transfer of a
charitable contribution (as defined in section 548(d)(3) of
this title) that is not covered under section 548(a)(1)(B) of
this title by reason of section 548(a)(2) of this title. Any
claim by any person to recover a transferred contribution
described in the preceding sentence under Federal or State
law in a Federal or State court shall be preempted by the
commencement of the case.''.
(3) Conforming amendments.--Section 546 of title 11, United
States Code, is amended--
(A) in subsection (e)--
(i) by striking ``548(a)(2)'' and inserting
``548(a)(1)(B)''; and
(ii) by striking ``548(a)(1)'' and inserting
``548(a)(1)(A)'';
(B) in subsection (f)--
(i) by striking ``548(a)(2)'' and inserting
``548(a)(1)(B)''; and
(ii) by striking ``548(a)(1)'' and inserting
``548(a)(1)(A)''; and
(C) in the first subsection (g)--
(i) by striking ``section 548(a)(1)'' and inserting
``section 548(a)(1)(A)''; and
(ii) by striking ``548(a)(2)'' and inserting
``548(a)(1)(B)''.
(c) Treatment of Post-Petition Charitable Contributions
Under Chapter 7.--Section 707 of title 11, United States
Code, is amended by adding at the end the following:
``(c) In making a determination whether to dismiss a case
under this section, the court may not take into consideration
whether a debtor has made, or continues to make, charitable
contributions (that meet the definition of `charitable
contribution' under section 548(d)(3)) to any qualified
religious or charitable entity or organization (as defined in
section 548(d)(4)).''.
(d) Treatment of Post-Petition Charitable Contributions
Under Chapter 13.--Section 111 of title 11, United States
Code, as added by section 102, is amended by adding at the
end the following:
``(c) For purposes of subsection (a), charitable
contributions (that meet the definition of `charitable
contribution' under section 548(d)(3)) to any qualified
religious or charitable entity or organization (defined in
section 548(d)(4)), but not to exceed 15 percent of the
debtor's gross income for the year in which such
contributions are made, shall be considered to be additional
expenses of the debtor required by extraordinary
circumstances.''.
(e) Rule of Construction.--Nothing in the amendments made
by this section is intended to limit the applicability of the
Religious Freedom Restoration Act of 1993 (42 U.S.C. 2002bb
et seq.).
SEC. 119. REINFORCE THE FRESH START.
(a) Restoration of an Effective Discharge.--Section
523(a)(17) of title 11, United States Code, is amended--
(1) by striking ``by a court'' and inserting ``on a
prisoner by any court'',
(2) by striking ``section 1915(b) or (f)'' and inserting
``subsection (b) or (f)(2) of section 1915'', and
[[Page H4380]]
(3) by inserting ``(or a similar non-Federal law)'' after
``title 28'' each place it appears.
(b) Protection of Retirement Funds in Bankruptcy.--Section
522 of title 11, United States Code, is amended--
(1) in subsection (b)(2)--
(A) in subparagraph (A) by striking ``and'' at the end;
(B) in subparagraph (B) by striking the period at the end
and inserting ``; and''; and
(C) by adding at the end the following:
``(C) retirement funds to the extent exempt from taxation
under section 401, 403, 408, 414, 457, or 501(a) of the
Internal Revenue Code of 1986.''; and
(2) in subsection (d) by adding at the end the following:
``(12) Retirement funds to the extent exempt from taxation
under 401, 403, 408, 414, 457, or 501(a) of the Internal
Revenue Code of 1986.''.
(c) Effective Protection for Utility Service in the Wake of
Deregulation.--Section 366 of title 11, United States Code,
is amended by adding at the end the following:
``(c) For the purposes of this section, the term `utility'
includes any provider of gas, electric, telephone,
telecommunication, cable television, satellite communication,
water, or sewer service, whether or not such service is a
regulated monopoly.''.
SEC. 119A. CHAPTER 11 DISCHARGE OF DEBTS ARISING FROM
TOBACCO-RELATED DEBTS.
Section 1141(d) of title 11, United States Code, is amended
by adding at the end the following:
``(5) The confirmation of a plan does not discharge a
debtor that is a corporation from any debt arising from a
judicial, administrative, or other action or proceeding that
is--
``(A) related to the consumption or consumer purchase of a
tobacco product; and
``(B) based in whole or in part on false pretenses, a false
representation, or actual fraud.''.
Subtitle C--Adequate Protections for Secured Creditors
SEC. 121. DISCOURAGING BAD FAITH REPEAT FILINGS.
Section 362(c) of title 11, United States Code, is
amended--
(1) in paragraph (1) by striking ``and'' at the end;
(2) in paragraph (2) by striking the period at the end and
inserting a semicolon; and
(3) by adding at the end the following new paragraphs:
``(3) If a single or joint case is filed by or against an
individual debtor under chapter 7, 11, or 13, and if a single
or joint case of that debtor was pending within the previous
1-year period but was dismissed, other than a case refiled
under a chapter other than chapter 7 after dismissal under
section 707(b) of this title, the stay under subsection (a)
with respect to any action taken with respect to a debt or
property securing such debt or with respect to any lease will
terminate with respect to the debtor on the 30th day after
the filing of the later case. If a party in interest
requests, the court may extend the stay in particular cases
as to any or all creditors (subject to such conditions or
limitations as the court may then impose) after notice and a
hearing completed before the expiration of the 30-day period
only if the party in interest demonstrates that the filing of
the later case is in good faith as to the creditors to be
stayed. A case is presumptively filed not in good faith (but
such presumption may be rebutted by clear and convincing
evidence to the contrary)--
``(A) as to all creditors if--
``(i) more than 1 previous case under any of chapters 7,
11, or 13 in which the individual was a debtor was pending
within such 1-year period;
``(ii) a previous case under any of chapters 7, 11, or 13
in which the individual was a debtor was dismissed within
such 1-year period, after the debtor failed to file or amend
the petition or other documents as required by this title or
the court without substantial excuse (but mere inadvertence
or negligence shall not be substantial excuse unless the
dismissal was caused by the negligence of the debtor's
attorney), failed to provide adequate protection as ordered
by the court, or failed to perform the terms of a plan
confirmed by the court; or
``(iii) there has not been a substantial change in the
financial or personal affairs of the debtor since the
dismissal of the next most previous case under any of
chapters 7, 11, or 13 of this title, or any other reason to
conclude that the later case will be concluded, if a case
under chapter 7 of this title, with a discharge, and if a
chapter 11 or 13 case, a confirmed plan which will be fully
performed;
``(B) as to any creditor that commenced an action under
subsection (d) in a previous case in which the individual was
a debtor if, as of the date of dismissal of that case, that
action was still pending or had been resolved by terminating,
conditioning, or limiting the stay as to actions of that
creditor.
``(4) If a single or joint case is filed by or against an
individual debtor under this title, and if 2 or more single
or joint cases of that debtor were pending within the
previous year but were dismissed, other than a case refiled
under section 707(b) of this title, the stay under subsection
(a) will not go into effect upon the filing of the later
case. On request of a party in interest, the court shall
promptly enter an order confirming that no stay is in effect.
If a party in interest requests within 30 days of the filing
of the later case, the court may order the stay to take
effect in the case as to any or all creditors (subject to
such conditions or limitations as the court may impose),
after notice and hearing, only if the party in interest
demonstrates that the filing of the later case is in good
faith as to the creditors to be stayed. A stay imposed
pursuant to the preceding sentence will be effective on the
date of entry of the order allowing the stay to go into
effect. A case is presumptively not filed in good faith (but
such presumption may be rebutted by clear and convincing
evidence to the contrary)--
``(A) as to all creditors if--
``(i) 2 or more previous cases under this title in which
the individual was a debtor were pending within the 1-year
period;
``(ii) a previous case under this title in which the
individual was a debtor was dismissed within the time period
stated in this paragraph after the debtor failed to file or
amend the petition or other documents as required by this
title or the court without substantial excuse (but mere
inadvertence or negligence shall not be substantial excuse
unless the dismissal was caused by the negligence of the
debtor's attorney), failed to pay adequate protection as
ordered by the court, or failed to perform the terms of a
plan confirmed by the court; or
``(iii) there has not been a substantial change in the
financial or personal affairs of the debtor since the
dismissal of the next most previous case under this title, or
any other reason to conclude that the later case will not be
concluded, if a case under chapter 7, with a discharge, and
if a case under chapter 11 or 13, with a confirmed plan that
will be fully performed; or
``(B) as to any creditor that commenced an action under
subsection (d) in a previous case in which the individual was
a debtor if, as of the date of dismissal of that case, that
action was still pending or had been resolved by terminating,
conditioning, or limiting the stay as to action of that
creditor.
``(5)(A) If a request is made for relief from the stay
under subsection (a) with respect to real or personal
property of any kind, and such request is granted in whole or
in part, the court may order in addition that the relief so
granted shall be in rem either for a definite period not less
than 1 year or indefinitely. After the issuance of such an
order, the stay under subsection (a) shall not apply to any
property subject to such an in rem order in any case of the
debtor under this title. If such an order so provides, such
stay shall also not apply in any pending or later-filed case
of any entity under this title that claims or has an interest
in the subject property other than those entities identified
in the court's order.
``(B) The court shall cause any order entered pursuant to
this paragraph with respect to real property to be recorded
in the applicable real property records, which recording
shall constitute notice to all parties having or claiming an
interest in such real property for purpose of this section.
``(6) For the purposes of this section, a case is pending
from the time of the order for relief until the case is
closed.''.
SEC. 122. DEFINITION OF HOUSEHOLD GOODS.
Section 101 of title 11, United States Code, is amended by
inserting after paragraph (27) the following:
``(27A) `household goods' has the meaning given such term
in the Trade Regulation Rule on Credit Practices promulgated
by the Federal Trade Commission (16 C.F.R. 444.1(i)), as in
effect on the effective date of this paragraph;''.
SEC. 123. DEBTOR RETENTION OF PERSONAL PROPERTY SECURITY.
Title 11, United States Code, is amended--
(1) in section 521--
(A) in paragraph (4) by striking ``and'' at the end;
(B) in paragraph (5) by striking the period at the end and
inserting ``; and''; and
(C) by adding at the end the following:
``(6) in an individual case under chapter 7 of this title,
not retain possession of personal property as to which a
creditor has an allowed claim for the purchase price secured
in whole or in part by an interest in that personal property
unless, in the case of an individual debtor, the debtor takes
1 of the following actions within 30 days after the first
meeting of creditors under section 341(a)--
``(A) enters into a reaffirmation agreement with the
creditor pursuant to section 524(c) of this title with
respect to the claim secured by such property; or
``(B) redeems such property from the security interest
pursuant to section 722 of this title.
``If the debtor fails to so act within the 30-day period, the
personal property affected shall no longer be property of the
estate, and the creditor may take whatever action as to such
property as is permitted by applicable nonbankruptcy law,
unless the court determines on the motion of the trustee, and
after notice and a hearing, that such property is of
consequential value or benefit to the estate.''; and
(2) in section 722 by inserting ``in full at the time of
redemption'' before the period at the end.
SEC. 124. RELIEF FROM STAY WHEN THE DEBTOR DOES NOT COMPLETE
INTENDED SURRENDER OF CONSUMER DEBT COLLATERAL.
Title 11, United States Code, is amended as follows--
(1) in section 362--
(A) by striking ``(e), and (f)'' in subsection (c) and
inserting in lieu thereof ``(e), (f), and (h)''; and
(B) by redesignating subsection (h) as subsection (i) and
by inserting after subsection (g) the following:
``(h) In an individual case pursuant to chapter 7, 11, or
13 the stay provided by subsection (a) is terminated with
respect to property of the estate securing in whole or in
part a claim, or subject to an unexpired lease, if the debtor
fails within the applicable time set by section 521(a)(2) of
this title--
``(1) to file timely any statement of intention required
under section 521(a)(2) of this title with respect to that
property or to indicate therein that the debtor will either
surrender the property or retain it and, if retaining it,
either redeem the property pursuant to section 722 of
[[Page H4381]]
this title, reaffirm the debt it secures pursuant to section
524(c) of this title, or assume the unexpired lease pursuant
to section 365(p) of this title if the trustee does not do
so, as applicable; or
``(2) to take timely the action specified in that statement
of intention, as it may be amended before expiration of the
period for taking action, unless the statement of intention
specifies reaffirmation and the creditor refuses to reaffirm
on the original contract terms;
unless the court determines on the motion of the trustee, and
after notice and a hearing, that such property is of
consequential value or benefit to the estate.'';
(2) in section 521, as amended by sections 104, 406, and
407--
(A) in paragraph (2) by striking ``consumer'';
(B) in paragraph (2)(B)--
(i) by striking ``forty-five days after the filing of a
notice of intent under this section'' and inserting ``30 days
after the first date set for the meeting of creditors under
section 341(a)''; and
(ii) by striking ``forty-five day'' the second place it
appears and inserting ``30-day'';
(C) in paragraph (2)(C) by inserting ``except as provided
in section 362(h)'' before the semicolon; and
(D) by adding at the end the following:
``(h) If the debtor fails timely to take the action
specified in subsection (a)(6) of this section, or in
paragraphs (1) and (2) of section 362(h) of this title, with
respect to property which a lessor or bailor owns and has
leased, rented, or bailed to the debtor or as to which a
creditor holds a security interest not otherwise voidable
under section 522(f), 544, 545, 547, 548, or 549, nothing in
this title shall prevent or limit the operation of a
provision in the underlying lease or agreement which has the
effect of placing the debtor in default under such lease or
agreement by reason of the occurrence, pendency, or existence
of a proceeding under this title or the insolvency of the
debtor. Nothing in this subsection shall be deemed to justify
limiting such a provision in any other circumstance.''.
SEC. 125. GIVING SECURED CREDITORS FAIR TREATMENT IN CHAPTER
13.
Section 1325(a)(5)(B)(i) of title 11, United States Code,
is amended to read as follows:
``(i) the plan provides that the holder of such claim
retain the lien securing such claim until the earlier of
payment of the underlying debt determined under nonbankruptcy
law or discharge under section 1328, and that if the case
under this chapter is dismissed or converted without
completion of the plan, such lien shall also be retained by
such holder to the extent recognized by applicable
nonbankruptcy law; and''.
SEC. 126. PROMPT RELIEF FROM STAY IN INDIVIDUAL CASES.
Section 362(e) of title 11, United States Code, is amended
by inserting at the end the following:
``Notwithstanding the foregoing, in the case of an individual
filing under chapter 7, 11, or 13, the stay under subsection
(a) shall terminate 60 days after a request under subsection
(d) of this section, unless--
``(1) a final decision is rendered by the court within such
60-day period; or
``(2) such 60-day period is extended either by agreement of
all parties in interest or by the court for a specific time
which the court finds is required by compelling
circumstances.''.
SEC. 127. STOPPING ABUSIVE CONVERSIONS FROM CHAPTER 13.
Section 348(f)(1) of title 11, United States Code, is
amended--
(1) by striking in subparagraph (B) ``in the converted
case, with allowed secured claims'' and inserting in lieu
thereof ``only in a case converted to chapter 11 or 12 but
not in one converted to chapter 7, with allowed secured
claims in cases under chapters 11 and 12''; and
(2) in subparagraph (A) by striking ``and'' at the end;
(3) in subparagraph (B) by striking the period and
inserting ``; and''; and
(4) by adding at the end the following:
``(C) with respect to cases converted from chapter 13, the
claim of any creditor holding security as of the date of the
petition shall continue to be secured by that security unless
the full amount of that claim determined under applicable
nonbankruptcy law has been paid in full as of the date of
conversion, notwithstanding any valuation or determination of
the amount of an allowed secured claim made for the purposes
of the case under chapter of this title. Unless a
prebankruptcy default has been fully cured pursuant to the
plan at the time of conversion, in any proceeding under this
title or otherwise, the default shall have the effect given
under applicable nonbankruptcy law.''.
SEC. 128. RESTRAINING ABUSIVE PURCHASES ON SECURED CREDIT.
Section 506 of title 11, United States Code, is amended by
adding at the end the following:
``(e) In an individual case under chapter 7, 11, 12, or
13--
``(1) subsection (a) shall not apply to an allowed claim to
the extent attributable in whole or in part to the purchase
price of personal property acquired by the debtor within 180
days of the filing of the petition, except for the purpose of
applying paragraph (3) of this subsection;
``(2) if such allowed claim attributable to the purchase
price is secured only by the personal property so acquired,
the value of the personal property and the amount of the
allowed secured claim shall be the sum of the unpaid
principal balance of the purchase price and accrued and
unpaid interest and charges at the contract rate;
``(3) if such allowed claim attributable to the purchase
price is secured by the personal property so acquired and
other property, the value of the security may be determined
under subsection (a), but the value of the security and the
amount of the allowed secured claim shall be not less than
the unpaid principal balance of the purchase price of the
personal property acquired and unpaid interest and charges at
the contract rate; and
``(4) in any subsequent case under this title that is filed
by or against the debtor in the 2-year period beginning on
the date the petition is filed in the original case, the
value of the personal property and the amount of the allowed
secured claim shall be deemed to be not less than the amount
provided under paragraphs (2) and (3).''.
SEC. 129. FAIR VALUATION OF COLLATERAL.
Section 506(a) of title 11, United States Code, is amended
by adding at the end the following:
``In the case of an individual debtor under chapters 7 and
13, such value with respect to personal property securing an
allowed claim shall be determined based on the replacement
value of such property as of the date of filing the petition
without deduction for costs of sale or marketing. With
respect to property acquired for personal, family, or
household purpose, replacement value shall mean the price a
retail merchant would charge for property of that kind
considering the age and condition of the property at the time
value is determined.''.
SEC. 130. PROTECTION OF HOLDERS OF CLAIMS SECURED BY DEBTOR'S
PRINCIPAL RESIDENCE.
Title 11, United States Code, is amended--
(1) in section 101 by inserting after paragraph (13) the
following:
``(13A) `debtor's principal residence' means a residential
structure including incidental property when the structure
contains 1 to 4 units, whether or not that structure is
attached to real property, and includes, without limitation,
an individual condominium or cooperative unit or mobile or
manufactured home or trailer;
``(13B) `incidental property' means property incidental to
such residence including, without limitation, property
commonly conveyed with a principal residence where the real
estate is located, window treatments, carpets, appliances and
equipment located in the residence, and easements,
appurtenances, fixtures, rents, royalties, mineral rights,
oil and gas rights, escrow funds and insurance proceeds;'';
(2) in section 362(b)--
(A) in paragraph (17) by striking ``or'' at the end
thereof;
(B) in paragraph (18) by striking the period at the end and
inserting ``; or''; and
(C) by inserting after paragraph (18) the following:
``(19) under subsection (a), until a prepetition default is
cured fully in a case under chapter 13 of this title case by
actual payment of all arrears as required by the plan, of the
postponement, continuation or other similar delay of a
prepetition foreclosure proceeding or sale in accordance with
applicable nonbankruptcy law, but nothing herein shall imply
that such postponement, continuation or other similar delay
is a violation of the stay under subsection (a).''; and
(3) by amending section 1322(b)(2) to read as follows:
``(2) modify the rights of holders of secured claims, other
than a claim secured primarily by a security interest in
property used as the debtor's principal residence at any time
during 180 days prior to the filing of the petition, or of
holders of unsecured claims, or leave unaffected the rights
of holders of any class of claims;''.
SEC. 131. AIRCRAFT EQUIPMENT AND VESSELS.
Section 1110(a)(1) of title 11, United States Code, is
amended--
(1) in subparagraph (A) by striking ``that become due on or
after the date of the order'';
(2) in subparagraph (B)--
(A) in clause (i) by striking ``and'' at the end; and
(B) in clause (ii)--
(i) by inserting ``and within such 60-day period'' after
``order''; and
(ii) in subclause (II) by striking the period at the end
and inserting ``; and''; and
(3) by adding at the end the following:
``(iii) that occurs after the date of the order and such
60-day period is cured in accordance with the terms of such
security agreement, lease, or conditional sale contract.''.
Subtitle D--Adequate Protections for Unsecured Creditors
SEC. 141. DEBTS INCURRED TO PAY NONDISCHARGEABLE DEBTS.
(a) Priority of Claims for Debts Incurred To Pay
Nondischargeable Debts.--Section 507(a) of title 11, United
States Code, is amended by adding at the end the following:
``(10) Tenth, remaining allowed unsecured claims for debts
that are nondischargeable under section 523(a)(19), but which
shall be payable under this paragraph in the higher order of
priority (if any) as the respective claims paid by incurring
such debts.''.
(b) Nondischargeability of Debts Incurred To Pay
Nondischargeable Debts.--Section 523(a) of title 11, United
States Code, is amended--
(1) in paragraph (17) by striking ``or'' at the end;
(2) in paragraph (18) by striking the period and inserting
``; or''; and
(3) by adding at the end the following:
``(19) incurred to pay a debt that is nondischargeable
under any other paragraph of this subsection.''.
SEC. 142. CREDIT EXTENSIONS ON THE EVE OF BANKRUPTCY PRESUMED
NONDISCHARGEABLE.
Section 523(a)(2)(C) of title 11, United States Code, is
amended to read as follows:
``(C) for purposes of subparagraph (A), consumer debts owed
to a single creditor incurred by an individual debtor on or
within 90 days before the order for relief under this title
are presumed to be nondischargeable, except that such
[[Page H4382]]
presumption shall not apply to consumer debts owed to a
single creditor which are incurred for necessaries and
aggregate $250 or less.''.
SEC. 143. FRAUDULENT DEBTS ARE NONDISCHARGEABLE IN CHAPTER 13
CASES.
Section 1328(a)(2) of title 11, United States Code, is
amended--
(1) by inserting ``(2), (3)(B), (4),'' after ``paragraph'';
and
(2) by inserting ``(6),'' after ``(5),''.
SEC. 144. APPLYING THE CODEBTOR STAY ONLY WHEN IT PROTECTS
THE DEBTOR.
Section 1301(b) of title 11, United States Code, is
amended--
(1) by inserting ``(1)'' after ``(b)''; and
(2) by adding at the end the following:
``(2) When the debtor did not receive the consideration for
the claim held by a creditor, the stay provided by subsection
(a) does not apply to such creditor, notwithstanding
subsection (c), to the extent the creditor proceeds against
the individual which received such consideration or against
property not in the possession of the debtor which secures
such claim, but this subsection shall not apply if the debtor
is primarily obligated to pay the creditor in whole or in
part with respect to the claim under a legally binding
separation agreement, or divorce or dissolution decree, with
respect to such individual or the person who has possession
of such property.
``(3) When the debtor's plan provides that the debtor's
interest in personal property subject to a lease as to which
the debtor is the lessee will be surrendered or abandoned or
no payments will be made under the plan on account of the
debtor's obligations under the lease, the stay provided by
subsection (a) shall terminate as of the date of confirmation
of the plan notwithstanding subsection (c).''.
SEC. 145. CREDIT EXTENSIONS WITHOUT A REASONABLE EXPECTATION
OF REPAYMENT MADE NONDISCHARGEABLE.
Section 523(a)(2) of title 11, United States Code, is
amended--
(1) in subparagraph (A) by striking ``or actual fraud,''
and inserting ``actual fraud, or use of a credit or charge
card or other device to access a credit line without a
reasonable expectation or ability to repay unless access to
such credit, credit or charge card or other device to access
the credit line was extended without an application therefor
and reasonable evaluation of the debtor's ability to
repay,'', and
(2) in subparagraph (B)(iv) by striking ``with intent to
deceive'' and inserting ``without taking reasonable steps to
ensure the accuracy of the statement''.
SEC. 146. DEBTS FOR ALIMONY, MAINTENANCE, AND SUPPORT.
(a) Nondischargeability.--Title 11, United States Code, is
amended--
(1) in section 523(a)(18)--
(A) by inserting ``(including interest)'' after ``law'';
and
(B) in subparagraph (A) by striking ``and'' at the end and
inserting ``or''; and
(2) in section 1328(a)(2) by striking ``or (9)'' and
inserting ``(9), or (18)''.
(b) Automatic Stay.--Section 362(b) of title 11, United
States Code, as amended by section 130, is amended--
(1) in paragraph (19) by striking ``or'' at the end;
(2) in paragraph (19) by striking the period at the end and
inserting a semicolon; and
(3) by adding at the end the following:
``(20) under subsection (a) with respect to the withholding
of income pursuant to an order as specified in section 466(b)
of the Social Security Act; or
``(21) under subsection (a) with respect to the
withholding, suspension, or restriction of drivers' licenses,
professional and occupational licenses, and recreational
licenses pursuant to State law as specified in section
466(a)(15) of the Social Security Act or with respect to the
reporting of overdue support owed by an absent parent to any
consumer reporting agency as specified in section 466(a)(7)
of the Social Security Act.''.
(c) Continued Liability of Property.--Section 522(c) of
title 11, United States Code, is amended by striking
``section 523(a)(1) or 523(a)(5)'' and inserting ``paragraph
(1), (5), or (18) of section 523(a)''.
(d) Priority of Claims.--Section 507(a) of title 11, United
States Code, as amended by section 141, is amended--
(1) in paragraph (10) by striking ``(10) Tenth'' and
inserting ``(11) Eleventh'';
(2) in paragraph (9) by striking ``(9) Ninth'' and
inserting ``(10) Tenth'';
(3) in paragraph (8) by striking ``(8) Eighth '' and
inserting ``(9) Ninth''; and
(4) by inserting after paragraph (7) the following:
``(8) Eighth, allowed unsecured claims for debts that are
nondischargeable under section 523(a)(18).''.
(e) Confirmation of Plans.--Title 11 of the United States
Code is amended--
(1) in section 1129(a) by adding at the end the following:
``(14) If the debtor is required by a judicial or
administrative order to pay alimony to, maintenance for, or
support of a spouse, former spouse, or child of the debtor,
the debtor has paid all amounts payable under such order for
alimony, maintenance, or support that are due after the date
the petition is filed.'';
(2) in section 1225(a)--
(A) in paragraph (5) by striking ``and'' at the end;
(B) in paragraph (6) by striking the period at the end and
inserting ``; and''; and
(C) by adding at the end the following:
``(7) the debtor is required by a judicial or
administrative order to pay alimony to, maintenance for, or
support of a spouse, former spouse, or child of the debtor,
the debtor has paid all amounts payable under such order for
alimony, maintenance, or support that are due after the date
the petition is filed.''; and
(3) in section 1325(a)--
(A) in paragraph (5) by striking ``and'' at the end;
(B) in paragraph (6) by striking the period at the end and
inserting ``; and''; and
(C) by adding at the end the following:
``(7) if the debtor is required by a judicial or
administrative order to pay alimony to, maintenance for, or
support of a spouse, former spouse, or child of the debtor,
the debtor has paid all amounts payable under such order for
alimony, maintenance, or support that are due after the date
the petition is filed.''.
(f) Discharge.--Title 11 United States Code is amended--
(1) in section 1228(a) by inserting ``and only after a
debtor who is required by a judicial or administrative order
to pay alimony to, maintenance for, or support of a spouse,
former spouse, or child of the debtor, certifies that all
amounts payable under such order for alimony, maintenance, or
support that are due after the date the petition is filed
have been paid,'' after ``this title,''; and
(2) in section 1328(a) by inserting ``and only after a
debtor who is required by a judicial or administrative order
to pay alimony to, maintenance for, or support of a spouse,
former spouse, or child of the debtor, certifies that all
amounts payable under such order for alimony, maintenance, or
support that are due after the date the petition is filed
have been paid,'' after ``plan,'' the 1st place it appears.
(g) Conforming Amendments.--Section 456(b) of the Social
Security Act (42 U.S.C. 656(b)) is amended--
(1) by inserting ``, including interest,'' after ``Code)'';
(2) by striking ``and'' and inserting ``or''; and
(3) by striking ``released by a discharge'' and inserting
``dischargeable''.
SEC. 147. NONDISCHARGEABILITY OF CERTAIN DEBTS FOR ALIMONY,
MAINTENANCE, AND SUPPORT.
Section 523(a)(5) of title 11, United States Code, is
amended to read as follows:
``(5) to a spouse, former spouse, or child of the debtor
for alimony to, maintenance for, or support of such spouse or
child, or to a spouse, former spouse, or child of the debtor,
to the extent such debt is the result of a property
settlement agreement, a hold harmless agreement, or any other
type of debt that is not in the nature of alimony,
maintenance, or support in connection with or incurred by the
debtor in the course of a separation agreement, divorce
decree, any modifications thereof, or other order of a court
of record, determination made in accordance with State or
territorial law by a governmental unit, but not to the extent
that such debt is assigned to another entity, voluntarily, by
operation of law, or otherwise (other than debts assigned
pursuant to section 408(a)(3) of the Social Security Act, or
such debt that has been assigned to the Federal government,
or to a State or political subdivision of such State, or the
creditor's attorney);''.
SEC. 148. OTHER EXCEPTIONS TO DISCHARGE.
Section 523 of title 11, United States Code, is amended--
(1) by striking subsection (a)(15), as added by section
304(e)(1) of Public Law 103-394;
(2) in subsection (a)(7) by inserting ``(including property
or funds required to be disgorged)'' after ``penalty''; and
(3) in subsection (c)(1) by striking ``(6), or (15)'' and
inserting ``or (6)''.
SEC. 149. FEES ARISING FROM CERTAIN OWNERSHIP INTERESTS.
(a) Exception to Discharge.--Section 523(a)(16) of title
11, United States Code, is amended--
(1) by striking ``dwelling'' the 1st place it appears;
(2) by striking ``ownership or'' and inserting
``ownership,'';
(3) by striking ``housing'' the 1st place it appears; and
(4) by striking ``but only'' and all that follows through
``such period,'', and inserting ``or a lot in a homeowners
association, for as long as the debtor or the trustee has a
legal, equitable, or possessory ownership interest in such
unit, such corporation, or such lot,''.
(b) Executory Contracts.--Section 365 of title 11, United
States Code, as amended by section 161, is amended by adding
at the end the following:
``(q) A debt of a kind described in section 523(a)(16) of
this title shall not be considered to be a debt arising from
an executory contract.''
SEC. 150. PROTECTION OF CHILD SUPPORT AND ALIMONY.
(a) Amendment.--Title 11 of the United States Code, as
amended by section 116, is amended by inserting after section
528 the following:
``Sec. 529. Protection of child support and alimony payments
after the discharge
``Notwithstanding the provisions of the constitution or law
of any State providing a different priority, any debts of the
individual who has received a discharge under this title to a
spouse, former spouse, or child for alimony to, maintenance
for, or support of such spouse or child, in connection with a
separation agreement, divorce decree, or other order of a
court of record, determination made in accordance with State
or territorial law by a governmental unit, or property
settlement agreement, but not to the extent that such debt--
``(1) is assigned to another entity, voluntarily, by
operation of law, or otherwise; or
``(2) includes a liability designated as alimony,
maintenance, or support, unless such liability is actually in
the nature of alimony, maintenance, or support,
shall have priority in payment and collection over a
creditor's claim which is not discharged
[[Page H4383]]
in the individual's case pursuant to paragraph (2), (4), or
(14) of section 523(a) of this title, but such priority shall
not affect the priority of any consensual lien, mortgage, or
security interest securing such creditor's claim.''.
(b) Conforming Amendment.--The table of sections of chapter
5 of title 11, United States Code, as amended by section 116,
is amended by inserting after the item relating to section
528 the following:
``529. Protection of child support and alimony.''.
SEC. 151. ADEQUATE PROTECTION FOR INVESTORS.
(a) Definition.--Section 101 of title 11, United States
Code, is amended by inserting after paragraph (48) the
following:
``(48A) `securities self regulatory organization' means
either a securities association registered with the
Securities and Exchange Commission pursuant to section 15A of
the Securities Exchange Act of 1934 or a national securities
exchange registered with the Securities and Exchange
Commission pursuant to section 6 of the Securities Exchange
Act of 1934;''.
(b) Automatic Stay.--Section 362(b) of title 11, United
States Code, as amended by sections 130 and 146, is amended--
(1) in paragraph (20) by striking ``or'' at the end;
(2) in paragraph (21) by striking the period at the end and
a inserting ``; or''; and
(3) by adding at the end the following:
``(22) under subsection (a) of this section, of the
commencement or continuation of an investigation or action by
a securities self regulatory organization to enforce such
organization's regulatory power; of the enforcement of an
order or decision, other than for monetary sanctions,
obtained in an action by the securities self regulatory
organization to enforce such organization's regulatory power;
or of any act taken by the securities self regulatory
organization to delist, delete, or refuse to permit quotation
of any stock that does not meet applicable regulatory
requirements.''.
Subtitle E--Adequate Protections for Lessors
SEC. 161. GIVING DEBTORS THE ABILITY TO KEEP LEASED PERSONAL
PROPERTY BY ASSUMPTION.
Section 365 of title 11, United States Code, is amended by
adding at the end the following:
``(p)(1) If a lease of personal property is rejected or not
timely assumed by the trustee under subsection (d), the
leased property is no longer property of the estate and the
stay under section 362(a) of this title is automatically
terminated.
``(2) In the case of an individual under chapter 7, the
debtor may notify the creditor in writing that the debtor
desires to assume the lease. Upon being so notified, the
creditor may, at its option, notify the debtor that it is
willing to have the lease assumed by the debtor and may
condition such assumption on cure of any outstanding default
on terms set by the lessor. If within 30 days of such notice
the debtor notifies the lessor in writing that the lease is
assumed, the liability under the lease will be assumed by the
debtor and not by the estate. The stay under section 362 of
this title and the injunction under section 524(a)(2) of this
title shall not be violated by notification of the debtor and
negotiation of cure under this subsection.
``(3) In a case under chapter 11 of this title in which the
debtor is an individual and in a case under chapter 13 of
this title, if the debtor is the lessee with respect to
personal property and the lease is not assumed in the plan
confirmed by the court, the lease is deemed rejected as of
the conclusion of the hearing on confirmation. If the lease
is rejected, the stay under section 362 of this title and any
stay under section 1301 is automatically terminated with
respect to the property subject to the lease.''.
SEC. 162. ADEQUATE PROTECTION OF LESSORS AND PURCHASE MONEY
SECURED CREDITORS.
Title 11, United States Code, is amended by adding after
section 1307 the following:
``Sec. 1307A. Adequate protection in chapter 13 cases
``(a)(1) On or before 30 days after the filing of a case
under this chapter, the debtor shall make cash payments in
the amount described below to any lessor of personal property
and to any creditor holding a claim secured by personal
property to the extent such claim is attributable to the
purchase of such property by the debtor. The debtor or the
plan shall continue such payments until the earlier of--
``(A) the time at which the creditor begins to receive
actual payments under the plan; or
``(B) the debtor relinquishes possession of such property
to the lessor or creditor, or to any third party acting under
claim of right, as applicable.
``(2) Such cash payments shall be in the amount of any
weekly, biweekly, monthly or other periodic payment scheduled
as payable under the contract between the debtor and
creditor; shall be paid at the times at which such payments
are scheduled to be made; and shall not include any
arrearages, penalties, or default or delinquency charges.
Such payments shall be deemed to be adequate protection
payments under section 362 of this title.
``(b) The court may, after notice and hearing, change the
amount and timing of the adequate protection payment under
subsection (a), but in no event shall it be payable less
frequently than monthly or in an amount less than the
reasonable depreciation of such property month to month.
``(c) Notwithstanding section 1326(b) of this title, if a
confirmed plan provides for payments to a creditor or lessor
described in subsection (a) and provides that payments to
such creditor or lessor under the plan will be deferred until
payment of amounts described in section 1326(b) of this
title, the payments required hereunder shall nonetheless be
continued in addition to plan payments until actual payments
to the creditor begin under the plan.
``(d) Notwithstanding sections 362, 542, and 543 of this
title, a lessor or creditor described in subsection (a) may
retain possession of property described in subsection (a)
which was obtained rightfully prior to the date of filing of
the petition until the first such adequate protection payment
is received by the lessor or creditor. Such retention of
possession and any acts reasonably related thereto shall not
violate the stay imposed under section 362(a) of this title,
nor any obligations imposed under section 542 or 543 of this
title.
``(e) On or before 60 days after the filing of a case under
this chapter, a debtor retaining possession of personal
property subject to a lease or securing a claim attributable
in whole or in part to the purchase price of that property
shall provide each creditor or lessor reasonable evidence of
the maintenance of any required insurance coverage with
respect to the use or ownership of such property and continue
to do so for so long as the debtor retains possession of such
property.''.
SEC. 163. ADEQUATE PROTECTION FOR LESSORS.
Section 362(b)(10) of title 11, United States Code, is
amended by striking ``nonresidential''.
Subtitle F--Bankruptcy Relief Less Frequently Available for Repeat
Filers
SEC. 171. EXTEND PERIOD BETWEEN BANKRUPTCY DISCHARGES.
Title 11, United States Code, is amended--
(1) in section 727(a)(8) by striking ``six'' and inserting
``10''; and
(2) in section 1328 by adding at the end the following:
``(f) Notwithstanding subsections (a) and (b), the court
shall not grant a discharge of all debts provided for by the
plan or disallowed under section 502 of this title if the
debtor has received a discharge in any case filed under
this title within 5 years of the order for relief under
this chapter.''.
Subtitle G--Exemptions
SEC. 181. EXEMPTIONS.
Section 522(b)(2)(A) of title 11, United States Code, is
amended--
(1) by striking ``180'' and inserting ``365''; and
(2) by striking ``, or for a longer portion of such 180-day
period than in any other place''.
SEC. 182. LIMITATION.
Section 522 of title 11, United States Code, is amended--
(1) in subsection (b)(2)(A) by inserting ``subject to
subsection (n),'' before ``any property''; and
(2) by adding at the end the following:
``(n)(1) Except as provided in paragraph (2), as a result
of electing under subsection (b)(2)(A) to exempt property
under State or local law, a debtor may not exempt any
interest to the extent that such interest exceeds $100,000 in
value, in the aggregate, in--
``(A) real or personal property that the debtor or a
dependent of the debtor uses as a residence;
``(B) a cooperative that owns property that the debtor or a
dependent of the debtor uses as a residence; or
``(C) a burial plot for the debtor or a dependent of the
debtor.
``(2) The limitation under paragraph (1) shall not apply to
an exemption claimed under subsection (b)(2)(A) by a family
farmer for the principal residence of that farmer.''.
TITLE II--BUSINESS BANKRUPTCY PROVISIONS
Subtitle A--General Provisions
SEC. 201. LIMITATION RELATING TO THE USE OF FEE EXAMINERS.
Section 330 of title 11, United States Code, is amended by
adding at the end the following:
``(e) The court may not appoint any person to examine any
request for compensation or reimbursement payable under this
section.''.
SEC. 202. SHARING OF COMPENSATION.
Section 504 of title 11, United States Code, is amended by
adding at the end the following:
``(c) This section shall not apply with respect to sharing,
or agreeing to share, compensation with a bona fide public
service attorney referral program that operates in accordance
with non-Federal law regulating attorney referral services
and with rules of professional responsibility applicable to
attorney acceptance of referrals.''.
SEC. 203. CHAPTER 12 MADE PERMANENT LAW.
Section 302(f) of the Bankruptcy Judges, United States
Trustees, and Family Farmer Bankruptcy Act of 1986 (11 U.S.C.
1201 note) is repealed.
SEC. 204. MEETINGS OF CREDITORS AND EQUITY SECURITY HOLDERS.
Section 341 of title 11, United States Code, is amended by
adding at the end the following:
``(e) Notwithstanding subsections (a) and (b), the court,
on the request of a party in interest and after notice and a
hearing, for cause may order that the United States trustee
not convene a meeting of creditors or equity security holders
if the debtor has filed a plan as to which the debtor
solicited acceptances prior to the commencement of the
case.''.
SEC. 205. CREDITORS' AND EQUITY SECURITY HOLDERS' COMMITTEES.
Section 1102(b) of title 11, United States Code, is amended
by adding at the end the following:
``(3) The court on its own motion or on request of a party
in interest, and after notice and a hearing, may order a
change in membership of a committee appointed under
subsection (a) if necessary to ensure adequate representation
of creditors or of equity security holders.''.
SEC. 206. POSTPETITION DISCLOSURE AND SOLICITATION.
Section 1125 of title 11, United States Code, is amended by
adding at the end the following:
[[Page H4384]]
``(g) Notwithstanding subsection (b), an acceptance or
rejection of the plan may be solicited from a holder of a
claim or interest if such solicitation complies with
applicable nonbankruptcy law and if such holder was solicited
before the commencement of the case in a manner complying
with applicable nonbankruptcy law.''.
SEC. 207. PREFERENCES.
Section 547(c) of title 11, United States Code, is
amended--
(1) by amending paragraph (2) to read as follows:
``(2) to the extent that such transfer was in payment of a
debt incurred by the debtor in the ordinary course of
business or financial affairs of the debtor and the
transferee, and such transfer was--
``(A) made in the ordinary course of business or financial
affairs of the debtor and the transferee; or
``(B) made according to ordinary business terms;'';
(2) in paragraph (7) by striking ``or'' at the end;
(3) in paragraph (8) by striking the period at the end and
inserting ``; or''; and
(4) by adding at the end the following:
``(9) if, in a case filed by a debtor whose debts are not
primarily consumer debts, the aggregate value of all property
that constitutes or is affected by such transfer is less than
$5000.''.
SEC. 208. VENUE OF CERTAIN PROCEEDINGS.
Section 1409(b) of title 28, United States Code, is amended
by inserting ``, or a nonconsumer debt against a noninsider
of less than $10,000,'' after ``$5,000''.
SEC. 209. PERIOD FOR FILING PLAN UNDER CHAPTER 11.
Section 1121(d) of title 11, United States Code, is
amended--
(1) by striking ``On'' and inserting ``(1) Subject to
paragraph (1), on''; and
(2) by adding at the end the following:
``(2)(A) Such 120-day period may not be extended beyond a
date that is 18 months after the date of the order for relief
under this chapter.
``(B) Such 180-day period may not be extended beyond a date
that is 20 months after the date of the order for relief
under this chapter.''.
SEC. 210. PERIOD FOR FILING PLAN UNDER CHAPTER 12.
(a) Extension of Period.--Section 1221 of title 11, United
States Code, is amended by inserting ``to any period not
later than 150 days after the order for relief'' after
``period''.
(b) Relief From the Stay.--Section 362(d) of title 11,
United States Code, is amended--
(1) in paragraph (2) by striking ``or'' at the end;
(2) in paragraph (3) by striking the period at the end and
inserting ``; or''; and
(3) by adding at the end the following:
``(4) with respect to a stay of an act against property
under subsection (a) of a debtor in a case under chapter 12,
by a creditor whose claim is secured by an interest in such
property, unless the debtor has filed a plan in accordance
with section 1221.''.
(c) Special Treatment of Secured Claims.--(1) Chapter 12 of
title 11, United States Code, is amended by inserting after
section 1231 the following:
``Sec. 1232. Special treatment of secured claims
``(a)(1) A claim secured by a lien on property of the
estate shall be allowed or disallowed under section 502 of
this title the same as if the holder of such claim had
recourse against the debtor on account of such claim, whether
or not such holder has such recourse, unless--
``(A) subject to paragraph (2), the holder of such claim
elects to apply subsection (b); or
``(B) such holder does not have such recourse, and such
property is sold under section 363 of this title or is to be
sold under the plan.
``(2) A holder of a claim may not elect to apply subsection
(b) if--
``(A) such claim is of inconsequential value; or
``(B) the holder of a claim has recourse against the debtor
on account of such claim, and such property is sold under
section 363 of this title or is to be sold under the plan.
``(b) If such an election is made to apply this subsection,
then notwithstanding section 506(a) of this title, such claim
is a secured claim to the extent such claim is allowed.''.
(2) The table of sections of chapter 12 of title 11, United
States Code, is amended by inserting after the item relating
to section 1231 the following:
``1232. Special treatment of secured claims.''.
SEC. 211. CASES ANCILLARY TO FOREIGN PROCEEDINGS INVOLVING
FOREIGN INSURANCE COMPANIES THAT ARE ENGAGED IN
THE BUSINESS OF INSURANCE OR REINSURANCE IN THE
UNITED STATES.
Section 304 of title 11, United States Code, is amended--
(1) in subsection (b) by striking ``provisions of
subsection (c)'' and inserting ``subsections (c) and (d)'';
and
(2) by adding at the end the following:
``(d) The court may not grant to a foreign representative
of the estate of an insurance company that is not organized
under the law of a State and that is engaged in the business
of insurance, or reinsurance, in the United States relief
under subsection (b) with respect to property that is--
``(1) a deposit required by a State law relating to
insurance or reinsurance;
``(2) a multibeneficiary trust required by a State law
relating to insurance or reinsurance to protect holders of
insurance policies issued in the United States or to protect
holders or claimants against such policies; or
``(3) a multibeneficiary trust authorized by a State law
relating to insurance or reinsurance to allow a person
engaged in the business of insurance in the United States--
``(A) to cede reinsurance to such an insurance company; and
``(B) to treat so ceded reinsurance as an asset, or
deduction from liability, in financial statements of such
person.''.
SEC. 212. REJECTION OF EXECUTORY CONTRACTS AFFECTING
INTELLECTUAL PROPERTY RIGHTS TO RECORDINGS OF
ARTISTIC PERFORMANCE.
Section 365(n) of title 11, United States Code, is amended
at the end the following:
``(5) The rejection by the trustee of an executory contract
affecting the intellectual property rights to recordings of
artistic performance shall not in any way diminish or impair
any applicable nonbankruptcy law rights to enforce
noncompetition provision or provisions regarding the
rendering of exclusive services as a performing artist that
may be contained in such contracts, except that such
enforcement shall be subject to the nondebtor party providing
to the debtor notice of an offer to perform the contract
under all of its original terms. The rights to enforce such
noncompetition or exclusivity provision shall not be treated
as claims that can be discharged under this title.''.
SEC. 213. UNEXPIRED LEASES OF NONRESIDENTIAL REAL PROPERTY.
Section 365(d)(4) of title 11, United States Code, is
amended to read as follows:
``(4) In a case under any chapter of this title, if the
trustee does not assume or reject an unexpired lease of
nonresidential real property under which the debtor is the
lessee before the earlier of (A) 120 days after the date of
the order for relief, or (B) the entry of an order confirming
a plan, then such lease is deemed rejected, and the trustee
shall immediately surrender such nonresidential real property
to the lessor but in no event shall such time period exceed
120 days. Notwithstanding the immediately preceding sentence,
and provided no plan has been confirmed, upon debtor's
motion, and after notice and a hearing, the court may within
such 120-day period extend the 120-day period by a period not
to exceed 150 days, contingent upon written consent of the
affected lessor or with the approval of the court, and
provided trustee has timely performed all post-petition lease
obligations, but in no circumstance shall such period extend
beyond the earlier of (i) 270 days from the date of the order
for relief or (ii) the entry of an order approving a
disclosure statement, without the consent of the lessor.''.
SEC. 214. DEFINITION OF DISINTERESTED PERSON.
Section 101(14) of title 11, United States Code, is amended
to read as follows:
``(14) `disinterested person' means a person that--
``(A) is not a creditor, an equity security holder, or an
insider;
``(B) is not and was not, within 2 years before the date of
the filing of the petition, a director, officer, or employee
of the debtor; and
``(C) does not have an interest materially adverse to the
interest of the estate or of any class of creditors or equity
security holders, by reason of any direct or indirect
relationship to, connection with, or interest in, the debtor,
or for any other reason;''.
Subtitle B--Specific Provisions
CHAPTER 1--SMALL BUSINESS BANKRUPTCY
SEC. 231. DEFINITIONS.
(a) Definitions.--Section 101 of title 11, United States
Code, is amended by striking paragraph (51C) and inserting
the following:
``(51C) `small business case' means a case filed under
chapter 11 of this title in which the debtor is a small
business debtor;
``(51D) `small business debtor' means--
``(A) a person (including affiliates of such person that
are also debtors under this title) that has aggregate
noncontingent, liquidated secured and unsecured debts as of
the date of the petition or the order for relief in an amount
not more than $5,000,000 (excluding debts owed to 1 or more
affiliates or insiders); or
``(B) a debtor of the kind described in paragraph (51B) but
without regard to the amount of such debtor's debts;
except that if a group of affiliated debtors has aggregate
noncontingent liquidated secured and unsecured debts greater
than $5,000,000 (excluding debt owed to 1 or more affiliates
or insiders), then no member of such group is a small
business debtor;''.
(b) Conforming Amendment.--Section 1102(a)(3) of title 11,
United States Code, is amended by inserting ``debtor'' after
``small business''.
SEC. 232. FLEXIBLE RULES FOR DISCLOSURE STATEMENT AND PLAN.
Section 1125(f) of title 11, United States Code, is amended
to read as follows:
``(f) Notwithstanding subsection (b), in a small business
case--
``(1) in determining whether a disclosure statement
provides adequate information, the court shall consider the
complexity of the case, the benefit of additional information
to creditors and other parties in interest, and the cost of
providing additional information;
``(2) the court may determine that the plan itself provides
adequate information and that a separate disclosure statement
is not necessary;
``(3) the court may approve a disclosure statement
submitted on standard forms approved by the court or adopted
pursuant to section 2075 of title 28; and
``(4)(A) the court may conditionally approve a disclosure
statement subject to final approval after notice and a
hearing;
``(B) acceptances and rejections of a plan may be solicited
based on a conditionally approved disclosure statement if the
debtor provides adequate information to each holder of a
claim or interest that is solicited, but a conditionally
approved disclosure statement shall be mailed not
[[Page H4385]]
less than 20 days before the date of the hearing on
confirmation of the plan; and
``(C) the hearing on the disclosure statement may be
combined with the hearing on confirmation of a plan.''.
SEC. 233. STANDARD FORM DISCLOSURE STATEMENTS AND PLANS.
The Advisory Committee on Bankruptcy Rules of the Judicial
Conference of the United States shall, within a reasonable
period of time after the date of the enactment of this Act,
propose for adoption standard form disclosure statements and
plans of reorganization for small business debtors (as
defined in section 101) of title 11, United States Code, as
amended by this Act), designed to achieve a practical balance
between--
(1) the reasonable needs of the courts, the United States
trustee or bankruptcy administrator, creditors, and other
parties in interest for reasonably complete information; and
(2) economy and simplicity for debtors.
SEC. 234. UNIFORM NATIONAL REPORTING REQUIREMENTS.
(a) Reporting Required.--(1) Title 11 of the United States
Code is amended by inserting after section 307 the following:
``Sec. 308. Debtor reporting requirements
``A small business debtor shall file periodic financial and
other reports containing information including--
``(1) the debtor's profitability, that is, approximately
how much money the debtor has been earning or losing during
current and recent fiscal periods;
``(2) reasonable approximations of the debtor's projected
cash receipts and cash disbursements over a reasonable
period;
``(3) comparisons of actual cash receipts and disbursements
with projections in prior reports;
``(4) whether the debtor is--
``(A) in compliance in all material respects with
postpetition requirements imposed by this title and the
Federal Rules of Bankruptcy Procedure; and
``(B) timely filing tax returns and paying taxes and other
administrative claims when due, and, if not, what the
failures are and how, at what cost, and when the debtor
intends to remedy such failures; and
``(5) such other matters as are in the best interests of
the debtor and creditors, and in the public interest in fair
and efficient procedures under chapter 11 of this title.''.
(2) The table of sections of chapter 3 of title 11, United
States Code, is amended by inserting after the item relating
to section 307 the following:
``308. Debtor reporting requirements.''.
(b) Effective Date.--The amendments made by subsection (a)
shall take effect 60 days after the date on which rules are
prescribed pursuant to section 2075, title 28, United States
Code to establish forms to be used to comply with section 308
of title 11, United States Code, as added by subsection (a).
SEC. 235. UNIFORM REPORTING RULES AND FORMS.
After consultation with the Director of the Executive for
United States Trustees and with the Judicial Conference of
the United States, the Attorney General of the United States
shall propose for adoption amended Federal Rules of
Bankruptcy Procedure and Official Bankruptcy Forms to be used
by small business debtors to comply with section 308 of title
11, United States Code, as added by section 234 of this Act
to achieve a practical balance between--
(1) the reasonable needs of the courts, the United States
trustee or bankruptcy administrator, creditors, and other
parties in interest for reasonably complete information; and
(2) economy and simplicity for debtors in cases under such
title.
SEC. 236. DUTIES IN SMALL BUSINESS CASES.
(a) Duties in Chapter 11 Cases.--Title 11 of the United
States Code is amended by inserting after section 1114 the
following:
``Sec. 1115. Duties of trustee or debtor in possession in
small business cases
``In a small business case, a trustee or the debtor in
possession, in addition to the duties provided in this title
and as otherwise required by law, shall--
``(1) append to the voluntary petition or, in an
involuntary case, file within 3 days after the date of the
order for relief--
``(A) its most recent balance sheet, statement of
operations, cash-flow statement, Federal income tax return;
or
``(B) a statement made under penalty of perjury that no
balance sheet, statement of operations, or cash-flow
statement has been prepared and no Federal tax return has
been filed;
``(2) attend, through its senior management personnel and
counsel, meetings scheduled by the court or the United States
trustee, including initial debtor interviews, scheduling
conferences, and meetings of creditors convened under section
341 of this title;
``(3) timely file all schedules and statements of financial
affairs, unless the court, after notice and a hearing, grants
an extension, which shall not extend such time period to a
date later than 30 days after the date of the order for
relief, absent extraordinary and compelling circumstances;
``(4) file all postpetition financial and other reports
required by the Federal Rules of Bankruptcy Procedure or by
local rule of the district court;
``(5) subject to section 363(c)(2), maintain insurance
customary and appropriate to the industry;
``(6)(A) timely file tax returns;
``(B) subject to section 363(c)(2), timely pay all
administrative expense tax claims, except those being
contested by appropriate proceedings being diligently
prosecuted; and
``(C) subject to section 363(c)(2), establish 1 or more
separate deposit accounts not later than 10 business days
after the date of order for relief (or as soon thereafter as
possible if all banks contacted decline the business) and
deposit therein, not later than 1 business day after receipt
thereof, all taxes payable for periods beginning after the
date the case is commenced that are collected or withheld by
the debtor for governmental units; and
``(7) allow the United States trustee or bankruptcy
administrator, or its designated representative, to inspect
the debtor's business premises, books, and records at
reasonable times, after reasonable prior written notice,
unless notice is waived by the debtor.''.
(b) Technical Amendment.--The table of sections of chapter
11, United States Code, is amended by inserting after the
item relating to section 1114 the following:
``1115. Duties of trustee or debtor in possession in small business
cases.''.
SEC. 237. PLAN FILING AND CONFIRMATION DEADLINES.
Section 1121(e) of title 11, United States Code, is amended
to read as follows:
``(e) In a small business case--
``(1) only the debtor may file a plan until after 90 days
after the date of the order for relief, unless shortened on
request of a party in interest made during the 90-day period,
or unless extended as provided by this subsection, after
notice and hearing the court, for cause, orders otherwise;
``(2) the plan, and any necessary disclosure statement,
shall be filed not later than 90 days after the date of the
order for relief; and
``(3) the time periods specified in paragraphs (1) and (2),
and the time fixed in section 1129(e) of this title, within
which the plan shall be confirmed may be extended only if--
``(A) the debtor, after providing notice to parties in
interest (including the United States trustee), demonstrates
by a preponderance of the evidence that it is more likely
than not that the court will confirm a plan within a
reasonable time;
``(B) a new deadline is imposed at the time the extension
is granted; and
``(C) the order extending time is signed before the
existing deadline has expired.''.
SEC. 238. PLAN CONFIRMATION DEADLINE.
Section 1129 of title 11, United States Code, is amended by
adding at the end the following:
``(e) In a small business case, the plan shall be confirmed
not later than 150 days after the date of the order for
relief unless such 150-day period is extended as provided in
section 1121(e)(3) of this title.''.
SEC. 239. PROHIBITION AGAINST EXTENSION OF TIME.
Section 105(d) of title 11, United States Code, is
amended--
(1) in paragraph (2)(B)(vi) by striking the period at the
end and inserting ``; and''; and
(2) by adding at the end the following:
``(3) in a small business case, not extend the time periods
specified in sections 1121(e) and 1129(e) of this title
except as provided in section 1121(e)(3) of this title.''.
SEC. 240. DUTIES OF THE UNITED STATES TRUSTEE AND BANKRUPTCY
ADMINISTRATOR.
(a) Duties of the United States Trustee.--Section 586(a) of
title 28, United States Code, as amended by section 111, is
amended--
(1) in paragraph (3)--
(A) in subparagraph (G) by striking ``and'' at the end;
(B) by redesignating subparagraph (H) as subparagraph (I);
and
(C) by inserting after subparagraph (G) the following:
``(H) in small business cases (as defined in section 101 of
title 11), performing the additional duties specified in
title 11 pertaining to such cases;'',
(2) in paragraph (6) by striking ``and'' at the end,
(3) in paragraph (7) by striking the period at the end and
inserting ``; and'', and
(4) by inserting after paragraph (7) the following:
``(8) in each of such small business cases--
``(A) conduct an initial debtor interview as soon as
practicable after the entry of order for relief but before
the first meeting scheduled under section 341(a) of title 11
at which time the United States trustee shall begin to
investigate the debtor's viability, inquire about the
debtor's business plan, explain the debtor's obligations to
file monthly operating reports and other required reports,
attempt to develop an agreed scheduling order, and inform the
debtor of other obligations;
``(B) when determined to be appropriate and advisable,
visit the appropriate business premises of the debtor and
ascertain the state of the debtor's books and records and
verify that the debtor has filed its tax returns;
``(C) review and monitor diligently the debtor's
activities, to identify as promptly as possible whether the
debtor will be unable to confirm a plan; and
``(D) in cases where the United States trustee finds
material grounds for any relief under section 1112 of title
11 move the court promptly for relief.''.
(b) Duties of the Bankruptcy Administrator.--In a small
business case (as defined in section 101 of title 11 of the
United States Code), the bankruptcy administrator shall
perform the duties specified in section 586(a)(6) of title 28
of the United States Code.
SEC. 241. SCHEDULING CONFERENCES.
Section 105(d) of title 11, United States Code, is
amended--
(1) in the matter preceding paragraph (1) by striking ``,
may'';
(2) by amending paragraph (1) to read as follows:
``(1) shall hold such status conferences as are necessary
to further the expeditious and economical resolution of the
case; and''; and
[[Page H4386]]
(3) in paragraph (2) by striking ``unless inconsistent with
another provision of this title or with applicable Federal
Rules of Bankruptcy Procedure,'' and inserting ``may''.
SEC. 242. SERIAL FILER PROVISIONS.
Section 362 of title 11, United States Code, is amended--
(1) in subsection (i) as so redesignated by section 124--
(A) by striking ``An'' and inserting ``(1) Except as
provided in paragraph (2), an''; and
(B) by adding at the end the following:
``(2) If such violation is based on an action taken by an
entity in the good-faith belief that subsection (h) applies
to the debtor, then recovery under paragraph (1) against such
entity shall be limited to actual damages.''; and
(2) by inserting after subsection (i), as redesignated by
section 124, the following:
``() The filing of a petition under chapter 11 of this
title operates as a stay of the acts described in subsection
(a) only in an involuntary case involving no collusion by the
debtor with creditors and in which the debtor--
``(1) is a debtor in a small business case pending at the
time the petition is filed;
``(2) was a debtor in a small business case which was
dismissed for any reason by an order that became final in the
2-year period ending on the date of the order for relief
entered with respect to the petition;
``(3) was a debtor in a small business case in which a plan
was confirmed in the 2-year period ending on the date of the
order for relief entered with respect to the petition; or
``(4) is an entity that has succeeded to substantially all
of the assets or business of a small business debtor
described in subparagraph (A), (B), or (C) unless the debtor
proves, by a preponderance of the evidence, that the filing
of such petition resulted from circumstances beyond the
control of the debtor not foreseeable at the time the case
then pending was filed; and that it is more likely than not
that the court will confirm a feasible plan, but not a
liquidating plan, within a reasonable time.''.
SEC. 243. EXPANDED GROUNDS FOR DISMISSAL OR CONVERSION AND
APPOINTMENT OF TRUSTEE.
(a) Expanded Grounds for Dismissal or Conversion.--Section
1112(b) of title 11, United States Code, is amended to read
as follows:
``(b)(1) Except as provided in paragraph (2), in subsection
(c), and in section 1104(a)(3) of this title, on request of a
party in interest, and after notice and a hearing, the court
shall convert a case under this chapter to a case under
chapter 7 of this title or dismiss a case under this chapter,
whichever is in the best interest of creditors and the
estate, if the movant establishes cause.
``(2) The relief provided in paragraph (1) shall not be
granted if the debtor or another party in interest objects
and establishes, by a preponderance of the evidence that--
``(A) it is more likely than not that a plan will be
confirmed within a time as fixed by this title or by order of
the court entered pursuant to section 1121(e)(3), or within a
reasonable time if no time has been fixed; and
``(B) if the reason is an act or omission of the debtor
that--
``(i) there exists a reasonable justification for the act
or omission; and
``(ii) the act or omission will be cured within a
reasonable time fixed by the court not to exceed 30 days
after the court decides the motion, unless the movant
expressly consents to a continuance for a specific period of
time, or compelling circumstances beyond the control of the
debtor justify an extension.
``(3) For purposes of this subsection, cause includes--
``(A) substantial or continuing loss to or diminution of
the estate;
``(B) gross mismanagement of the estate;
``(C) failure to maintain appropriate insurance;
``(D) unauthorized use of cash collateral harmful to 1 or
more creditors;
``(E) failure to comply with an order of the court;
``(F) failure timely to satisfy any filing or reporting
requirement established by this title or by any rule
applicable to a case under this chapter;
``(G) failure to attend the meeting of creditors convened
under section 341(a) of this title or an examination ordered
under rule 2004 of the Federal Rules of Bankruptcy Procedure;
``(H) failure timely to provide information or attend
meetings reasonably requested by the United States trustee;
``(I) failure timely to pay taxes due after the date of the
order for relief or to file tax returns due after the order
for relief;
``(J) failure to file a disclosure statement, or to file or
confirm a plan, within the time fixed by this title or by
order of the court;
``(K) failure to pay any fees or charges required under
chapter 123 of title 28;
``(L) revocation of an order of confirmation under section
1144 of this title, and denial of confirmation of another
plan or of a modified plan under section 1129 of this title;
``(M) inability to effectuate substantial consummation of a
confirmed plan;
``(N) material default by the debtor with respect to a
confirmed plan; and
``(O) termination of a plan by reason of the occurrence of
a condition specified in the plan.
``(4) The court shall commence the hearing on any motion
under this subsection not later than 30 days after filing of
the motion, and shall decide the motion within 15 days after
commencement of the hearing, unless the movant expressly
consents to a continuance for a specific period of time or
compelling circumstances prevent the court from meeting the
time limits established by this paragraph.''.
(b) Additional Grounds for Appointment of Trustee.--Section
1104(a) of title 11, United States Code, is amended--
(1) in paragraph (1) by striking ``or'' at the end;
(2) in paragraph (2) by striking the period at the end and
inserting ``; or''; and
(3) by adding at the end the following:
``(3) if grounds exist to convert or dismiss the case under
section 1112 of this title, but the court determines that the
appointment of a trustee is in the best interests of
creditors and the estate.''.
CHAPTER 2--SINGLE ASSET REAL ESTATE
SEC. 251. SINGLE ASSET REAL ESTATE DEFINED.
Section 101(51B) of title 11, United States Code, is
amended to read as follows:
``(51B) `single asset real estate' means undeveloped real
property or other real property constituting a single
property or project, other than residential real property
with fewer than 4 residential units, on which is located a
single development or project which property or project
generates substantially all of the gross income of a debtor
and on which no substantial business is being conducted by a
debtor, or by a commonly controlled group of entities all of
which are concurrently debtors in a case under chapter 11 of
this title, other than the business of operating the real
property and activities incidental thereto;''.
SEC. 252. PAYMENT OF INTEREST.
Section 362(d)(3) of title 11, United States Code, is
amended--
(1) by inserting ``or 30 days after the court determines
that the debtor is subject to this paragraph, whichever is
later'' after ``90-day period)''; and
(2) by amending subparagraph (B) to read as follows:
``(B) the debtor has commenced monthly payments (which
payments may, in the debtor's sole discretion,
notwithstanding section 363(c)(2) of this title, be made from
rents or other income generated before or after the
commencement of the case by or from the property) to each
creditor whose claim is secured by such real estate (other
than a claim secured by a judgment lien or by an unmatured
statutory lien), which payments are in an amount equal to
interest at the then-applicable nondefault contract rate of
interest on the value of the creditor's interest in the real
estate; or''.
TITLE III--MUNICIPAL BANKRUPTCY PROVISIONS
SEC. 301. PETITION AND PROCEEDINGS RELATED TO PETITION.
(a) Technical Amendment Relating to Municipalities.--
Section 921(d) of title 11, United States Code, is amended by
inserting ``notwithstanding section 301(b)'' before the
period at the end.
(b) Conforming Amendment.--Section 301 of title 11, United
States Code, is amended--
(1) by inserting ``(a)'' before ``A voluntary''; and
(2) by amending the last sentence to read as follows:
``(b) The commencement of a voluntary case under a chapter
of this title constitutes an order for relief under such
chapter.''.
TITLE IV--BANKRUPTCY ADMINISTRATION
Subtitle A--General Provisions
SEC. 401. ADEQUATE PREPARATION TIME FOR CREDITORS BEFORE THE
MEETING OF CREDITORS IN INDIVIDUAL CASES.
Section 341(a) of title 11, United States Code, is amended
by inserting after the first sentence the following: ``If the
debtor is an individual in a voluntary case under chapter 7,
11, or 13, the meeting of creditors shall not be convened
earlier than 60 days (or later than 90 days) after the date
of the order for relief, unless the court, after notice and
hearing, determines unusual circumstances justify an earlier
meeting.''.
SEC. 402. CREDITOR REPRESENTATION AT FIRST MEETING OF
CREDITORS.
Section 341(c) of title 11, United States Code, is amended
by inserting after the first sentence the following:
``Notwithstanding any local court rule, provision of a State
constitution, any other State or Federal nonbankruptcy law,
or other requirement that representation at the meeting of
creditors under subsection (a) be by an attorney, a creditor
holding a consumer debt or its representatives (which
representatives may include an entity or an employee of an
entity and may be a representative for more than 1 creditor)
shall be permitted to appear at and participate in the
meeting of creditors in a case under chapter 7 or 13 either
alone or in conjunction with an attorney for the creditor.
Nothing in this subsection shall be construed to require any
creditor to be represented by an attorney at any meeting of
creditors.''.
SEC. 403. FILING PROOFS OF CLAIM.
Section 501 of title 11, United States Code, is amended by
adding at the end the following:
``(e) In a case under chapter 7 or 13, a proof of claim or
interest is deemed filed under this section for any claim or
interest that appears in the schedules filed under section
521(a)(1) of this title, except a claim or interest that is
scheduled as disputed, contingent, or unliquidated.''.
SEC. 404. AUDIT PROCEDURES.
(a) Amendment.--Section 586 of title 28, United States
Code, as amended by sections 111 and 240, is amended--
(1) by amending subsection (a)(6) to read as follows:
``(6) make such reports as the Attorney General directs,
including the results of audits performed under subsection
(f),'';
(2) by inserting at the end the following:
``(f)(1) The Attorney General shall establish procedures
for the auditing of the accuracy and completeness of
petitions, schedules, and other information which the debtor
is required to provide under sections 521 and 1322, and, if
applicable, section 111, of title 11 in individual cases
[[Page H4387]]
filed under chapter 7 or 13 of such title. Such audits shall
be in accordance with generally accepted auditing standards
and performed by independent certified public accountants or
independent licensed public accountants. Such procedures
shall--
``(A) establish a method of selecting appropriate qualified
persons to contract with the United States trustee to perform
such audits;
``(B) establish a method of randomly selecting cases to be
audited according to generally accepted audit standards,
provided that no less than 1 out of every 100 cases in each
Federal judicial district shall be selected for audit;
``(C) require audits for schedules of income and expenses
which reflect higher than average variances from the
statistical norm of the district in which the schedules were
filed;
``(D) establish procedures for reporting the results of
such audits and any material misstatement of income,
expenditures or assets of a debtor to the Attorney General,
the United States Attorney and the court, as appropriate, and
for providing public information no less than annually on the
aggregate results of such audits including the percentage of
cases, by district, in which a material misstatement of
income or expenditures is reported; and
``(E) establish procedures for fully funding such audits.
``(2) The United States trustee for each district is
authorized to contract with auditors to perform audits in
cases designated by the United States trustee according to
the procedures established under paragraph (1) of this
subsection.
``(3) According to procedures established under paragraph
(1), upon request of a duly appointed auditor, the debtor
shall cause the accounts, papers, documents, financial
records, files and all other papers, things or property
belonging to the debtor as the auditor requests and which are
reasonably necessary to facilitate an audit to be made
available for inspection and copying.
``(4) The report of each such audit shall be filed with the
court, the Attorney General, and the United States Attorney,
as required under procedures established by the Attorney
General under paragraph (1). If a material misstatement of
income or expenditures or of assets is reported, a statement
specifying such misstatement shall be filed with the court
and the United States trustee shall give notice thereof to
the creditors in the case and, in an appropriate case, in the
opinion of the United States trustee, requires investigation
with respect to possible criminal violations, the United
States Attorney for the district.''.
(b) Effective Date.--The amendments made by this section
shall take effect 18 months after the date of the enactment
of this Act.
SEC. 405. GIVING CREDITORS FAIR NOTICE IN CHAPTER 7 AND 13
CASES.
Section 342 of title 11, United States Code, is amended--
(1) in subsection (c)--
(A) by striking ``, but the failure of such notice to
contain such information shall not invalidate the legal
effect of such notice''; and
(B) by adding the following at the end:
``If the credit agreement between the debtor and the creditor
or the last communication before the filing of the petition
in a voluntary case from the creditor to a debtor who is an
individual states an account number of the debtor which is
the current account number of the debtor with respect to any
debt held by the creditor against the debtor, the debtor
shall include such account number in any notice to the
creditor required to be given under this title. If the
creditor has specified to the debtor an address at which the
creditor wishes to receive correspondence regarding the
debtor's account, any notice to the creditor required to be
given by the debtor under this title shall be given at such
address. For the purposes of this section, `notice' shall
include, but shall not be limited to, any correspondence from
the debtor to the creditor after the commencement of the
case, any statement of the debtor's intention under section
521(a)(2) of this title, notice of the commencement of any
proceeding in the case to which the creditor is a party, and
any notice of the hearing under section 1324.'';
(2) by adding at the end the following:
``(d) At any time, a creditor in a case of an individual
debtor under chapter 7 or 13 may file with the court and
serve on the debtor a notice of the address to be used to
notify the creditor in that case. Five days after receipt of
such notice, if the court or the debtor is required to give
the creditor notice, such notice shall be given at that
address.
``(e) An entity may file with the court a notice stating
its address for notice in cases under chapters 7 and 13.
After 30 days following the filing of such notice, any notice
in any case filed under chapter 7 or 13 given by the court
shall be to that address unless specific notice is given
under subsection (d) with respect to a particular case.
``(f) Notice given to a creditor other than as provided in
this section shall not be effective notice until it has been
brought to the attention of the creditor. If the creditor has
designated a person or department to be responsible for
receiving notices concerning bankruptcy cases and has
established reasonable procedures so that bankruptcy notices
received by the creditor will be delivered to such department
or person, notice will not be brought to the attention of the
creditor until received by such person or department. No
sanction under section 362(h) of this title or any other
sanction which a court may impose on account of violations of
the stay under section 362(a) of this title or failure to
comply with section 542 or 543 of this title may be imposed
on any action of the creditor unless the action takes place
after the creditor has received notice of the commencement of
the case effective under this section.''.
SEC. 406. DEBTOR TO PROVIDE TAX RETURNS AND OTHER
INFORMATION.
Section 521 of title 11, United States Code, is amended--
(1) by inserting ``(a)'' before ``The'';
(2) by amending paragraph (1) to read as follows:
``(1) file--
``(A) a list of creditors, and
``(B) unless the court orders otherwise--
``(i) a schedule of assets and liabilities;
``(ii) a schedule of current income and current
expenditures;
``(iii) a statement of the debtor's financial affairs;
``(iv) copies of all payment advices or other evidence of
payment, if any, received by the debtor from any employer of
the debtor in the period 60 days prior to the filing of the
petition;
``(v) a statement of the amount of projected monthly net
income, itemized to show how calculated;
``(vi) if applicable, any statement under paragraphs (3)
and (4) of section 109(h);
``(vii) a statement disclosing any reasonably anticipated
increase in income or expenditures over the next 12 months;
and
``(viii) a certificate, if applicable--
``(I) of an attorney whose name is on the petition as the
attorney for the debtor, or of any bankruptcy petition
preparer who signed the petition pursuant to section
110(b)(1) of this title, indicating that such attorney or
bankruptcy petition preparer delivered to the debtor any
notice required by section 342(b)(1) of this title; or
``(II) if no attorney for the debtor is indicated and no
bankruptcy petition preparer signed the petition of the
debtor, that such notice was obtained and read by the
debtor;''; and
(3) by adding at the end the following:
``(b) At any time, a creditor in a case of an individual
debtor under chapter 7 or 13 may file with the court and
serve on the debtor notice that the creditor requests the
petition, schedules, and statement of financial affairs filed
by the debtor in the case. At any time, a creditor in a case
under chapter 13 of this title may file with the court and
serve on the debtor notice that the creditor requests the
plan filed by the debtor in the case. Within 10 days of the
first such request in a case under this subsection for the
petition, schedules, and statement of financial affairs and
the first such request for the plan under this subsection,
the debtor shall serve on that creditor a conformed copy of
the requested documents or plan and any amendments thereto as
of that date, and shall thereafter promptly serve on that
creditor at the time filed with the court--
``(1) any requested document or plan which is not filed
with the court at the time requested; and
``(2) any amendment to any requested document or plan.
``(c)(1) An individual debtor in a case under chapter 7 or
13 shall provide to the United States trustee--
``(A) copies of all Federal tax returns (including any
schedules and attachments) filed by the debtor for the 3 most
recent tax years preceding the order for relief;
``(B) at the time the debtor files them with the
Commissioner of Internal Revenue, all Federal tax returns
(including any schedules and attachments) for the debtor's
tax years ending while such case is pending; and
``(C) at the time the debtor files them with the
Commissioner of Internal Revenue, all amendments to the tax
returns (including schedules and attachments) described in
subparagraphs (A) and (B).
``(2)(A) The United States trustee shall make such Federal
tax returns (including schedules, attachments, and
amendments) available to any party in interest for inspection
and copying not later than 10 days after receiving a request
by such party.
``(B) If the United States trustee does not comply with
subparagraph (A), on the motion of such party, the court
shall issue an order compelling the United States trustee to
comply with subparagraph (A).
``(d) A debtor in a case under chapter 13 of this title
shall file, from a time which is the later of 90 days after
the close of the debtor's tax year or 1 year after the order
for relief unless a plan has then been confirmed, and
thereafter on or before 45 days before each anniversary of
the confirmation of the plan until the case is closed, a
statement subject to the penalties of perjury by the debtor
of the debtor's income and expenditures in the preceding tax
year and monthly net income, showing how calculated. Such
statement shall disclose the amount and sources of income of
the debtor, the identity of any persons responsible with the
debtor for the support of any dependents of the debtor, and
any persons who contributed and the amount contributed to the
household in which the debtor resides. Such tax returns,
amendments and statement of income and expenditures shall be
available to the United States trustee, any bankruptcy
administrator, any trustee and any party in interest for
inspection and copying.''.
SEC. 407. DISMISSAL FOR FAILURE TO FILE SCHEDULES TIMELY OR
PROVIDE REQUIRED INFORMATION.
Section 521 of title 11, United States Code, as amended by
section 406, is amended by adding at the end the following:
``(e) Notwithstanding section 707(a) of this title, if an
individual debtor in a voluntary case under chapter 7 or 13
fails to provide all of the information required under
subsections (a)(1) and (c)(1)(A) within 45 days after the
filing of the petition, the case shall be automatically
dismissed effective on the 46th day after the filing of the
petition without the need for any order of court, but any
party in interest may request the court to enter an order
dismissing the case and the court shall, if so requested,
enter an order of dismissal within 5 days of such request.
Upon request of the debtor made within 45 days after
[[Page H4388]]
the filing of the petition, the court may allow the debtor up
to an additional 15 days to provide the information required
under subsections (a)(1) and (c)(1)(A) if the court finds
compelling justification for doing so.
``(f) If an individual debtor in a case under chapter 7 or
13 fails to perform any of the duties imposed by subsections
(b), (c)(1)(B), (c)(1)(C), and (d), any party in interest may
request that the court order the debtor to comply. Within 10
days of such request the court shall order that the debtor do
so within a period of time set by the court no longer than 30
days. If the debtor does not comply with that order within
the period of time set by the court, the court shall, on
request of any party in interest certifying that the debtor
has not so complied, enter an order dismissing the case
within 5 days of such request.''.
SEC. 408. ADEQUATE TIME TO PREPARE FOR HEARING ON
CONFIRMATION OF THE PLAN.
Section 1324 of title 11, United States Code, is amended--
(1) by striking ``After'' and inserting the following:
``(a) Except as provided in subsection (b) and after''; and
(2) by adding at the end the following:
``(b) The hearing on confirmation of the plan may be held
not earlier than 20 days, and not later than 45 days, after
the meeting of creditors under section 341(a) of this
title.''.
SEC. 409. CHAPTER 13 PLANS TO HAVE A 5-YEAR DURATION IN
CERTAIN CASES.
Title 11, United States Code, is amended--
(1) by amending section 1322(d) to read as follows:
``(d) If the total current monthly income of the debtor and
in a joint case, the debtor and the debtor's spouse combined,
is not less than the highest national median family income
reported for a family of equal or lesser size or, in the case
of a household of 1 person, not less than the national median
household income for 1 earner, the plan may not provide for
payments over a period that is longer than 5 years, unless
the court, for cause, approves a longer period, but the court
may not approve a period that exceeds 7 years. If the total
current monthly income of the debtor or in a joint case, the
debtor and the debtor's spouse combined, is less than the
highest national median family income reported for a family
of equal or lesser size, or in the case of a household of 1
person less than the national median household income for 1
earner, the plan may not provide for payments over a period
that is longer than 3 years, unless the court, for cause,
approves a longer period, but the court may not approve a
period that is longer than 5 years.'';
(2) in section 1329--
(A) by striking in subsection (c) ``three years'' and
inserting ``the applicable commitment period under section
1325(b)(1)(B)(ii)'' and by striking ``five years'' and
inserting ``maximum duration period''; and
(B) by inserting at the end of subsection (c) the
following:
``The maximum duration period shall be 5 years if the total
current monthly income of the debtor, and in a joint case,
the debtor and the debtor's spouse combined, is not less than
the highest national median family income reported for a
family of equal or lesser size or, in the case of a household
of 1 person, not less than the national median household
income for 1 earner, as of the date of the modification and
shall be 3 years if the total current monthly income is less
than the highest national median family income reported for a
family of equal or lesser size or, in the case of a household
of 1 person, less than the national median household income
for 1 earner as of the date of the modification.''.
SEC. 410. SENSE OF THE CONGRESS REGARDING EXPANSION OF RULE
9011 OF THE FEDERAL RULES OF BANKRUPTCY
PROCEDURE.
It is the sense of the Congress that rule 9011 of the
Federal Rules of Bankruptcy Procedure (11 U.S.C. App) should
be modified to include a requirement that all documents
(including schedules), signed and unsigned, submitted to the
court or to a trustee by debtors who represent themselves and
debtors who are represented by an attorney be submitted only
after the debtor or the debtor's attorney has made reasonable
inquiry to verify that the information contained in such
documents is well grounded in fact, and is warranted by
existing law or a good-faith argument for the extension,
modification, or reversal of existing law.
SEC. 411. JURISDICTION OF COURTS OF APPEALS.
(a) Jurisdiction.--Title 28 of the United States Code is
amended--
(1) by striking section 158;
(2) by inserting after section 1292 the following:
``Sec. 1293. Bankruptcy appeals
``The courts of appeals (other the United States Court of
Appeals for the Federal Circuit) shall have jurisdiction of
appeals from the following:
``(1) Final orders and judgments of bankruptcy courts
entered under--
``(A) section 157(b) of this title in core proceedings
arising under title 11, or arising in or related to a case
under title 11; or
``(B) section 157(c)(2) of this title in proceedings
referred to such courts.
``(2) Final orders and judgments of district courts entered
under section 157 of this title in--
``(A) core proceedings arising under title 11, or arising
in or related to a case under title 11; or
``(B) proceedings that are not core proceedings, but that
are otherwise related to a case under title 11.
``(3) Orders and judgments of bankruptcy courts or district
courts entered under section 105 of title 11, or the refusal
to enter an order or judgment under such section.
``(4) Orders of bankruptcy courts or district courts
entered under section 1104(a) or 1121(d) of title 11, or the
refusal to enter an order under such section.
``(5) An interlocutory order of a bankruptcy court or
district court entered in a case under title 11, in a
proceeding arising under title 11, or in a proceeding arising
in or related to a case under title 11, if--
``(A) such court is of the opinion that--
``(i) such order involves a controlling question of law as
to which there is substantial ground for difference of
opinion; and
``(ii) an immediate appeal from such order may materially
advance the ultimate termination of such case or such
proceeding; or
``(B) the court of appeals that would have jurisdiction of
an appeal of a final order entered in such case or such
proceeding permits, in its discretion, appeal to be taken
from such interlocutory order.''; and
(3) in--
(A) the table of sections for chapter 6 by striking the
item relating to section 158; and
(B) the table of sections for chapter 83 by inserting after
the item relating to section 1292 the following:
``1293. Bankruptcy appeals.''.
(b) Conforming Amendments.--(1) Section 305(c) of title 11,
the United States Code, is amended by striking ``158(d),
1291, or 1292'' and inserting ``1291, 1292, or 1293''.
(2) Title 28, United States Code, is amended--
(A) in subsections (b)(1) and (c)(2) of section 157 by
striking ``section 158'' and inserting ``section 1293'';
(B) in section 1334(d) by striking ``158(d), 1291, or
1292'' and inserting ``1291, 1292, or 1293''; and
(C) in section 1452(b) by striking ``158(d), 1291, or
1292'' and inserting ``1291, 1292, or 1293''.
SEC. 412. ESTABLISHMENT OF OFFICIAL FORMS.
The Judicial Conference of the United States shall
establish official forms to facilitate compliance with the
amendments made by sections 101 and 102.
SEC. 413. ELIMINATION OF CERTAIN FEES PAYABLE IN CHAPTER 11
BANKRUPTCY CASES.
(a) Amendments.--Section 1930(a)(6) of title 28, United
States Code, is amended--
(1) in the 1st sentence by striking ``until the case is
converted or dismissed, whichever occurs first'', and
(2) in the 2d sentence--
(A) by striking ``The'' and inserting ``Until the plan is
confirmed or the case is converted (whichever occurs first)
the'', and
(B) by striking ``less than $300,000;'' and inserting
``less than $300,000. Until the case is converted or
dismissed (whichever occurs first and without regard to
confirmation of the plan) the fee shall be''.
(b) Delayed Effective Date.--The amendments made by
subsection (a) shall take effect on October 1, 1999.
Subtitle B--Data Provisions
SEC. 441. IMPROVED BANKRUPTCY STATISTICS.
(a) Amendment.--Title 28, United States Code, is amended by
adding after section 158 the following new section:
``Sec. 159. Bankruptcy statistics
``The Director of the Executive Office for United States
Trustees shall compile statistics regarding individual
debtors with primarily consumer debts seeking relief under
chapters 7, 11, and 13 of title 11. Such statistics shall be
in a form prescribed by the Administrative Office of the
United States Courts. The Office shall compile such
statistics, and make them public, and report annually to the
Congress on the information collected, and on its analysis
thereof, no later than October 31 of each year. Such
compilation shall be itemized by chapter of title 11, shall
be presented in the aggregate and for each district, and
shall include the following:
``(1) Total assets and total liabilities of such debtors,
and in each category of assets and liabilities, as reported
in the schedules prescribed pursuant to section 2075 of this
title and filed by such debtors.
``(2) The current total monthly income, projected monthly
net income, and average income and average expenses of such
debtors as reported on the schedules and statements the
debtor has filed under sections 111, 521, and 1322 of title
11.
``(3) The aggregate amount of debt discharged in the
reporting period, determined as the difference between the
total amount of debt and obligations of a debtor reported on
the schedules and the amount of such debt reported in
categories which are predominantly nondischargeable.
``(4) The average time between the filing of the petition
and the closing of the case.
``(5) The number of cases in the reporting period in which
a reaffirmation was filed and the total number of
reaffirmations filed in that period, and of those cases in
which a reaffirmation was filed, the number in which the
debtor was not represented by an attorney, and of those the
number of cases in which the reaffirmation was approved by
the court.
``(6) With respect to cases filed under chapter 13 of title
11--
``(A) the number of cases in which a final order was
entered determining the value of property securing a claim
less than the claim, and the total number of such orders in
the reporting period; and
``(B) the number of cases dismissed for failure to make
payments under the plan.
``(7) The number of cases in which the debtor filed another
case within the 6 years previous to the filing.''.
(b) Effective Date.--The amendment made by subsection (a)
shall take effect 18 months after the date of the enactment
of this Act.
[[Page H4389]]
SEC. 442. BANKRUPTCY DATA.
(a) Amendment.--Title 28 of the United States Code is
amended by inserting after section 589a the following:
``Sec. 589b. Bankruptcy data
``(a) Rules.--The Attorney General shall, within a
reasonable time after the effective date of this section,
issue rules requiring uniform forms for (and from time to
time thereafter to appropriately modify and approve)--
``(1) final reports by trustees in cases under chapters 7,
12, and 13 of title 11; and
``(2) periodic reports by debtors in possession or
trustees, as the case may be, in cases under chapter 11 of
title 11.
``(b) Reports.--All reports referred to in subsection (a)
shall be designed (and the requirements as to place and
manner of filing shall be established) so as to facilitate
compilation of data and maximum possible access of the
public, both by physical inspection at 1 or more central
filing locations, and by electronic access through the
Internet or other appropriate media.
``(c) Required Information.--The information required to be
filed in the reports referred to in subsection (b) shall be
that which is in the best interests of debtors and creditors,
and in the public interest in reasonable and adequate
information to evaluate the efficiency and practicality of
the Federal bankruptcy system. In issuing rules proposing the
forms referred to in subsection (a), the Attorney General
shall strike the best achievable practical balance between--
``(1) the reasonable needs of the public for information
about the operational results of the Federal bankruptcy
system; and
``(2) economy, simplicity, and lack of undue burden on
persons with a duty to file reports.
``(d) Final Reports.--Final reports proposed for adoption
by trustees under chapters 7, 12, and 13 of title 11 shall,
in addition to such other matters as are required by law or
as the Attorney General in the discretion of the Attorney
General, shall propose, include with respect to a case under
such title--
``(1) information about the length of time the case was
pending;
``(2) assets abandoned;
``(3) assets exempted;
``(4) receipts and disbursements of the estate;
``(5) expenses of administration;
``(6) claims asserted;
``(7) claims allowed; and
``(8) distributions to claimants and claims discharged
without payment;
in each case by appropriate category and, in cases under
chapters 12 and 13 of title 11, date of confirmation of the
plan, each modification thereto, and defaults by the debtor
in performance under the plan.
``(e) Periodic Reports.--Periodic reports proposed for
adoption by trustees or debtors in possession under chapter
11 of title 11 shall, in addition to such other matters as
are required by law or as the Attorney General, in the
discretion of the Attorney General, shall propose, include--
``(1) information about the standard industry
classification, published by the Department of Commerce, for
the businesses conducted by the debtor;
``(2) length of time the case has been pending;
``(3) number of full-time employees as at the date of the
order for relief and at end of each reporting period since
the case was filed;
``(4) cash receipts, cash disbursements and profitability
of the debtor for the most recent period and cumulatively
since the date of the order for relief;
``(5) compliance with title 11, whether or not tax returns
and tax payments since the date of the order for relief have
been timely filed and made;
``(6) all professional fees approved by the court in the
case for the most recent period and cumulatively since the
date of the order for relief (separately reported, in for the
professional fees incurred by or on behalf of the debtor,
between those that would have been incurred absent a
bankruptcy case and those not); and
``(7) plans of reorganization filed and confirmed and, with
respect thereto, by class, the recoveries of the holders,
expressed in aggregate dollar values and, in the case of
claims, as a percentage of total claims of the class
allowed.''.
(b) Technical Amendment.--The table of sections of chapter
39 of title 28, United States Code, is amended by adding at
the end the following:
``589b. Bankruptcy data.''.
SEC. 443. SENSE OF THE CONGRESS REGARDING AVAILABILITY OF
BANKRUPTCY DATA.
It is the sense of the Congress that--
(1) the national policy of the United States should be that
all data held by bankruptcy clerks in electronic form, to the
extent such data reflects only public records (as defined in
section 107 of title 11 of the United States Code), should be
released in a usable electronic form in bulk to the public
subject to such appropriate privacy concerns and safeguards
as the Judicial Conference of the United States may
determine; and
(2) there should be established a bankruptcy data system in
which--
(A) a single set of data definitions and forms are used to
collect data nationwide; and
(B) data for any particular bankruptcy case are aggregated
in the same electronic record.
TITLE V--TAX PROVISIONS
SEC. 501. TREATMENT OF CERTAIN LIENS.
(a) Treatment of Certain Liens.--Section 724 of title 11,
United States Code, is amended--
(1) in subsection (b), in the matter preceding paragraph
(1), by inserting ``(other than to the extent that there is a
properly perfected unavoidable tax lien arising in connection
with an ad valorem tax on real or personal property of the
estate)'' after ``under this title'';
(2) in subsection (b)(2), after ``507(a)(1)'', insert
``(except that such expenses, other than claims for wages,
salaries, or commissions which arise after the filing of a
petition, shall be limited to expenses incurred under chapter
7 of this title and shall not include expenses incurred under
chapter 11 of this title)''; and
(3) by adding at the end the following:
``(e) Before subordinating a tax lien on real or personal
property of the estate, the trustee shall--
``(1) exhaust the unencumbered assets of the estate; and
``(2) in a manner consistent with section 506(c) of this
title, recover from property securing an allowed secured
claim the reasonable, necessary costs and expenses of
preserving or disposing of that property.
``(f) Notwithstanding the exclusion of ad valorem tax liens
set forth in this section and subject to the requirements of
subsection (e)--
``(1) claims for wages, salaries, and commissions that are
entitled to priority under section 507(a)(3) of this title;
or
``(2) claims for contributions to an employee benefit plan
entitled to priority under section 507(a)(4) of this title,
may be paid from property of the estate which secures a tax
lien, or the proceeds of such property.''.
(b) Determination of Tax Liability.--Section 505(a)(2) of
title 11, United States Code, is amended--
(1) in subparagraph (A), by striking ``or'' at the end;
(2) in subparagraph (B), by striking the period at the end
and inserting ``; or''; and
(3) by adding at the end the following:
``(C) the amount or legality of any amount arising in
connection with an ad valorem tax on real or personal
property of the estate, if the applicable period for
contesting or redetermining that amount under any law (other
than a bankruptcy law) has expired.''.
SEC. 502. ENFORCEMENT OF CHILD AND SPOUSAL SUPPORT.
Section 522(c)(1) of title 11, United States Code, is
amended by inserting ``, except that, notwithstanding any
other Federal law or State law relating to exempted property,
exempt property shall be liable for debts of a kind specified
in paragraph (1) or (5) of section 523(a) of this title''
before the semicolon at the end.
SEC. 503. EFFECTIVE NOTICE TO GOVERNMENT.
(a) Effective Notice to Governmental Units.--Section 342 of
title 11, United States Code, as amended by section 405, is
amended by adding at the end the following:
``(g) If a debtor lists a governmental unit as a creditor
in a list or schedule, any notice required to be given by the
debtor under this title, any rule, any applicable law, or any
order of the court, shall identify the department, agency, or
instrumentality through which the debtor is indebted. The
debtor shall identify (with information such as a taxpayer
identification number, loan, account or contract number, or
real estate parcel number, where applicable), and describe
the underlying basis for the governmental unit's claim. If
the debtor's liability to a governmental unit arises from a
debt or obligation owed or incurred by another individual,
entity, or organization, or under a different name, the
debtor shall identify such individual, entity, organization,
or name.
``(h) The clerk shall keep and update quarterly, in the
form and manner as the Director of the Administrative Office
of the United States Courts prescribes, and make available to
debtors, a register in which a governmental unit may
designate a safe harbor mailing address for service of notice
in cases pending in the district. A governmental unit may
file a statement with the clerk designating a safe harbor
address to which notices are to be sent, unless such
governmental unit files a notice of change of address.''.
(b) Adoption of Rules Providing Notice.--The Advisory
Committee on Bankruptcy Rules of the Judicial Conference
shall, within a reasonable period of time after the date of
the enactment of this Act, propose for adoption enhanced
rules for providing notice to State, Federal, and local
government units that have regulatory authority over the
debtor or which may be creditors in the debtor's case. Such
rules shall be reasonably calculated to ensure that notice
will reach the representatives of the governmental unit, or
subdivision thereof, who will be the proper persons
authorized to act upon the notice. At a minimum, the rules
should require that the debtor--
(1) identify in the schedules and the notice, the
subdivision, agency, or entity in respect of which such
notice should be received;
(2) provide sufficient information (such as case captions,
permit numbers, taxpayer identification numbers, or similar
identifying information) to permit the governmental unit or
subdivision thereof, entitled to receive such notice, to
identify the debtor or the person or entity on behalf of
which the debtor is providing notice where the debtor may be
a successor in interest or may not be the same as the person
or entity which incurred the debt or obligation; and
(3) identify, in appropriate schedules, served together
with the notice, the property in respect of which the claim
or regulatory obligation may have arisen, if any, the nature
of such claim or regulatory obligation and the purpose for
which notice is being given.
(c) Effect of Failure of Notice.--Section 342 of title 11,
United States Code, as amended by subsection (a) and section
405, is amended by adding at the end the following:
``(i)(1) A notice that does not comply with subsections (d)
and (e) shall have no effect unless the debtor demonstrates,
by clear and convincing evidence, that timely notice was
given in a manner reasonably calculated to satisfy the
requirements of this section was given, and that--
[[Page H4390]]
``(A) either the notice was timely sent to the safe harbor
address provided in the register maintained by the clerk of
the district in which the case was pending for such purposes;
or
``(B) no safe harbor address was provided in such list for
the governmental unit and that an officer of the governmental
unit who is responsible for the matter or claim had actual
knowledge of the case in sufficient time to act.
``(2) No sanction under section 362(h) of this title or any
other sanction which a court may impose on account of
violations of the stay under section 362(a) of this title or
failure to comply with section 542 or 543 of this title may
be imposed unless the action takes place after notice of the
commencement of the case as required by this section has been
received.''.
SEC. 504. NOTICE OF REQUEST FOR A DETERMINATION OF TAXES.
Section 505(b) of title 11, United States Code, is amended
by striking ``Unless'' at the beginning of the second
sentence thereof and inserting ``If the request is made in
the manner designated by the governmental unit and unless''.
SEC. 505. RATE OF INTEREST ON TAX CLAIMS.
Chapter 5 of title 11, United States Code, is amended by
adding at the end the following:
``Sec. 511. Rate of interest on tax claims
``Notwithstanding any provision of this title that requires
the payment of interest on a claim, if interest is required
to be paid on a tax claim, the rate of interest shall be as
follows:
``(1) In the case of ad valorem tax claims, whether secured
or unsecured, other unsecured tax claims where interest is
required to be paid under section 726(a)(5) of this title and
secured tax claims the rate shall be determined under
applicable nonbankruptcy law.
``(2) In the case of unsecured claims for taxes arising
before the date of the order for relief and paid under a plan
of reorganization, the minimum rate of interest to be applied
during the period after the filing of the petition shall be
the Federal short-term rate rounded to the nearest full
percent, determined under section 1274(d) of the Internal
Revenue Code of 1986, for the calendar month in which the
plan is confirmed, plus 3 percentage points.''.
SEC. 506. TOLLING OF PRIORITY OF TAX CLAIM TIME PERIODS.
Section 507(a)(9)(A) of title 11, United States Code, as so
redesignated, is amended--
(1) in clause (i) by inserting after ``petition'' and
before the semicolon ``, plus any time, plus 6 months, during
which the stay of proceedings was in effect in a prior case
under this title''; and
(2) amend clause (ii) to read as follows:
``(ii) assessed within 240 days before the date of the
filing of the petition, exclusive of--
``(I) any time plus 30 days during which an offer in
compromise with respect of such tax, was pending or in effect
during such 240-day period;
``(II) any time plus 30 days during which an installment
agreement with respect of such tax was pending or in effect
during such 240-day period, up to 1 year; and
``(III) any time plus 6 months during which a stay of
proceedings against collections was in effect in a prior case
under this title during such 240-day period.''.
SEC. 507. ASSESSMENT DEFINED.
(a) Assessment Defined for Priority Purposes.--Section 101
of title 11, United States Code, is amended by inserting
after paragraph (2) the following:
``(3) `assessment'--
``(A) for purposes of State and local taxes, means that
point in time when all actions required have been taken so
that thereafter a taxing authority may commence an action to
collect the tax, and
``(B) for Federal tax purposes has the meaning given such
term in the Internal Revenue Code of 1986;
and `assessed' and `assessable' shall be interpreted in light
of the definition of assessment in this paragraph;''.
(b) Assessment Defined for the Stay of Proceedings.--
Section 362(b)(9)(D) of title 11, United States Code, is
amended by inserting after ``the making of an assessment''
the following: ``as defined by applicable nonbankruptcy law
notwithstanding the definition of an `assessment' elsewhere
in this title''.
SEC. 508. CHAPTER 13 DISCHARGE OF FRAUDULENT AND OTHER TAXES.
Section 1328(a)(2) of title 11, United States Code, is
amended by inserting ``(1),'' after ``paragraph''.
SEC. 509. CHAPTER 11 DISCHARGE OF FRAUDULENT TAXES.
Section 1141(d) of title 11, United States Code, as amended
by section 119A, is amended by adding at the end the
following:
``(6) Notwithstanding the provisions of paragraph (1), the
confirmation of a plan does not discharge a debtor which is a
corporation from any debt for a tax or customs duty with
respect to which the debtor made a fraudulent return or
willfully attempted in any manner to evade or defeat such
tax.''.
SEC. 510. THE STAY OF TAX PROCEEDINGS.
(a) The Section 362 Stay Limited to Prepetition Taxes.--
Section 362(a)(8) of title 11, United States Code, is amended
by striking the period at the end and inserting ``, in
respect of a tax liability for a taxable period ending before
the order for relief.''.
(b) The Appeal of Tax Court Decisions Permitted.--Section
362(b)(9) of title 11, United States Code, is amended--
(1) in subparagraph (C) by striking ``or'' at the end,
(2) in subparagraph (D) by striking the period at the end
and inserting ``; or'', and
(3) by adding at the end the following:
``(E) the appeal of a decision by a court or administrative
tribunal which determines a tax liability of the debtor
without regard to whether such determination was made
prepetition or postpetition.''.
SEC. 511. PERIODIC PAYMENT OF TAXES IN CHAPTER 11 CASES.
Section 1129(a)(9) of title 11, United States Code, is
amended--
(1) in subparagraph (B) by striking ``and'' at the end; and
(2) in subparagraph (C)--
(A) by striking ``deferred cash payments, over a period not
exceeding six years after the date of assessment of such
claim,'' and inserting ``regular installment payments in
cash, but in no case with a balloon provision, and no more
than three months apart, beginning no later than the
effective date of the plan and ending on the earlier of five
years after the petition date or the last date payments are
to be made under the plan to unsecured creditors,'';
(B) by striking the period at the end and inserting ``;
and''; and
(3) by adding at the end the following:
``(D) with respect to a secured claim which would be
described in section 507(a)(8) of this title but for its
secured status, the holder of such claim will receive on
account of such claim cash payments of not less than is
required in subparagraph (C) and over a period no greater
than is required in such subparagraph.''.
SEC. 512. THE AVOIDANCE OF STATUTORY TAX LIENS PROHIBITED.
Section 545(2) of title 11, United States Code, is amended
by striking the semicolon at the end and inserting ``, except
where such purchaser is a purchaser described in section 6323
of the Internal Revenue Code of 1986 or similar provision of
State or local law;''.
SEC. 513. PAYMENT OF TAXES IN THE CONDUCT OF BUSINESS.
(a) Payment of Taxes Required.--Section 960 of title 28,
United States Code, is amended--
(1) by inserting ``(a)'' before ``Any''; and
(2) by adding at the end the following:
``(b) Such taxes shall be paid when due in the conduct of
such business unless--
``(1) the tax is a property tax secured by a lien against
property that is abandoned within a reasonable time after the
lien attaches, by the trustee of a bankruptcy estate,
pursuant to section 554 of title 11; or
``(2) payment of the tax is excused under a specific
provision of title 11.
``(c) In a case pending under chapter 7 of title 11,
payment of a tax may be deferred until final distribution is
made under section 726 of title 11 if--
``(1) the tax was not incurred by a trustee duly appointed
under chapter 7 of title 11; or
``(2) before the due date of the tax, the court has made a
finding of probable insufficiency of funds of the estate to
pay in full the administrative expenses allowed under section
503(b) of title 11 that have the same priority in
distribution under section 726(b) of title 11 as such tax.''.
(b) Payment of Ad Valorem Taxes Required.--Section
503(b)(1)(B) of title 11, United States Code, is amended in
clause (i) by inserting after ``estate,'' and before
``except'' the following: ``whether secured or unsecured,
including property taxes for which liability is in rem only,
in personam or both,''.
(c) Request for Payment of Administrative Expense Taxes
Eliminated.--Section 503(b)(1) of title 11, United States
Code, is amended by adding at the end the following:
``(D) notwithstanding the requirements of subsection (a) of
this section, a governmental unit shall not be required to
file a request for the payment of a claim described in
subparagraph (B) or (C);''.
(d) Payment of Taxes and Fees as Secured Claims.--Section
506 of title 11, United States Code, is amended--
(1) in subsection (b) by inserting ``or State statute''
after ``agreement''; and
(2) in subsection (c) by inserting ``, including the
payment of all ad valorem property taxes in respect of the
property'' before the period at the end.
SEC. 514. TARDILY FILED PRIORITY TAX CLAIMS.
Section 726(a)(1) of title 11, United States Code, is
amended by striking ``before the date on which the trustee
commences distribution under this section'' and inserting
``on or before the earlier of 10 days after the mailing to
creditors of the summary of the trustee's final report or the
date on which the trustee commences final distribution under
this section''.
SEC. 515. INCOME TAX RETURNS PREPARED BY TAX AUTHORITIES.
Section 523(a)(1)(B) of title 11, United States Code, is
amended--
(1) by inserting ``or equivalent report or notice,'' after
``a return,'';
(2) in clause (i)--
(A) by inserting ``or given'' after ``filed''; and
(B) by striking ``or'' at the end;
(3) in clause (ii)--
(A) by inserting ``or given'' after ``filed'';
(B) by inserting ``, report, or notice'' after ``return'';
and
(4) by adding at the end the following:
``(iii) for purposes of this subsection, a return--
``(I) must satisfy the requirements of applicable
nonbankruptcy law, and includes a return prepared pursuant to
section 6020(a) of the Internal Revenue Code of 1986, or
similar State or local law, or a written stipulation to a
judgment entered by a nonbankruptcy tribunal, but does not
include a return made pursuant to section 6020(b) of the
Internal Revenue Code of 1986, or similar State or local law,
and
``(II) must have been filed in a manner permitted by
applicable nonbankruptcy law; or''.
SEC. 516. THE DISCHARGE OF THE ESTATE'S LIABILITY FOR UNPAID
TAXES.
Section 505(b) of title 11, United States Code, is amended
in the second sentence by inserting ``the estate,'' after
``misrepresentation,''.
[[Page H4391]]
SEC. 517. REQUIREMENT TO FILE TAX RETURNS TO CONFIRM CHAPTER
13 PLANS.
(a) Filing of Prepetition Tax Returns Required for Plan
Confirmation.--Section 1325(a) of title 11, United States
Code, as amended by section 146, is amended--
(1) in paragraph (6) by striking ``and'' at the end;
(2) in paragraph (7) by striking the period at the end and
inserting ``; and''; and
(3) by adding at the end the following:
``(8) if the debtor has filed all Federal, State, and local
tax returns as required by section 1308 of this title.''.
(b) Additional Time Permitted for Filing Tax Returns.--(1)
Chapter 13 of title 11, United States Code, is amended by
adding at the end the following:
``Sec. 1308. Filing of prepetition tax returns
``(a) On or before the day prior to the day on which the
first meeting of the creditors is convened under section
341(a) of this title, the debtor shall have filed with
appropriate tax authorities all tax returns for all taxable
periods ending in the 6-year period ending on the date of
filing of the petition.
``(b) If the tax returns required by subsection (a) have
not been filed by the date on which the first meeting of
creditors is convened under section 341(a) of this title, the
trustee may continue such meeting for a reasonable period of
time, to allow the debtor additional time to file any unfiled
returns, but such additional time shall be no more than--
``(1) for returns that are past due as of the date of the
filing of the petition, 120 days from such date,
``(2) for returns which are not past due as of the date of
the filing of the petition, the later of 120 days from such
date or the due date for such returns under the last
automatic extension of time for filing such returns to which
the debtor is entitled, and for which request has been timely
made, according to applicable nonbankruptcy law, and
``(3) upon notice and hearing, and order entered before the
lapse of any deadline fixed according to this subsection,
where the debtor demonstrates, by clear and convincing
evidence, that the failure to file the returns as required is
because of circumstances beyond the control of the debtor,
the court may extend the deadlines set by the trustee as
provided in this subsection for--
``(A) a period of no more than 30 days for returns
described in paragraph (1) of this subsection, and
``(B) for no more than the period of time ending on the
applicable extended due date for the returns described in
paragraph (2).
``(c) For purposes of this section only, a return includes
a return prepared pursuant to section 6020 (a) or (b) of the
Internal Revenue Code of 1986 or similar State or local law,
or a written stipulation to a judgment entered by a
nonbankruptcy tribunal.''.
(2) The table of sections of chapter 13 of title 11, United
States Code, is amended by inserting after the item relating
to section 1307 the following:
``1308. Filing of prepetition tax returns.''.
(c) Dismissal or Conversion on Failure To Comply.--Section
1307 of title 11, United States Code, is amended--
(1) by redesignating subsections (e) and (f) as subsections
(f) and (g), respectively, and
(2) by inserting after subsection (d) the following:
``(e) Upon the failure of the debtor to file tax returns
under section 1308 of this title, on request of a party in
interest or the United States trustee and after notice and a
hearing, the court shall dismiss a case or convert a case
under this chapter to a case under chapter 7 of this title,
whichever is in the best interests of creditors and the
estate.''.
(d) Timely Filed Claims.--Section 502(b)(9) of title 11,
United States Code, is amended by striking the period at the
end and inserting ``, and except that in a case under chapter
13 of this title, a claim of a governmental unit for a tax in
respect of a return filed under section 1308 of this title
shall be timely if it is filed on or before 60 days after
such return or returns were filed as required.''.
(e) Rules for Objections to Claims and to Confirmation.--It
is the sense of Congress that the Advisory Committee on
Bankruptcy Rules of the Judicial Conference should, within a
reasonable period of time after the date of the enactment of
this Act, propose for adoption amended Federal Rules of
Bankruptcy Procedure which provide that--
(1) notwithstanding the provisions of Rule 3015(f), in
cases under chapter 13 of title 11, United States Code, a
governmental unit may object to the confirmation of a plan on
or before 60 days after the debtor files all tax returns
required under sections 1308 and 1325(a)(7) of title 11,
United States Code, and
(2) in addition to the provisions of Rule 3007, in a case
under chapter 13 of title 11, United States Code, no
objection to a tax in respect of a return required to be
filed under such section 1308 shall be filed until such
return has been filed as required.
SEC. 518. STANDARDS FOR TAX DISCLOSURE.
Section 1125(a) of title 11, United States Code, is amended
in paragraph (1)--
(1) by inserting after ``records,'' the following:
``including a full discussion of the potential material
Federal, State, and local tax consequences of the plan to the
debtor, any successor to the debtor, and a hypothetical
investor domiciled in the State in which the debtor resides
or has its principal place of business typical of the holders
of claims or interests in the case,'',
(2) by inserting ``such'' after ``enable'', and
(3) by striking ``reasonable'' where it appears after
``hypothetical'' and by striking ``typical of holders of
claims or interests'' after ``investor''.
SEC. 519. SETOFF OF TAX REFUNDS.
Section 362(b) of title 11, United States Code, as amended
by sections 130, 146, and 150 is amended--
(1) in paragraph (21) by striking ``or'',
(2) in paragraph (22) by striking the period at the end and
inserting ``; or'', and
(3) by inserting after paragraph (22) (as so redesignated)
the following:
``(23) under subsection (a) of the setoff of an income tax
refund, by a governmental unit, in respect of a taxable
period which ended before the order for relief against an
income tax liability for a taxable period which also ended
before the order for relief, unless--
``(A) prior to such setoff, an action to determine the
amount or legality of such tax liability under section 505(a)
was commenced; or
``(B) where the setoff of an income tax refund is not
permitted because of a pending action to determine the amount
or legality of a tax liability, the governmental unit may
hold the refund pending the resolution of the action.''.
TITLE VI--ANCILLARY AND OTHER CROSS-BORDER CASES
SEC. 601. AMENDMENT TO ADD A CHAPTER 6 TO TITLE 11, UNITED
STATES CODE.
(a) In General.--Title 11, United States Code, is amended
by inserting after chapter 5 the following:
``CHAPTER 6--ANCILLARY AND OTHER CROSS-BORDER CASES
``Sec.
``601. Purpose and scope of application.
``SUBCHAPTER I--GENERAL PROVISIONS
``602. Definitions.
``603. International obligations of the United States.
``604. Commencement of ancillary case.
``605. Authorization to act in a foreign country.
``606. Public policy exception.
``607. Additional assistance.
``608. Interpretation.
``SUBCHAPTER II--ACCESS OF FOREIGN REPRESENTATIVES AND CREDITORS TO THE
COURT
``609. Right of direct access.
``610. Limited jurisdiction.
``611. Commencement of bankruptcy case under section 301 or 303.
``612. Participation of a foreign representative in a case under this
title.
``613. Access of foreign creditors to a case under this title.
``614. Notification to foreign creditors concerning a case under this
title.
``SUBCHAPTER III--RECOGNITION OF A FOREIGN PROCEEDING AND RELIEF
``615. Application for recognition of a foreign proceeding.
``616. Presumptions concerning recognition.
``617. Order recognizing a foreign proceeding.
``618. Subsequent information.
``619. Relief that may be granted upon petition for recognition of a
foreign proceeding.
``620. Effects of recognition of a foreign main proceeding.
``621. Relief that may be granted upon recognition of a foreign
proceeding.
``622. Protection of creditors and other interested persons.
``623. Actions to avoid acts detrimental to creditors.
``624. Intervention by a foreign representative.
``SUBCHAPTER IV--COOPERATION WITH FOREIGN COURTS AND FOREIGN
REPRESENTATIVES
``625. Cooperation and direct communication between the court and
foreign courts or foreign representatives.
``626. Cooperation and direct communication between the trustee and
foreign courts or foreign representatives.
``627. Forms of cooperation.
``SUBCHAPTER V--CONCURRENT PROCEEDINGS
``628. Commencement of a case under this title after recognition of a
foreign main proceeding.
``629. Coordination of a case under this title and a foreign
proceeding.
``630. Coordination of more than 1 foreign proceeding.
``631. Presumption of insolvency based on recognition of a foreign main
proceeding.
``632. Rule of payment in concurrent proceedings.
``Sec. 601. Purpose and scope of application
``(a) The purpose of this chapter is to incorporate the
Model Law on Cross-Border Insolvency so as to provide
effective mechanisms for dealing with cases of cross-border
insolvency with the objectives of--
``(1) cooperation between--
``(A) United States courts, United States Trustees,
trustees, examiners, debtors, and debtors in possession; and
``(B) the courts and other competent authorities of foreign
countries involved in cross-border insolvency cases;
``(2) greater legal certainty for trade and investment;
``(3) fair and efficient administration of cross-border
insolvencies that protects the interests of all creditors,
and other interested entities, including the debtor;
``(4) protection and maximization of the value of the
debtor's assets; and
``(5) facilitation of the rescue of financially troubled
businesses, thereby protecting investment and preserving
employment.
``(b) This chapter applies where--
``(1) assistance is sought in the United States by a
foreign court or a foreign representative in connection with
a foreign proceeding;
``(2) assistance is sought in a foreign country in
connection with a case under this title;
[[Page H4392]]
``(3) a foreign proceeding and a case under this title with
respect to the same debtor are taking place concurrently; or
``(4) creditors or other interested persons in a foreign
country have an interest in requesting the commencement of,
or participating in, a case or proceeding under this title.
``(c) This chapter does not apply to--
``(1) a proceeding concerning an entity identified by
exclusion in subsection 109(b); or
``(2) an individual, or to an individual and such
individual's spouse, who have debts within the limits
specified in under section 109(e) and who are citizens of the
United States or aliens lawfully admitted for permanent
residence in the United States.
``SUBCHAPTER I--GENERAL PROVISIONS
``Sec. 602. Definitions
``For the purposes of this chapter, the term--
``(1) `debtor' means an entity that is the subject of a
foreign proceeding;
``(2) `establishment' means any place of operations where
the debtor carries out a nontransitory economic activity;
``(3) `foreign court' means a judicial or other authority
competent to control or supervise a foreign proceeding;
``(4) `foreign main proceeding' means a foreign proceeding
taking place in the country where the debtor has the center
of its main interests;
``(5) `foreign nonmain proceeding' means a foreign
proceeding, other than a foreign main proceeding, taking
place in a country where the debtor has an establishment;
``(6) `trustee' includes a trustee, a debtor in possession
in a case under any chapter of this title, or a debtor under
chapters 9 or 13 of this title; and
``(7) `within the territorial jurisdiction of the United
States' when used with reference to property of a debtor
refers to tangible property located within the territory of
the United States and intangible property deemed under
applicable nonbankruptcy law to be located within that
territory, including any property subject to attachment or
garnishment that may properly be seized or garnished by an
action in a Federal or State court in the United States.
``Sec. 603. International obligations of the United States
``To the extent that this chapter conflicts with an
obligation of the United States arising out of any treaty or
other form of agreement to which it is a party with 1 or more
other countries, the requirements of the treaty or agreement
prevail.
``Sec. 604. Commencement of ancillary case
``A case under this chapter is commenced by the filing of a
petition for recognition of a foreign proceeding under
section 615.
``Sec. 605. Authorization to act in a foreign country
``A trustee or another entity (including an examiner)
authorized by the court may be authorized by the court to act
in a foreign country on behalf of an estate created under
section 541. An entity authorized to act under this section
may act in any way permitted by the applicable foreign law.
``Sec. 606. Public policy exception
``Nothing in this chapter prevents the court from refusing
to take an action governed by this chapter if the action
would be manifestly contrary to the public policy of the
United States.
``Sec. 607. Additional assistance
``(a) Nothing in this chapter limits the power of the
court, upon recognition of a foreign proceeding, to provide
additional assistance to a foreign representative under this
title or under other laws of the United States.
``(b) In determining whether to provide additional
assistance under this title or under other laws of the United
States, the court shall consider whether such additional
assistance, consistent with the principles of comity, will
reasonably assure--
``(1) just treatment of all holders of claims against or
interests in the debtor's property;
``(2) protection of claim holders in the United States
against prejudice and inconvenience in the processing of
claims in such foreign proceeding;
``(3) prevention of preferential or fraudulent dispositions
of property of the debtor;
``(4) distribution of proceeds of the debtor's property
substantially in accordance with the order prescribed by this
title; and
``(5) if appropriate, the provision of an opportunity for a
fresh start for the individual that such foreign proceeding
concerns.
``Sec. 608. Interpretation
``In interpreting this chapter, the court shall consider
its international origin, and the need to promote an
application of this chapter that is consistent with the
application of similar statutes adopted by foreign
jurisdictions.
``SUBCHAPTER II--ACCESS OF FOREIGN REPRESENTATIVES AND CREDITORS TO THE
COURT
``Sec. 609. Right of direct access
``(a) A foreign representative is entitled to commence a
case under section 604 by filing a petition for recognition
under section 615, and upon recognition, to apply directly to
other Federal and State courts for appropriate relief in
those courts.
``(b) Upon recognition, and subject to section 610, a
foreign representative has the capacity to sue and be sued,
and shall be subject to the laws of the United States of
general applicability.
``(c) Recognition under this chapter is prerequisite to the
granting of comity or cooperation to a foreign proceeding in
any State or Federal court in the United States. Any request
for comity or cooperation in any court shall be accompanied
by a sworn statement setting forth whether recognition under
section 615 has been sought and the status of any such
petition.
``(d) Upon denial of recognition under this chapter, the
court may issue appropriate orders necessary to prevent an
attempt to obtain comity or cooperation from courts in the
United States without such recognition.
``Sec. 610. Limited jurisdiction
``The sole fact that a foreign representative files a
petition under sections 615 does not subject the foreign
representative to the jurisdiction of any court in the United
States for any other purpose.
``Sec. 611. Commencement of case under section 301 or 303
``(a) Upon filing a petition for recognition, a foreign
representative may commence--
``(1) an involuntary case under section 303; or
``(2) a voluntary case under section 301 or 302, if the
foreign proceeding is a foreign main proceeding.
``(b) The petition commencing a case under subsection (a)
of this section must be accompanied by a statement describing
the petition for recognition and its current status. The
court where the petition for recognition has been filed must
be advised of the foreign representative's intent to commence
a case under subsection (a) of this section prior to such
commencement.
``(c) A case under subsection (a) shall be dismissed unless
recognition is granted.
``Sec. 612. Participation of a foreign representative in a
case under this title
``Upon recognition of a foreign proceeding, the foreign
representative in that proceeding is entitled to participate
as a party in interest in a case regarding the debtor under
this title.
``Sec. 613. Access of foreign creditors to a case under this
title
``(a) Foreign creditors have the same rights regarding the
commencement of, and participation in, a case under this
title as domestic creditors.
``(b)(1) Subsection (a) of this section does not change or
codify present law as to the priority of claims under section
507 or 726 of this title, except that the claim of a foreign
creditor under those sections shall not be given a lower
priority than that of general unsecured claims without
priority solely because the holder of such claim is a foreign
creditor.
``(2)(A) Subsection (a) of this section and paragraph (1)
of this subsection do not change or codify present law as to
the allowability of foreign revenue claims or other foreign
public law claims in a proceeding under this title.
``(B) Allowance and priority as to a foreign tax claim or
other foreign public law claim shall be governed by any
applicable tax treaty of the United States, under the
conditions and circumstances specified therein.
``Sec. 614. Notification to foreign creditors concerning a
case under this title
``(a) Whenever in a case under this title notice is to be
given to creditors generally or to any class or category of
creditors, such notice shall also be given to the known
creditors generally, or to creditors in the notified class or
category, that do not have addresses in the United States.
The court may order that appropriate steps be taken with a
view to notifying any creditor whose address is not yet
known.
``(b) Such notification to creditors with foreign addresses
described in subsection (a) shall be given individually,
unless the court considers that, under the circumstances,
some other form of notification would be more appropriate. No
letters rogatory or other similar formality is required.
``(c) When a notification of commencement of a case is to
be given to foreign creditors, the notification shall--
``(1) indicate the time period for filing proofs of claim
and specify the place for their filing;
``(2) indicate whether secured creditors need to file their
proofs of claim; and
``(3) contain any other information required to be included
in such a notification to creditors pursuant to this title
and the orders of the court.
``(d) Any rule of procedure or order of the court as to
notice or the filing of a claim shall provide such additional
time to creditors with foreign addresses as is reasonable
under the circumstances.
``SUBCHAPTER III--RECOGNITION OF A FOREIGN PROCEEDING AND RELIEF
``Sec. 615. Application for recognition of a foreign
proceeding
``(a) A foreign representative applies to the court for
recognition of the foreign proceeding in which the foreign
representative has been appointed by filing a petition for
recognition.
``(b) A petition for recognition shall be accompanied by--
``(1) a certified copy of the decision commencing the
foreign proceeding and appointing the foreign representative;
``(2) a certificate from the foreign court affirming the
existence of the foreign proceeding and of the appointment of
the foreign representative; or
``(3) in the absence of evidence referred to in paragraphs
(1) and (2), any other evidence acceptable to the court of
the existence of the foreign proceeding and of the
appointment of the foreign representative.
``(c) A petition for recognition shall also be accompanied
by a statement identifying all foreign proceedings with
respect to the debtor that are known to the foreign
representative.
``(d) The documents referred to in paragraphs (1) and (2)
of subsection (b) must be translated into English. The court
may require a translation into English of additional
documents.
``Sec. 616. Presumptions concerning recognition
``(a) If the decision or certificate referred to in section
615(b) indicates that the foreign proceeding is a foreign
proceeding within the meaning of section 101(23) and that the
person or body is a foreign representative within the meaning
of
[[Page H4393]]
section 101(24), the court is entitled to so presume.
``(b) The court is entitled to presume that documents
submitted in support of the petition for recognition are
authentic, whether or not they have been legalized.
``(c) In the absence of evidence to the contrary, the
debtor's registered office, or habitual residence in the case
of an individual, is presumed to be the center of the
debtor's main interests.
``Sec. 617. Order recognizing a foreign proceeding
``(a) Subject to section 606, an order recognizing a
foreign proceeding shall be entered if--
``(1) the foreign proceeding is a foreign main proceeding
or foreign nonmain proceeding within the meaning of section
602;
``(2) the foreign representative applying for recognition
is a person or body within the meaning of section 101(24);
and
``(3) the petition meets the requirements of section 615.
``(b) The foreign proceeding shall be recognized--
``(1) as a foreign main proceeding if it is taking place in
the country where the debtor has the center of its main
interests; or
``(2) as a foreign nonmain proceeding if the debtor has an
establishment within the meaning of section 602 in the
foreign country where the proceeding is pending.
``(c) A petition for recognition of a foreign proceeding
shall be decided upon at the earliest possible time. Entry of
an order recognizing a foreign proceeding shall constitute
recognition under this chapter.
``(d) The provisions of this subchapter do not prevent
modification or termination of recognition if it is shown
that the grounds for granting it were fully or partially
lacking or have ceased to exist, but in considering such
action the court shall give due weight to possible prejudice
to parties that have relied upon the granting of recognition.
The case under this chapter may be closed in the manner
prescribed for a case under section 350.
``Sec. 618. Subsequent information
``From the time of filing the petition for recognition of
the foreign proceeding, the foreign representative shall file
with the court promptly a notice of change of status
concerning--
``(1) any substantial change in the status of the foreign
proceeding or the status of the foreign representative's
appointment; and
``(2) any other foreign proceeding regarding the debtor
that becomes known to the foreign representative.
``Sec. 619. Relief that may be granted upon petition for
recognition of a foreign proceeding
``(a) From the time of filing a petition for recognition
until the petition is decided upon, the court may, at the
request of the foreign representative, where relief is
urgently needed to protect the assets of the debtor or the
interests of the creditors, grant relief of a provisional
nature, including--
``(1) staying execution against the debtor's assets;
``(2) entrusting the administration or realization of all
or part of the debtor's assets located in the United States
to the foreign representative or another person authorized by
the court, including an examiner, in order to protect and
preserve the value of assets that, by their nature or because
of other circumstances, are perishable, susceptible to
devaluation or otherwise in jeopardy; and
``(3) any relief referred to in paragraph (3), (4), or (7)
of section 621(a).
``(b) Unless extended under section 621(a)(6), the relief
granted under this section terminates when the petition for
recognition is decided upon.
``(c) It is a ground for denial of relief under this
section that such relief would interfere with the
administration of a foreign main proceeding.
``(d) The court may not enjoin a police or regulatory act
of a governmental unit, including a criminal action or
proceeding, under this section.
``(e) The standards, procedures, and limitations applicable
to an injunction shall apply to relief under this section.
``Sec. 620. Effects of recognition of a foreign main
proceeding
``(a) Upon recognition of a foreign proceeding that is a
foreign main proceeding--
``(1) section 362 applies with respect to the debtor and
that property of the debtor that is within the territorial
jurisdiction of the United States; and
``(2) transfer, encumbrance, or any other disposition of an
interest of the debtor in property within the territorial
jurisdiction of the United States is restrained as and to the
extent that is provided for property of an estate under
sections 363, 549, and 552.
Unless the court orders otherwise, the foreign representative
may operate the debtor's business and may exercise the powers
of a trustee under section 549, subject to sections 363 and
552.
``(b) The scope, and the modification or termination, of
the stay and restraints referred to in subsection (a) of this
section are subject to the exceptions and limitations
provided in subsections (b), (c), and (d) of section 362,
subsections (b) and (c) of section 363, and sections 552, 555
through 557, 559, and 560.
``(c) Subsection (a) of this section does not affect the
right to commence individual actions or proceedings in a
foreign country to the extent necessary to preserve a claim
against the debtor.
``(d) Subsection (a) of this section does not affect the
right of a foreign representative or an entity to file a
petition commencing a case under this title or the right of
any party to file claims or take other proper actions in such
a case.
``Sec. 621. Relief that may be granted upon recognition of a
foreign proceeding
``(a) Upon recognition of a foreign proceeding, whether
main or nonmain, where necessary to effectuate the purpose of
this chapter and to protect the assets of the debtor or the
interests of the creditors, the court may, at the request of
the foreign representative, grant any appropriate relief,
including--
``(1) staying the commencement or continuation of
individual actions or individual proceedings concerning the
debtor's assets, rights, obligations or liabilities to the
extent they have not been stayed under section 620(a);
``(2) staying execution against the debtor's assets to the
extent it has not been stayed under section 620(a);
``(3) suspending the right to transfer, encumber or
otherwise dispose of any assets of the debtor to the extent
this right has not been suspended under section 620(a);
``(4) providing for the examination of witnesses, the
taking of evidence or the delivery of information concerning
the debtor's assets, affairs, rights, obligations or
liabilities;
``(5) entrusting the administration or realization of all
or part of the debtor's assets within the territorial
jurisdiction of the United States to the foreign
representative or another person, including an examiner,
authorized by the court;
``(6) extending relief granted under section 619(a); and
``(7) granting any additional relief that may be available
to a trustee, except for relief available under sections 522,
544, 545, 547, 548, 550, and 724(a).
``(b) Upon recognition of a foreign proceeding, whether
main or nonmain, the court may, at the request of the foreign
representative, entrust the distribution of all or part of
the debtor's assets located in the United States to the
foreign representative or another person, including an
examiner, authorized by the court, provided that the court is
satisfied that the interests of creditors in the United
States are sufficiently protected.
``(c) In granting relief under this section to a
representative of a foreign nonmain proceeding, the court
must be satisfied that the relief relates to assets that,
under the law of the United States, should be administered in
the foreign nonmain proceeding or concerns information
required in that proceeding.
``(d) The court may not enjoin a police or regulatory act
of a governmental unit, including a criminal action or
proceeding, under this section.
``(e) The standards, procedures, and limitations applicable
to an injunction shall apply to relief under paragraphs (1),
(2), (3), and (6) of subsection (a).
``Sec. 622. Protection of creditors and other interested
persons
``(a) In granting or denying relief under section 619 or
621, or in modifying or terminating relief under subsection
(c) of this section, the court must find that the interests
of the creditors and other interested persons or entities,
including the debtor, are sufficiently protected.
``(b) The court may subject relief granted under section
619 or 621 to conditions it considers appropriate.
``(c) The court may, at the request of the foreign
representative or an entity affected by relief granted under
section 619 or 621, or at its own motion, modify or terminate
such relief.
``Sec. 623. Actions to avoid acts detrimental to creditors
``(a) Upon recognition of a foreign proceeding, the foreign
representative has standing in a pending case under another
chapter of this title to initiate actions under sections 522,
544, 545, 547, 548, 550, and 724(a).
``(b) When the foreign proceeding is a foreign nonmain
proceeding, the court must be satisfied that an action under
subsection (a) of this section relates to assets that, under
United States law, should be administered in the foreign
nonmain proceeding.
``Sec. 624. Intervention by a foreign representative
``Upon recognition of a foreign proceeding, the foreign
representative may intervene in any proceedings in a State or
Federal court in the United States in which the debtor is a
party.
``SUBCHAPTER IV--COOPERATION WITH FOREIGN COURTS AND FOREIGN
REPRESENTATIVES
``Sec. 625. Cooperation and direct communication between the
court and foreign courts or foreign representatives
``(a) In all matters included within section 601, the court
shall cooperate to the maximum extent possible with foreign
courts or foreign representatives, either directly or through
the trustee.
``(b) The court is entitled to communicate directly with,
or to request information or assistance directly from,
foreign courts or foreign representatives, subject to the
rights of parties in interest to notice and participation.
``Sec. 626. Cooperation and direct communication between the
trustee and foreign courts or foreign representatives
``(a) In all matters included in section 601, the trustee
or other person, including an examiner, authorized by the
court, shall, subject to the supervision of the court,
cooperate to the maximum extent possible with foreign courts
or foreign representatives.
``(b) The trustee or other person, including an examiner,
designated by the court is entitled, subject to the
supervision of the court, to communicate directly with
foreign courts or foreign representatives.
``(c) Section 1104(d) shall apply to the appointment of an
examiner under this chapter. Any examiner shall comply with
the qualification requirements imposed on a trustee by
section 322.
[[Page H4394]]
``Sec. 627. Forms of cooperation
``Cooperation referred to in sections 625 and 626 may be
implemented by any appropriate means, including--
``(1) appointment of a person or body, including an
examiner, to act at the direction of the court;
``(2) communication of information by any means considered
appropriate by the court;
``(3) coordination of the administration and supervision of
the debtor's assets and affairs;
``(4) approval or implementation of agreements concerning
the coordination of proceedings; and
``(5) coordination of concurrent proceedings regarding the
same debtor.
``SUBCHAPTER V--CONCURRENT PROCEEDINGS
``Sec. 628. Commencement of a case under this title after
recognition of a foreign main proceeding
``After recognition of a foreign main proceeding, a case
under another chapter of this title may be commenced only if
the debtor has assets in the United States. The effects of
that case shall be restricted to the assets of the debtor
that are within the territorial jurisdiction of the United
States and, to the extent necessary to implement cooperation
and coordination under sections 625, 626, and 627, to other
assets of the debtor that are within the jurisdiction of the
court under sections 541(a) of this title, and 1334(e) of
title 28, to the extent that such other assets are not
subject to the jurisdiction and control of a foreign
proceeding that has been recognized under this chapter.
``Sec. 629. Coordination of a case under this title and a
foreign proceeding
``Where a foreign proceeding and a case under another
chapter of this title are taking place concurrently regarding
the same debtor, the court shall seek cooperation and
coordination under sections 625, 626, and 627, and the
following shall apply:
``(1) When the case in the United States is taking place at
the time the petition for recognition of the foreign
proceeding is filed--
``(A) any relief granted under sections 619 or 621 must be
consistent with the case in the United States; and
``(B) even if the foreign proceeding is recognized as a
foreign main proceeding, section 620 does not apply.
``(2) When a case in the United States under this title
commences after recognition, or after the filing of the
petition for recognition, of the foreign proceeding--
``(A) any relief in effect under sections 619 or 621 shall
be reviewed by the court and shall be modified or terminated
if inconsistent with the case in the United States; and
``(B) if the foreign proceeding is a foreign main
proceeding, the stay and suspension referred to in section
620(a) shall be modified or terminated if inconsistent with
the case in the United States.
``(3) In granting, extending, or modifying relief granted
to a representative of a foreign nonmain proceeding, the
court must be satisfied that the relief relates to assets
that, under the law of the United States, should be
administered in the foreign nonmain proceeding or concerns
information required in that proceeding.
``(4) In achieving cooperation and coordination under
sections 628 and 629, the court may grant any of the relief
authorized under section 305.
``Sec. 630. Coordination of more than 1 foreign proceeding
``In matters referred to in section 601, with respect to
more than 1 foreign proceeding regarding the debtor, the
court shall seek cooperation and coordination under sections
625, 626, and 627, and the following shall apply:
``(1) Any relief granted under section 619 or 621 to a
representative of a foreign nonmain proceeding after
recognition of a foreign main proceeding must be consistent
with the foreign main proceeding.
``(2) If a foreign main proceeding is recognized after
recognition, or after the filing of a petition for
recognition, of a foreign nonmain proceeding, any relief in
effect under section 619 or 621 shall be reviewed by the
court and shall be modified or terminated if inconsistent
with the foreign main proceeding.
``(3) If, after recognition of a foreign nonmain
proceeding, another foreign nonmain proceeding is recognized,
the court shall grant, modify, or terminate relief for the
purpose of facilitating coordination of the proceedings.
``Sec. 631. Presumption of insolvency based on recognition of
a foreign main proceeding
``In the absence of evidence to the contrary, recognition
of a foreign main proceeding is for the purpose of commencing
a proceeding under section 303, proof that the debtor is
generally not paying its debts.
``Sec. 632. Rule of payment in concurrent proceedings
``Without prejudice to secured claims or rights in rem, a
creditor who has received payment with respect to its claim
in a foreign proceeding pursuant to a law relating to
insolvency may not receive a payment for the same claim in a
case under any other chapter of this title regarding the
debtor, so long as the payment to other creditors of the same
class is proportionately less than the payment the creditor
has already received.''.
(b) Clerical Amendment.--The table of chapters for title
11, United States Code, is amended by inserting after the
item relating to chapter 5 the following:
``6. Ancillary and Other Cross-Border Cases..................601''.....
SEC. 602. AMENDMENTS TO OTHER CHAPTERS IN TITLE 11, UNITED
STATES CODE.
(a) Applicability of Chapters.--Section 103 of title 11,
United States Code, is amended--
(1) in subsection (a), by inserting before the period the
following: ``and this chapter, sections 307, 555 through 557,
559, and 560 apply in a case under chapter 6''; and
(2) by adding at the end the following:
``(j) Chapter 6 applies only in a case under that chapter,
except that section 605 applies to trustees and to any other
entity authorized by the court, including an examiner, under
chapters 7, 11, and 12, to debtors in possession under
chapters 11 and 12, and to debtors or trustees under chapters
9 and 13 who are authorized to act under section 605.''.
(b) Definitions.--Section 101 of title 11, United States
Code, is amended by striking paragraphs (23) and (24) and
inserting the following:
``(23) `foreign proceeding' means a collective judicial or
administrative proceeding in a foreign state, including an
interim proceeding, pursuant to a law relating to insolvency
in which proceeding the assets and affairs of the debtor are
subject to control or supervision by a foreign court, for the
purpose of reorganization or liquidation;
``(24) `foreign representative' means a person or body,
including a person or body appointed on an interim basis,
authorized in a foreign proceeding to administer the
reorganization or the liquidation of the debtor's assets or
affairs or to act as a representative of the foreign
proceeding;''.
(c) Amendments to Title 28, United States Code.--
(1) Procedures.--Section 157(b)(2) of title 28, United
States Code, is amended--
(A) in subparagraph (N), by striking ``and'' at the end;
(B) in subparagraph (O), by striking the period at the end
and inserting ``; and''; and
(C) by adding at the end the following:
``(P) recognition of foreign proceedings and other matters
under chapter 6 of title 11.''.
(2) Bankruptcy cases and proceedings.--Section 1334(c)(1)
of title 28, United States Code, is amended by striking
``Nothing in'' and inserting ``Except with respect to a case
under chapter 6 of title 11, nothing in''.
(3) Duties of trustees.--Section 586(a)(3) of title 28,
United States Code, is amended by inserting ``6,'' after
``chapter''.
TITLE VII--MISCELLANEOUS
SEC. 701. TECHNICAL AMENDMENTS.
Title 11 of the United States Code is amended--
(1) in section 109(b)(2) by striking ``subsection (c) or
(d) of'';
(2) in section 541(b)(4) by adding ``or'' at the end; and
(3) in section 552(b)(1) by striking ``product'' each place
it appears and inserting ``products''.
SEC. 702. APPLICATION OF AMENDMENTS.
The amendments made by this Act shall apply only with
respect to cases commenced under title 11 of the United
States Code after the date of the enactment of this Act.
The CHAIRMAN. It is now in order to consider amendment No. 1 printed
in House Report 103-573.
Amendment No. 1 Offered by Mr. Gekas
Mr. GEKAS. Mr. Chairman, pursuant to the rule, I offer the Hyde
amendment, the so-called manager's amendment.
The CHAIRMAN. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 1 printed in House Report 105-573 offered by
Mr. Gekas:
Page 6, line 8, strike ``spouse'' and insert ``spouse,''.
Page 8, line 13, insert ``, issued by the Internal Revenue
Service,'' after ``debts)''.
Page 8, line 16, strike ``under'' and insert ``by''.
Page 8, beginning on line 16, strike ``financial analysis
for expenses'' and insert ``allowance for such expenses''.
Page 9, line 10, insert ``total'' after ``monthly''.
Page 9, line 20, insert ``total'' after ``monthly''.
Page 9, line 21, strike ``what income'' and insert ``any
income that''.
Page 12, line 15, insert ``chapter 13'' after ``a'' (and
make such technical and conforming changes to the table of
contents of the bill as may be appropriate).
Page 13, line 1, insert ``, issued by the Internal Revenue
Service,'' after ``debts)''.
Page 13, line 4, strike ``under'' and insert ``by''.
Page 13, beginning on line 5, strike ``financial analysis
for expenses'' and insert ``allowance for such expenses''.
Page 13, line 15, strike ``of'' and insert ``under''.
Page 13, line 22, strike ``of'' and insert ``under''.
Page 14, line 3, insert ``and'' at the end.
Page 14, beginning on line 14, strike ``, in a case in
which a trustee has been appointed,''.
Page 14, beginning on line 21, strike ``what income'' and
inserting ``any income that''.
Page 18, line 1, strike ``total current monthly'' and
insert ``current monthly total''.
Page 18, beginning on line 7, strike ``total current
monthly'' and insert ``current monthly total''.
Page 20, line 24, strike ``and'' at the end and insert a
comma.
Page 21, line 1, strike ``its schedules'' and insert
``schedules,''.
Page 21, beginning on line 3, strike ``and its schedules''
and insert ``schedules,''.
Page 22, beginning on line 6, strike ``outside'' and all
that follows through ``system)'' on line 7.
[[Page H4395]]
Page 24, line 21, insert ``by the debtor'' after
``statement''.
Page 25, after line 6, insert the following (and make such
technical and conforming changes as may be appropriate):
SEC. 105. WHO MAY BE A DEBTOR UNDER CHAPTER 11.
Section 109(d) of title 11, United States Code, is amended
by inserting ``, or a person described in subsection
(b)(4)),'' after ``chapter 7''.
Page 25, line 19, strike ``12'' and insert ``12,''.
Page 26, line 3, strike ``(i)'' and insert ``(i)(I)''.
Page 26, line 5, strike ``(ii)'' and insert ``(II)''.
Page 26, line 6, strike the period at the end and insert
``; and''.
Page 26, after line 6, insert the following:
``(ii) that offers its services to debtors without charge,
or at an appropriately reduced charge if payment of any
regular charge would impose a hardship on the debtor or a
dependent of the debtor.''
Page 26, line 10, insert ``or on the motion of the United
States trustee and'' after ``district''.
Page 26, beginning on line 11, strike ``the United States
trustee and''.
Page 27, line 21, strike ``60'' and insert ``180''.
Page 33, line 22, strike ``select a chapter 7 proceeding''
and insert ``choose to file a chapter 7 case''.
Page 34, line 1, strike ``select a chapter 13 proceeding''
and insert ``choose to file a chapter 13 case''.
Page 34, line 6, strike ``proceeding'' and insert
``relief''.
Page 34, line 9, strike ``proceeding'' and insert
``relief''.
Page 34, line 10, strike ``procceding'' and insert
``case''.
Page 34, beginning on line 13, strike ``represent you in
litigation'' and insert ``give you legal advice''.
Page 34, line 21, insert ``, to the extent permitted by
nonbankruptcy law,''.
Page 38, line 4, strike ``or'' and insert ``and''.
Page 41, after line 12, insert the following:
``(5) Notwithstanding any other provision of Federal law,
if the court, on its own motion or on the motion of the
United States trustee, finds that a person intentionally
violated section 526 or 527 of this title, or engaged in a
clear and consistent pattern or practice of violating section
526 or 527 of this title, the court may--
``(A) enjoin the violation of such section; or
``(B) impose an appropriate civil penalty against such
person.''.
Page 43, line 17, insert ``, together with any other such
contribution,'' after ``contribution''.
Page 46, line 12, strike ``2002bb'' and insert ``2000bb''.
Page 49, beginning on line 8, strike ``If a party in
interest requests'' and insert ``Upon motion by a party in
interest for continuation of the automatic stay and upon
notice and a hearing''.
Page 55, line 9, strike ``reaffirmation''.
Page 56, line 1, insert ``the automatic'' after ``from''
(and make such technical and conforming changes to the table
of contents of the bill as may be appropriate).
Page 59, line 7, insert ``the automatic'' after ``from''
(and make such technical and conforming changes to the table
of contents of the bill as may be appropriate).
Page 59, line 20, insert ``as described in findings made by
the court'' after ``circumstances''.
Page 60, line 12, strike ``cases'' and insert ``a case''.
Page 64, line 3, strike ``case''.
Page 66, line 19, insert ``, excluding debts incurred for
necessaries that do not exceed $250 in the aggregate,'' after
``creditor''.
Page 66, beginning on line 22, strike ``, except'' and all
that follows through ``less'' on line 25.
Page 67, line 23, strike ``or divorce or dissolution
decree'' and insert ``divorce decree, or other order of a
court of record''.
Page 68, strike lines 8 through 23 (and make such technical
and conforming changes as may be appropriate).
Page 74, strike lines 13 through 15, and insert the
following:
(2) in subsection (a)(7) by inserting ``an order of
disgorgement or restitution obtained by a governmental
unit,'' after ``such debt is for''; and
Page 75, line 20, strike ``the''.
Page 76, line 14, strike ``(14)'' and insert ``(19)''.
Page 76, in the matter after line 21, insert ``payments
after discharge'' after ``alimony''.
Page 78, after line 2, insert the following (and make such
technical and conforming changes as may be appropriate):
SEC. 152. HIGHER PRIORITY FOR DEBTS FOR ALIMONY, MAINTENANCE,
AND SUPPORT.
Section 507(a) of title 11, United States Code, is
amended--
(1) by striking paragraph (7);
(2) in paragraph (6) by striking ``(6) Sixth'' and
inserting ``(7) Seventh'';
(3) in paragraph (5) by striking ``(5) Fifth'' and
inserting ``(6) Sixth'';
(4) in paragraph (4) by striking ``(4) Fourth'' and
inserting ``(5) Fifth'';
(5) in paragraph (3) by striking ``(3) Third'' and
inserting ``(4) Fourth''; and
(6) by inserting after paragraph (2) the following:
``(3) Third, allowed claims for debts to a spouse, former
spouse, or child of the debtor for alimony to, maintenance
for, or support of such spouse or child, in connection with a
separation agreement, divorce decree or other order of a
court of record, determination made in accordance with State
or territorial law by a governmental unit, or property
settlement agreement, but not to the extent that such debt--
``(A) is assigned to another entity, voluntarily, by
operation of law, or otherwise; or
``(B) includes a liability designed as alimony,
maintenance, or support, unless such liability is actually in
the nature of alimony, maintenance, or support.''.
Page 83, strike lines 17 through 19, and insert the
following:
apply to--
``(A) an exemption claimed under subsection (b)(2)(A) by a
family farmer for the principal residence of that farmer; or
``(B) an involuntary case.''.
Page 84, strike lines 8 through 10, and insert the
following:
``(e) A person appointed to examine a request for
compensation or reimbursement payable under this section may
not be paid on the basis of the amount of any reduction
recommended by such person in the amount or rate of such
compensation or such reimbursement.''.
Page 85, line 16, strike ``(3)'' and insert ``(3)(A)''.
Page 85, line 16, insert ``, subject to subparagraph (B),''
after ``or''.
Page 85, line 20, strike the close quotation marks and the
period at the end.
Page 85, after line 20, insert the following:
``(B) A request to change the membership of a committee
appointed under subsection (a) may be made under subparagraph
(A) by a party in interest only after such request is
submitted to and denied by the United States trustee.''.
Beginning on page 90, strike line 24 and all that follows
through line 10 on page 91, and insert the following:
``(5) Where the court finds that a personal services
contract is property of the estate, the trustee may not
reject an executory contract for personal services in which
advances are paid for the creation of copyrighted sound
recordings in the future if a material purpose for commencing
a case under this title is to reject such contract, unless,
absent such rejection, economic rehabilitation of the
debtor's finances, including such contract, cannot be
achieved.''.
Page 91, beginning on line 24, strike ``debtor's motion''
and insert ``motion of the trustee''.
Page 92, line 4, insert ``the'' after ``provided''.
Page 92, after line 24, insert the following (and make such
technical and conforming changes as may be appropriate):
SEC. 215. DEFAULTS BASED ON NONMONETARY OBLIGATIONS.
(a) Executory Contracts and Unexpired Leases.--Section 365
of title 11, United States Code, is amended--
(1) in subsection (b)--
(A) in paragraph (1)(A) by striking the semicolon at the
end and inserting the following:
``other than a default that is a breach of a provision
relating to--
``(i) the satisfaction of any provision (other than a
penalty rate or penalty provision) relating to a default
arising from any failure to perform nonmonetary obligations
under an unexpired lease of real property, if it is
impossible for the trustee to cure such default by performing
nonmonetary acts at and after the time of assumption; or
``(ii) the satisfaction of any provision (other than a
penalty rate or penalty provision) relating to a default
arising from any failure to perform nonmonetary obligations
under an executory contract, if it is impossible for the
trustee to cure such default by performing nonmonetary acts
at and after the time of assumption and if the court
determines, based on the equities of the case, that this
subparagraph should not apply with respect to such
default;'', and
(B) by amending paragraph (2)(D) to read as follows:
``(D) the satisfaction of any penalty rate or penalty
provision relating to a default arising from a failure to
perform nonmonetary obligations under an executory contract
or under an unexpired lease of real or personal property.'',
(2) in subsection (c)--
(A) in paragraph (2) by adding ``or'' at the end,
(B) in paragraph (3) by striking ``; or'' at the end and
inserting a period, and
(C) by striking paragraph (4),
(3) in subsection (d)--
(A) by striking paragraphs (5) through (9), and
(B) by redesignating paragraph (10) as paragraph(5).
(4) in subsection (f)(1) by striking ``; except that'' and
all that follows through the end of the paragraph and
inserting a period.
(b) Impairment of Claims or Interests.--Section 1124(2) of
title 11, United States Code, is amended--
(1) in subparagraph (A) by inserting ``or of a kind that
section 365(b)(1)(A) of this title expressly does not require
to be cured'' before the semicolon at the end,
(2) in subparagraph (C) by striking ``and'' at the end,
(3) by redesignating subparagraph (D) as subparagraph (E),
and
(4) by inserting after subparagraph (C) the following:
[[Page H4396]]
``(D) if such claim or such interest arises from any
failure to perform a nonmonetary obligation, compensates the
holder of such claim or such interest (other than the debtor
or an insider) for any actual pecuniary loss incurred by such
holder as a result of such failure; and''.
Page 95, beginning on line 14, strike ``statements and
plans'' and insert ``statement and plan'' (and make such
technical and conforming changes to the table of contents of
the bill as may be appropriate).
Beginning on page 97, strike line 17 and all that follows
through line 6 on page 98, and insert the following (and make
such technical and conforming changes as may be appropriate):
SEC. 235. UNIFORM REPORTING RULES AND FORMS FOR SMALL
BUSINESS CASES.
(a) Proposal of Rules and Forms.--The Advisory Committee on
Bankruptcy Rules of the Judicial Conference of the United
States shall propose for adoption amended Federal Rules of
Bankruptcy Procedure and Official Bankruptcy Forms to be used
by small business debtors to file periodic financial and
other reports containing information, including information
relating to--
(1) the debtor's profitability;
(2) the debtor's cash receipts and disbursements; and
(3) whether the debtor is timely filing tax returns and
paying taxes and other administrative claims when due.
(b) Purpose.--The rules and forms proposed under subsection
(a) shall be designed to achieve a practical balance
between--
(1) the reasonable needs of the bankruptcy court, the
United States trustee or bankruptcy administrator, creditors,
and other parties in interest for reasonably complete
information;
(2) the small business debtor's interest that required
reports be easy and inexpensive to complete; and
(3) the interest of all parties that the required reports
help the small business debtor to understand its financial
condition and plan its future.
Page 103, line 22, insert ``and'' at the end.
Page 104, strike lines 3 through 6, and insert the
following:
``(9) in cases in which the United States trustee finds
material grounds for any relief under section 1112 of title
11, the United States trustee shall apply promptly to the
court for relief.''.
Page 105, line 15, strike ``()'' and insert ``(j)''.
Page 106, line 5, strike ``(C) un-'' and insert ``(C);''.
Page 106, strike lines 6 through 12, and insert the
following:
unless the debtor proves, by a preponderance of the evidence,
that the filing of such petition resulted from circumstances
beyond the control of the debtor not foreseeable at the time
the case then pending was filed; and that it is more likely
than not that the court will confirm a feasible plan, but not
a liquidating plan, within a reasonable time.''.
Page 108, line 24, strike ``, and'' and all that follows
through line 2 on page 109, and insert a semicolon.
Page 112, after line 6, insert the following (and make such
technical and conforming changes as may be appropriate):
SEC. 302. APPLICABILITY OF OTHER SECTIONS TO CHAPTER 9.
Section 901 of title 11, United States Code, is amended--
(1) by inserting ``555, 556,'' after ``553,''; and
(2) by inserting ``559, 560,'' after ``557,''.
Page 125, line 8, strike ``total current monthly'' and
insert ``current monthly total''.
Page 125, line 17, strike ``total current monthly'' and
insert ``current monthly total''.
Page 126, beginning on line 11, strike ``total current
monthly'' and insert ``current monthly total''.
Page 126, line 18, strike ``total current monthly'' and
insert ``current monthly total''.
Page 131, line 3, strike ``or dismissed'' and insert ``,
dismissed, or closed''.
Page 131, beginning on line 17, strike ``Such'' and all
that follows through ``Courts.'' on line 19.
Page 131, line 20, insert ``in such form as shall be
determined by such Office, in consultation with the
Administrative Office of the United States Courts,'' after
``tics,''.
Page 131, line 19, strike ``Office'' and insert ``Executive
Office for United States Trustees''.
Page 132, line 5, strike ``total current monthly'' and
insert ``current monthly total''.
Page 133, line 16, insert ``uniform rules for the
collection of'' after ``SEC. 442.'' (and make such technical
and conforming changes to the table of contents of the bill
as may be appropriate).
Page 140, strike lines 6 through 10, and insert the
following:
amended to read as follows:
``(1) a debt of a kind specified in paragraph (1) or (5) of
section 523(a) of this title, and such property shall be
liable for a debt of a kind specified in such paragraph (5)
notwithstanding any State law to the contrary;''
Page 161, line 16, strike ``or'' at the end.
Page 161, line 21, strike the period at the end and insert
``; or''.
Page 161, after line 21, insert the following:
``(3) an entity subject to a proceeding under the
Securities Investor Protection Act, a stockbroker subject to
subchapter III of chapter 7 of this title, or a commodity
broker subject to subchapter IV of chapter 7 of this title.
Page 164, line 2, strike ``Nothing in this chapter limits
the power of'' and insert ``Subject to the specific
limitations stated elsewhere in this chapter''.
Page 165, after line 15, insert the following:
``(c) Subject to section 610 of this title, a foreign
representative is subject to laws of general application.
Page 165, line 16, strike ``(c)'' and insert ``(d)''.
Page 165, beginning on line 17, strike ``proceeding'' and
insert ``representative''.
Page 165, line 19, insert ``by a foreign representative''
after ``cooperation''.
Page 166. line 5, strike ``sections'' and insert
``section''.
Page 166, line 10, strike ``filing a petition for''.
Page 166, strike lines 22 and 23.
Page 170, line 24, insert ``after notice and a hearing''
after ``606,''.
Page 177, strike lines 11 through 17, and insert the
following:
``(a) The court may grant relief under section 619 or 621,
or may modify or terminate relief under subsection (c) of
this section, only if the interests of the creditors and
other interested persons or entities, including the debtor,
are sufficiently protected.
``(b) The court may subject relief granted under section
619 or 621, or the operation of the debtor's business under
section 620(a)(2) of this title, to conditions it considers
appropriate, including the giving of security or the filing
of a bond.
Page 177, after line 21, insert the following:
``(d) Section 1104(d) shall apply to the appointment of an
examiner under this chapter. Any examiner shall comply with
the qualification requirements imposed on a trustee by
section 322.
Page 178, line 19, strike ``In all matters included
within'' and insert ``Consistent with''.
Page 179, line 6, strike ``In all matters included within''
and insert ``Consistent with''.
Page 179, line 12, strike ``designated'' and insert
``authorized''.
Page 179, strike lines 15 through 18.
Page 181, line 8, insert ``the relief granted in'' after
``with''.
Page 181, line 24, insert ``the relief granted in'' after
``with''.
Page 186, line 11, strike ``The'' and insert ``Except as
otherwise provided in this Act, the''.
The CHAIRMAN. Pursuant to House Resolution 462, the gentleman from
Pennsylvania (Mr. Gekas) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentleman from Pennsylvania (Mr. Gekas).
Mr. GEKAS. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, I have consulted with the gentleman from New York on
the purport of the manager's amendment. It has several technical
amendments that need attention and to which we have agreed, and it puts
into the Record the concerns that the Justice Department has voiced
with respect to some of the provisions. We have incorporated those into
the manager's amendment, and made those known to the gentleman from New
York and the minority.
On that, then, we would ask for a vote on the manager's amendment.
Mr. Chairman, I reserve the balance of my time.
The CHAIRMAN. Does the gentleman from New York (Mr. Nadler) seek time
in opposition?
Mr. NADLER. Yes, I do, Mr. Chairman.
The CHAIRMAN. The gentleman from New York (Mr. Nadler) is recognized
for 5 minutes.
Mr. NADLER. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, we do not object to this amendment. I just want to
point out that, like a number of other amendments, this amendment deals
with the problem of child support and spouse support, but does not deal
adequately with it.
This amendment would raise the priority of support, child and spouse
support, above several priorities. It would raise it above several
existing priorities that are rarely relevant in consumer cases. It
would make it have a higher priority than wages owed by the debtor to
people, to workers he did not pay, and payments involving grain
elevators and fishermen.
It does not change the Chapter 13 payment formula, which still
requires payment of credit card debt concurrently with child support.
It does not deal with the larger problems created by other provisions
of the bill that require payments so great that a Chapter 13 plan may
be rendered infeasible.
It also does not deal with ``adequate protection payments'' required
by Section 320 of the bill that would compete with support at the
outset of the plan,
[[Page H4397]]
so that the debtor could not devote significant funds to payment of
even the first priority support claims.
If such adequate protection payments failed to provide adequate
protection, in fact, a creditor, such as a credit card creditor, who
took a security interest in minor household items could argue it was
entitled to a still higher superpriority under section 507(b).
So in other words, Mr. Chairman, there is nothing wrong with this
amendment. It goes a fiftieth of the way towards helping the terrible
problems this bill puts in the way of adequately collecting child and
spouse support, but it does not deal with the basic problems. So while
we have no objection to it and we certainly would not ask for a
recorded vote, it does not do very much at all.
Mr. Chairman, I yield back the balance of my time.
Mr. GEKAS. Mr. Chairman, I yield back the balance of my time.
The CHAIRMAN. The question is on the amendment offered by the
gentleman from Pennsylvania (Mr. Gekas).
The amendment was agreed to.
The CHAIRMAN. It is now in order to consider amendment No. 2 printed
in House Report 105-573.
Amendment No. 2 offered by Mr. Nadler
Mr. NADLER. Mr. Chairman, I offer amendment No. 2.
The CHAIRMAN. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment 2 printed in House Report 105-573 offered by Mr.
Nadler:
Page 13, strike line 23 and insert the following:
plan; and
``(D) if the debtor is engaged in business, the payment of
expenditures necessary for the continuation, preservation,
and operation of such business;'';
Beginning on page 93, strike line 5 and all that follows
through line 2 on page 94, and insert the following:
(a) Definition.--Section 101 of title 11, United States
Code, is amended--
(1) by redesignating paragraph (51C) as paragraph (51D);
and
(2) by inserting after paragraph (51B) the following:
``(51C) `small business case' means a case filed under
chapter 11 of this title in which the debtor is a small
business debtor;''.
Beginning on page 98, strike line 7 and all that follows
through the matter preceding line 15 on page 100 (and make
such technical and conforming changes as may be appropriate).
Beginning on page 100, strike line 15 and all that follows
through line 11 on page 104 (and make such technical and
conforming changes as may be appropriate).
Beginning on page 105, strike line 1 and all that follows
through line 12 on page 106 (and make such technical and
conforming changes as may be appropriate).
Beginning on page 106, strike line 13 and all that follows
through line 16 on page 109, and insert the following (and
make such technical and conforming changes as may be
appropriate):
SEC. 243. ADDITIONAL GROUNDS FOR APPOINTMENT OF TRUSTEE.
Section 1104(a) of title 11, United States Code,
The CHAIRMAN. Pursuant to House Resolution 462, the gentleman from
New York (Mr. Nadler) and a Member opposed each will control 5 minutes.
The Chair recognizes the gentleman from New York (Mr. Nadler).
Mr. NADLER. Mr. Chairman, I yield myself such time as I may consume.
(Mr. NADLER asked and was given permission to revise and extend his
remarks.)
Mr. NADLER. Mr. Chairman, this amendment strikes several sections of
the small business title. We have heard testimony from the National
Bankruptcy Conference, and we also have received a letter from the
Small Business Administration that indicates that the bureaucratic
burdens placed by this bill on small businesses, the short time lines
for filing many more documents than are necessary for larger
businesses, the higher standard for getting an extension of the
automatic stay so that the small business, in order to get an
extension, would have to pass what amounts to a mini-confirmation
hearing, a real catch-22, and the inclusion of a new definition of
single-asset real estate in the definition of small business, so that,
for example, Rockefeller Center would have to be reorganized under the
small business rules if it were involved in a bankruptcy, all combine
to make this title a virtual death sentence for thousands of small
businesses.
I know my colleagues on the other side of the aisle like to oppose
regulations that protect the environment or worker safety by arguing
they are burdensome on small businesses. We have had several hearings
this year attacking clean air regulations and attacking regulations to
keep workers from falling off of roofs, and regulations to keep
asbestos from being released into the atmosphere.
At every point we have heard moving speeches about the fate of small
businesses under these regulations. Some members of the committee have
opposed increasing our shamefully low minimum wage for the same
reasons.
Here is a chance to put our words into action. This small business
title threatens every small business and independent contractor in
America. We should strike its most offending sections. The amendment
restores the current definition of small business to a business of $2
million. The increase to $5 million would pull in 85 percent of
businesses into this section, and make it involuntary. It will be
transforming small business bankruptcy from a safety net for small
businesses to a tiger cage.
The amendment strikes the burdensome and costly meeting and filing
requirements imposed on small businesses for the first time, and it
also gets the U.S. Trustee out of the business of essentially running a
small business in Chapter 11. It strikes the definition of monthly net
income in the bill, and restores the existing definition so that an
individual debtor in Chapter 13 may continue to use his or her personal
income for a small business.
As we may know, many small businesses are either unincorporated or
are small businesses which the debtor personally guarantees. They end
up in Chapter 13, not Chapter 11. The bill as written would not allow
them to use their personal resources to reorganize the business, as
current law does. This change would kill many small businesses.
Finally, the amendment restores current law in the appointing of a
trustee.
Mr. Chairman, small business is the engine for job growth in America.
There is not a single Member of this House who has not spoken out in
defense of small business. That is the right thing to do. But we should
not move forward with these costly, onerous, and burdensome new rules
that the Small Business Administration and the National Bankruptcy
Conference tell us will kill many small businesses unnecessarily,
instead of letting them be reorganized. We ought to pass this amendment
so as not to impose these new burdens and this death sentence on
thousands of small businesses.
Mr. Chairman, I reserve the balance of my time.
The CHAIRMAN. Does the gentleman from Pennsylvania (Mr. Gekas) seek
time in opposition?
Mr. GEKAS. I rise in opposition to the amendment, Mr. Chairman.
The CHAIRMAN. The gentleman from Pennsylvania (Mr. Gekas) is
recognized for 5 minutes.
Mr. GEKAS. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, in this particular case the gentleman from New York
(Mr. Nadler) full well knows that the recommendations of the bankruptcy
commission, which worked 2 years on just this kind of provision, made
certain recommendations in filing their report late last year.
It is those provisions, those recommendations, which we have
incorporated into H.R. 3150, and which themselves have received the
blessing of the NFIB, and other organizations, such as, and this is
important, the National Federation of Independent Businesses, NFIB,
which I mentioned; the American Bankruptcy Institute, the Executive
Office for United States Trustees, and various bankruptcy judges.
But more importantly than that, the NFIB language that they employed
in the letter of support to us says this, and this is a better speech
than I could make, or any combination of Members could make:
[[Page H4398]]
``The legislation,'' and this is the NFIB speaking, the National
Federation of Independent Business, ``The legislation strikes a fair
balance by giving small business owners more of a chance to get back
what is rightfully theirs while still providing bankruptcy protection
to those small businesses who truly need it.''
I endorse the NFIB endorsement of the endorsed bill that we now
endorse, and reendorse by asking for a negative vote on the proposal at
hand.
Mr. Chairman, I reserve the balance of my time.
Mr. NADLER. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, I am surprised to hear the gentleman from Pennsylvania
(Mr. Gekas) point out that the National Bankruptcy Review Commission
supports this. The National Bankruptcy Review Commission rejected the
central concept of the bill, the so-called means-based testing. But
that he does not care about.
Let me simply say this. The Small Business Administration of the
United States says the provisions of this bill, without this amendment,
would add
such substantial additional costs to the reorganization
process that many small businesses may forgo reorganization
under Chapter 11 and immediately file for Chapter 7
liquidation proceedings.
They would be forced to close their doors, leaving their creditors
without recourse. The nonbipartisan and widely respected National
Bankruptcy Conference says,
These cost-raising changes ultimately could deny tens of
thousands of small businesses a meaningful opportunity to
restructure that have obligations and continue in business.
This would close the door on thousands of businesses that
would have been able to reorganize successfully if given the
chance.
The AFL-CIO says,
The potentially broad reach of these provisions and the
manner in which they restrict the workings of the bankruptcy
case for these businesses will likely place numerous jobs at
risk.
So the AFL-CIO, the Small Business Administration, and the National
Bankruptcy Conference, which is probably the greatest expert on this,
all tell us these provisions which this amendment would strike will
kill thousands of small businesses by denying them the realistic
opportunity to reorganize, and forcing them instead to liquidate.
I urge my colleagues to vote for this amendment so these small
businesses are not thrown into liquidation, instead of reorganization,
killing thousands and thousands of jobs.
{time} 1530
Mr. GEKAS. Mr. Chairman, I yield back the balance of my time in
opposition to the amendment.
Mr. NADLER. Mr. Chairman, I yield back the balance of my time.
The CHAIRMAN. The question is on the amendment offered by the
gentleman from New York (Mr. Nadler).
The question was taken; and the Chairman announced that the noes
appeared to have it.
Mr. NADLER. Mr. Chairman, I demand a recorded vote, and pending that,
I make the point of order that a quorum is not present
The CHAIRMAN. Pursuant to the rule, further proceedings on the
amendment offered by the gentleman from New York (Mr. Nadler) will be
postponed.
The point of no quorum is considered withdrawn.
The CHAIRMAN. It is now in order to consider amendment No. 3 printed
in House Report 105-573. Does any Member seek recognition to offer
amendment No. 3?
Parliamentary Inquiries
Mr. NADLER. Mr. Chairman, I have a parliamentary inquiry.
The CHAIRMAN. The gentleman will state it.
Mr. NADLER. Mr. Chairman, which amendment are you referring to? The
Boucher-Gekas amendment?
The CHAIRMAN. The Delahunt amendment No. 3.
Mr. NADLER. Mr. Chairman, we will come back to that.
The CHAIRMAN. According to the rule, amendment No. 3 is now in order
to be offered by the gentleman from Massachusetts (Mr. Delahunt).
Mr. NADLER. Mr. Chairman, I have a further parliamentary inquiry. On
the list that I have, the Boucher-Gekas amendment is next, and then
Gekas and then Shaw-Camp, Paul, Gekas-McCollum-Smith, Scott, Velazquez,
Baldacci, and Delahunt is last according to this.
The CHAIRMAN. According to the rule adopted by the House, it is now
in order to consider amendment No. 3 to be offered by the gentleman
from Massachusetts (Mr. Delahunt) or his designee, debatable for 10
minutes.
Mr. NADLER. Mr. Chairman, I ask unanimous consent that that amendment
be considered later when the gentleman from Massachusetts (Mr.
Delahunt) can come to the floor, because the list we have does not
indicate that order.
The CHAIRMAN. The Chair does not have the authority to entertain that
request in the Committee of the Whole.
Mr. NADLER. Mr. Chairman, I believe that with unanimous consent, the
Chair could entertain that request.
The CHAIRMAN. The Committee of the Whole cannot change the order of
the amendments as approved under the special order adopted by the
House.
Mr. GEKAS. Mr. Chairman, I have a parliamentary inquiry.
The CHAIRMAN. The gentleman will state it.
Mr. GEKAS. Mr. Chairman, if the gentleman from Massachusetts (Mr.
Delahunt), who was supposed to have an amendment made in order at this
time, would strike the last word or change the text of the amendment
that he wishes to offer, could it be made in order in the Committee of
the Whole?
The CHAIRMAN. Permission cannot be sought to offer a new amendment.
Permission might be sought to modify a pending amendment in the
Committee of the Whole. But the Committee of the Whole is operating
under the rule adopted earlier in the House.
If there is no Member here to offer amendment No. 3, the Committee
will move on to amendment No. 4.
Mr. GEKAS. Mr. Chairman, I have a further parliamentary inquiry.
The CHAIRMAN. The gentleman will state it.
Mr. GEKAS. Mr. Chairman, I wish to express to the gentleman from New
York (Mr. Nadler) that when the time comes that the gentleman from
Massachusetts (Mr. Delahunt) is prepared to proceed, we will coordinate
whatever it takes, even a motion to rise, in order to accommodate that
amendment. So at this point, why do we not proceed?
Mr. NADLER. Mr. Chairman, I have a further parliamentary inquiry.
The CHAIRMAN. The gentleman will state it.
Mr. NADLER. Mr. Chairman, I appreciate the cooperation of the
gentleman from Pennsylvania (Mr. Gekas). My parliamentary inquiry is if
we go on to the next amendment now, and 10 or 15 or 20 minutes from now
when the gentleman from Massachusetts arrives, if a motion to rise is
made, we can then entertain that amendment in the House?
The CHAIRMAN. At a later time, if the Committee rises and then the
gentleman seeks permission to offer the amendment, that request could
be entertained in the full House.
Mr. NADLER. Mr. Chairman, I appreciate that offer from the
distinguished gentleman from Pennsylvania, and I think it is a good
idea, and we should go on to the next amendment now with the
understanding that when the gentleman from Massachusetts arrives at the
conclusion of the amendment that we are now discussing, that we move
that the House rises.
The CHAIRMAN. It is now in order----
Mr. NADLER. Mr. Chairman, I am told that I need to move that the
House rise now.
The CHAIRMAN. It does not have to be done now.
Mr. NADLER. Mr. Chairman, it is okay to go to the next amendment
then, as far as I am concerned.
The CHAIRMAN. It is now in order to consider amendment No. 4 printed
in House Report 105-573.
Amendment No. 4 Offered by Mr. Boucher.
Mr. BOUCHER. Mr. Chairman, I offer an amendment.
The CHAIRMAN. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 4 printed in House Report 105-573 offered by
Mr. Boucher:
Page 54, line 15, before the semicolon insert the
following:
``, except that the term shall also include any tangible
personal property reasonably
[[Page H4399]]
necessary for the maintenance and support of a dependent
child''.
Page 66, strike lines 11 through 13 and insert the
following:
``(19) incurred to pay a debt that is nondischargeable by
reason of any other provision of this subsection or section
727, 1141, 1228(a), 1228(b), or 1328(b), except for any debt
incurred to pay such a nondischargeable debt in any case in
which--
``(A)(i) the debtor who paid the nondischargeable debt is a
single custodial parent who has 1 or more dependent children
at the time of the order for relief, or
``(ii) there is an allowed claim for alimony to,
maintenance for, or support of a spouse, former spouse, or
child of the debtor payable under a judicial or
administrative order to such spouse or child (but not to any
other person) which was unpaid as of the date of the
petition; and
``(B) the creditor is unable to demonstrate that the debtor
intentionally incurred the debt to pay the debt which is
nondischargeable;''.
Page 70, after line 12, insert the following (and make such
technical and conforming changes as may be appropriate):
(1) in the matter preceding paragraph (1) by inserting
before the colon the following:
``, except that, notwithstanding any other provision of this
title, any expense or claim entitled to priority under
paragraph (7) shall have first priority over any other
expense or claim that has priority under any other provision
of this subsection'';
Page 70, after line 22, insert the following (and make such
technical and conforming changes as may be appropriate):
(e) Contents of Plans.--Section 1322(b)(1) of title 11,
United States Code, is amended by striking the semicolon at
the end and inserting the following:
``and provide for the payment of any claim entitled to
priority under section 507(a)(7) of this title before the
payment of any other claim entitled to priority under section
507(a), notwithstanding the priorities established under
section 507(a);''.
The CHAIRMAN. Pursuant to the rule, the gentleman from Virginia (Mr.
Boucher), and the gentleman from New York (Mr. Nadler) each will
control 5 minutes.
The Chair recognizes the gentleman from Virginia (Mr. Boucher).
Mr. BOUCHER. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, this amendment relates to the priority of child support
and alimony recipients in association with bankruptcy proceedings.
During consideration of the bill in the House Judiciary Committee,
provisions were adopted which not only assured no disadvantage from
this reform for the recipient of alimony or the recipient of child
support payments, but which in very significant respects improved that
person's ability to receive child support and alimony payments in
comparison to current law.
For example, the bill provides that unlike current law, Chapter 13
plans cannot be confirmed unless all child support payments due since
the bankruptcy filing have been paid. The Chapter 13 plan cannot be
discharged until all arrearages that were due prior to the filing have
been paid as well.
These are very significant improvements with regard to current law
for the condition of the child support and alimony recipient.
Another example: Under current law child support and alimony wage
orders which require that an employer withhold from an employee's
salary amounts that are due under child support or alimony are stayed
when a bankruptcy petition is filed under any of the various chapters.
The bill creates an exemption from this stay for wage orders and
assures that payment of child support or alimony under them will
continue.
A third example: Under current law the property which is exempt under
State law which is owned by a spouse who owes child support or alimony
may not be subjected to the other spouse's child support or alimony
claim after the spouse who owns the property has been discharged in
bankruptcy. The bill improves upon current law by subjecting that
exempt property to the child support or alimony claim.
A fourth example: Under current law a debt one spouse owes to another
that arises from something other than child support or alimony and is
incorporated in a separation agreement or divorce decree is
dischargeable in bankruptcy and may not be enforced against property
that is exempt under State law. The bill says these debts owed to the
spouse may never be discharged and may be enforced against exempt
property.
In each of these four instances, the situation of the recipient of
child support or alimony is improved with regard to current law.
The amendment that I am pleased to be offering now with the gentleman
from Pennsylvania (Mr. Gekas) makes four additional improvements in
current law from the standpoint of the child support or alimony
recipient.
First, we clearly give the child support or alimony recipient top
priority to receive payment during the pendency of the bankruptcy
proceeding. Today, she is seventh behind farmers who have claims
against grain elevators, fishermen who have claims against wholesalers,
and others. We, with this amendment, clearly make her the first
priority.
The second change we make will require that child support and alimony
be first in line for payment in Chapter 13 plans. That also is an
improvement with respect to current law.
Third, we help the single parent who files for bankruptcy by
expanding the definition of ``household goods'' to include items that
are needed in child rearing. Unlike under current law, with this
amendment she will be able to keep those items.
We also provide that nonsecured debt which is acquired to pay
nondischargeable debt, such as taxes, is nondischargeable against
single parents and debtors who owe child support or alimony only if the
debt was acquired intentionally to pay nondischargeable debt.
In each of these four areas we are making improvements with regard to
current law, better assuring the priority of the child support or
alimony recipient.
And because of the changes made in the committee, the various
organizations around the country numbering several that are responsible
for aiding child support and alimony recipients and enforcing those
obligations have endorsed this bill, including the Child Support and
Family Council of California, the City of New York Law Department, and
others.
Mr. Chairman, they understand that the changes that are made in the
committee, as amplified by these changes on the floor, will actually
improve the circumstance of the child support or alimony recipient as
compared to current law.
Mr. Chairman, I urge the adoption of this amendment.
Mr. Chairman, I reserve the balance of my time.
Mr. NADLER. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, this, again, is another one of those amendments that
may do a little good. It is probably harmless, but it does not solve
any of the fundamental problems.
For instance, we are told that on the provision of this amendment
regarding debts incurred to pay nondischargeable debts, it amends
another of the provisions, creating large categories of new
nondischargeable debts, mostly credit card debts.
This amendment, which purports to protect women and children
dependent on support from the debtor, does nothing to change this
provision of the bill. Besides being limited only to cases in which
debtors are single parents or are in arrears on support, it simply
requires the creditor to show that the debtor ``intentionally''
incurred the debt in question. Virtually no debts incurred to pay other
debts are not incurred intentionally, so the change is meaningless.
Then we have the provision that states that alimony and support
claims should be paid before other priority claims in Chapter 13. But
this does not change the Chapter 13 payment formula, which still
requires payment of nonpriority credit card debt concurrently with
support. In other words, the requirement in section 102 that support be
paid concurrently with credit card debts is not changed at all.
The amendment does not deal with the larger problems created by other
provisions that required payments so great that a Chapter 13 plan may
not be feasible, in which case no creditors may be paid.
This amendment makes a new section that places child support and
alimony ahead of all other unsecured priority claims in the
distribution of the assets in a Chapter 7 case. While this is a worthy
idea, and I commend the author for this, it will have little effect
since it is rare, very rare, for any assets at all to be distributed in
a Chapter 7 case.
[[Page H4400]]
Also, because the amendment places child support and alimony ahead of
administrative expenses, like the trustee's commission, we are going to
have trustees abandoning these assets rather if there are not
sufficient additional assets to compensate the trustee. The amendment,
therefore, could cause, and in many cases would cause, women and
children to receive even less support in some cases.
In summary, Mr. Chairman, as the administration has said in its
letter that we received today, and as most of the organizations
concerned with child support agree, this amendment, the manager's
amendment, the amendments in committee do not really deal with the
problem of child support collection.
Let me just add one comment, since the gentleman referred to the Law
Department of my own city, the City of New York. The Law Department of
the City of New York has one concern overriding everything else:
collecting taxes. That is what they care about, not child support. So I
do not credit what they say about how this will deal with child
support. I know the Law Department of my own city only too well.
Mr. Chairman, I reserve the balance of my time.
Mr. BOUCHER. Mr. Chairman, I yield the balance of my time to the
gentleman from Virginia (Mr. Moran).
Mr. MORAN of Virginia. Mr. Speaker, since the gentleman from New York
(Mr. Nadler) has chosen to cite the administration's statement of
policy, let me quote it. ``If debtors truly have the ability to repay a
portion of their debt, after taking into account all relevant factors,
including child support and alimony payments, a successful, supervised
repayment plan under Chapter 13 rules could result in a more reliable
payment of child support and alimony than would the unsupervised
situation after Chapter 7 discharge.''
{time} 1545
That is the point of this bill. With the Boucher amendment this
Statement of Administration Policy is, in effect, an endorsement of
this bill, certainly as it relates to child support. I thank the
administration for its good judgment. I would bring this to the
attention of all the Members of this body.
Mr. NADLER. Mr. Chairman, I yield myself such time as I may consume.
I am constrained to correct what the gentleman from Virginia said a
moment ago. He quoted half a paragraph. What this paragraph says in the
statement from the administration is, the formulaic approach in this
bill, as currently written, could result in moving to Chapter 13 those
debtors who are likely to fail to complete required repayment plans.
These debtors would return to Chapter 7 with a diminished ability to
repay their nondischarged debt, including child support and alimony.
There are other approaches to limiting access to Chapter 7 that would
not have this result.
And they are referring not to the needs-based approach of this bill
but to the approach of the Democratic substitute.
Then it continues: If debtors truly have the ability to repay a
portion of their debt after taking into account all the relevant
factors, including child support and alimony payments, a successful,
supervised repayment plan under Chapter 13 could result in a more
reliable payment, et cetera.
They are talking about under a different system from this bill, under
a system such as under the Democratic substitute that we will be
offering a little later. Frankly, it is not accurate to refer only to
the second half of the paragraph in saying that.
The fact remains that the administration and most of the women's
groups, the NOW, the Children's Defense Fund, the American Association
of University Women, the YWCA, they all oppose this bill because of the
problem of child support. They all say that these amendments do not
solve that problem.
Having said that, again, I will observe, this is not a terrible
amendment. I do not think it does much good, but it does not do any
harm. I will not ask for a vote against it. All I am saying is I do not
think it solves any problems.
The CHAIRMAN. The question is on the amendment offered by the
gentleman from Virginia (Mr. Boucher).
The amendment was agreed to.
The CHAIRMAN. It is now in order to consider amendment No. 5 printed
in House Report 105-573.
Does any Member wish to offer amendment No. 5?
It is now in order to consider amendment No. 6 printed in House
Report 105-573.
Amendment No. 6 Offered by Mr. Shaw
Mr. SHAW. Mr. Chairman, I offer an amendment.
The CHAIRMAN. The Clerk will designate the amendment.
The text of the amendment is as follows:
Amendment No. 6 printed in House Report 105-573 offered by
Mr. Shaw:
Page 76, line 17, insert the following before the 1st
period: except with respect to any property of the debtor
acquired after the date of the filing of the petition. A
creditor that receives a payment, or collects money or
property, in satisfaction of all or part of any debt excepted
from discharge under paragraph (2), (4), or (14) of section
523(a) of this title shall hold such payment, such money, or
such property in trust and, not later than 20 days after
receiving such payment or collecting such money or property,
shall distribute such payment, such money, or such property
ratably to individuals who then hold debts entitled to
priority under this section. Not later than 5 years after
receiving such payment or collecting such money or property,
such creditor shall make the distribution required by this
section to all individuals whose identity is known to such
creditor, or is reasonably ascertainable by such creditor, at
the time of distribution.
The CHAIRMAN. Pursuant to House Resolution 462, the gentleman from
Florida (Mr. Shaw) and a Member opposed each will control 5 minutes.
The Chair recognizes the gentleman from Florida (Mr. Shaw).
Modification to Amendment No. 6 Offered by Mr. Shaw
Mr. SHAW. Mr. Chairman, I ask unanimous consent that the amendment be
modified in the form that I have placed at the desk and which was, just
a few minutes ago, supplied to each side.
The CHAIRMAN. The Clerk will report the modification.
The Clerk read as follows:
Modification to Amendment No. 6 Offered by Mr. Shaw:
Page 76, line 17, insert the following before the 1st
period: except with respect to any property of the debtor
acquired after the date of the filing of the petition. A
creditor that receives a payment, or collects money or
property, in satisfaction of all or part of any debt excepted
from discharge under paragraph (2), (4), or (14) of section
523(a) of this title shall, not later than 20 days after
receiving such payment or collecting such money or property,
distribute such payment, such money, or such property ratably
to individuals who then hold debts entitled to priority under
section 507(a)(3) of this title. Not later than 2 years after
receiving such payment or collecting such money or property,
such creditor shall make the distribution required by this
section to all individuals whose identify is known to such
creditor at the time of distribution.
Mr. SHAW (during the reading). Mr. Chairman, I ask unanimous consent
that the modification be considered as read and printed in the Record.
The CHAIRMAN. Is there objection to the request of the gentleman from
Florida?
There was no objection.
The CHAIRMAN. Is there objection to the modification of the
amendment?
Mr. NADLER. Mr. Chairman, I have no objection.
The CHAIRMAN. Without objection, the modification is agreed to.
There was no objection.
(Mr. Shaw asked and was given permission to revise and extend his
remarks.)
Mr. SHAW. Mr. Chairman, I yield myself such time as I may consume.
I rise to offer the Shaw-Camp-English amendment that is central to
the Committee on Ways and Means' work on the collection of child
support.
Under the leadership of the gentleman from Pennsylvania (Mr. Gekas),
the Committee on the Judiciary has succeeded in not only maintaining
existing child support priorities but in creating a new priority to
help custodial mothers who are owed child support after bankruptcy.
While the legislation creates a post-bankruptcy priority for child
support, it does not contain a procedure for the enforcement of same.
We are afraid that credit card companies will outperform mothers,
especially poor mothers, in securing the father's money, the very money
that Congress has determined should go first to the mothers and to the
children.
Our amendment is really just a perfecting amendment to the amendments
[[Page H4401]]
already adopted by the Committee on the Judiciary. If the credit card
companies obtain payments from the parents who owe past due child
support, the companies are required to hold the payments and distribute
the payments to the custodial mothers if they surface at a later date
and invoke their legal claim to the money already obtained by the
companies.
This amendment would protect the limited number of custodial mothers
who are owed child support but who are not in the Federal child support
program and whose children's father was involved in a bankruptcy. These
mothers and their children are at risk of losing money, and they cannot
afford to lose this important support.
This amendment, as modified, varies from the original amendment that
was made in order by the Committee on Rules. In doing so, I eliminated
the need of the trust, which was provided in that particular bill,
which has caused great heartburn, and I think rightfully so, to some of
the banks and credit card companies that would be holding these
particular funds. We also reduced from 5 years to 2 years the period of
time in which these claims have to be made and we also require, as a
condition for this liability, that they have actual notice of the claim
of the parent.
I think this is a very reasonable amendment, and I would urge its
adoption.
Mr. Chairman, I reserve the balance of my time.
The CHAIRMAN. Who seeks time in opposition to the amendment?
Mr. GEKAS. Mr. Chairman, I rise in opposition to the amendment. I
rise in opposition to the bill as it is now constructed.
Mr. NADLER. Mr. Chairman, I rise in opposition.
The CHAIRMAN. Is the gentleman from Pennsylvania (Mr. Gekas) opposed
to the amendment offered by the gentleman from Florida (Mr. Shaw)?
Mr. GEKAS. I am opposed to it in the first instance in the structure
that it now contains. I am opposed to it. I reserve the right to change
my mind after I make some remarks for the Record.
The CHAIRMAN. The gentleman from Pennsylvania (Mr. Gekas) is
recognized for 5 minutes.
Parliamentary Inquiry
Mr. NADLER. Mr. Chairman, I have a parliamentary inquiry.
The CHAIRMAN. The gentleman will state it.
Mr. NADLER. Mr. Chairman, I assume that side of the aisle is not
going to control 100 percent of the time.
Mr. GEKAS. Mr. Chairman, I will yield to the gentleman myself if I
have some time. I will yield to the gentleman from New York.
Mr. NADLER. Mr. Chairman, is not the normal practice to, in this
case, to have three people controlling time?
The CHAIRMAN. The 5 minutes in opposition is controlled by an
opponent and in this case the gentleman from Pennsylvania (Mr. Gekas)
is recognized.
Mr. GEKAS. Mr. Chairman, I am an opponent, and I am going to yield to
the gentleman from New York, if I have some time left, and I will try
to reserve some time for him.
Mr. Chairman, I yield myself such time as I may consume.
The only reason I oppose the amendment in its original concept, now I
am being converted slowly but surely to the thrust of the bill, was
that it was so inflexible. It was too difficult to implement, in our
judgment. It would cause more trouble than it would solve.
Now that the language has been improved in which some of the language
that would have made a credit or a trustee for the support payment has
been eliminated, I feel a little better about it. So in the final
context of it, after I yield to the gentleman from New York, I may
change my mind and agree to the bill or at least not vote against it.
Mr. Chairman, I yield 2 minutes to the gentleman from New York (Mr.
Nadler).
Mr. NADLER. Mr. Chairman, I simply want to point out, this amendment
originally required that the credit card company that obtained payment
from a parent who owed past due child support, a nondischargeable debt,
and they obtained the payment from someone who owed child support, had
to hold this money in trust for up to 5 years in case they found and
made due diligent efforts to find the parent owed the child support and
then turned it over to her.
The amendment is simply eliminating the due diligence effort and is
shortening the time period to 2 years, and what it is really doing is
making a real admission. The admission is that when all is said and
done, the nondischargeability, making credit card debt
nondischargeable, as this bill does, makes it impossible in the post-
discharge situation to enforce the child support.
The change in this amendment recognizes this, because it would be a
real burden to hold it for 5 years. But why would you want to hold it
for 5 years? Because the credit card company has gotten to the bank
first, and they may not know where or who the child support owed the
custodial parent is. This is just throwing in the towel and admitting
that we cannot enforce the child support, and there is no point in this
situation. And there is no point holding the money in trust for 5 years
so we will only do it for 2 years.
I do not oppose the amendment, but, again, I think it just
illustrates that what we are saying about the provision of the bill,
that making that credit card debt undischargeable makes it impossible,
makes it very difficult to collect the child support despite all the
cosmetic amendments that we have heard about.
Mr. SHAW. Mr. Chairman, I yield 1 minute to the gentleman from
Michigan (Mr. Camp), coauthor of the amendment.
Mr. CAMP. Mr. Chairman, I thank the gentleman for yielding me the
time.
Mr. Chairman, I rise in support of the Shaw-Camp-English amendment.
The collection of child support has been central to the work of the
gentleman from Florida (Mr. Shaw) on the Committee on Ways and Means,
to all of our work on the Committee on Ways and Means. And the
gentleman from Florida (Mr. Shaw) and I appreciate the efforts of the
Committee on the Judiciary in making the collection of child support
payments the number one priority for debtors in reorganizing their
debt.
We should make absolutely sure that kids receive the support they are
entitled to. Our perfecting amendment would merely require credit card
companies which obtain payments from debtors who owe past due child
support to pay custodial parents if they surface at a later date.
Without this additional protection, parents with children living on
tight budgets, who cannot afford to bring legal action, may not be able
to collect the money they desperately need.
I urge the House to pass this important amendment and ensure that
children continue to be this Congress's top priority.
Mr. SHAW. Mr. Chairman, I yield 1 minute to the gentleman from
Pennsylvania (Mr. English), the other coauthor of the amendment.
Mr. ENGLISH of Pennsylvania. Mr. Chairman, I rise in strong support
of the amendment offered by the distinguished chairman of the Committee
on Ways and Means' Subcommittee on Human Resources that will build on
efforts initiated in our subcommittee to further strengthen our
Nation's child support system.
I appreciate that H.R. 3150 provides for a new Federal priority for
child support debt. Under our amendment, though, if credit card
companies obtain payments from parents who owe past due child support,
the companies are required to distribute the payment to custodial
mothers, if they surface at a later date, and invoke their legal claim
to the money already obtained by the companies.
This amendment will protect approximately 150,000 mothers who are
owed child support and whose children's father was involved in a
bankruptcy. In my view, this is a critical part of closing the loop,
offering additional protection to mothers and their children, and
making sure that these collections will go forward.
I hope this amendment will pass with bipartisan support.
Mr. SHAW. Mr. Chairman, I yield myself such time as I may consume.
I would urge the passage of this most important amendment. There is
no greater responsibility that people have in their lives than to take
care of the children and help support the children
[[Page H4402]]
that they have helped bring into this world. I think it sets the
priorities right, and this offers a mechanism by which this money can
be made available for the support of the children.
Mr. Chairman, I yield back the balance of my time.
Mr. GEKAS. Mr. Chairman, I yield myself the balance of my time.
Let me reiterate, the intent and purpose of the Shaw amendment is of
the highest import, because we have attempted in different ways to
parallel that intent in language that we have already incorporated
either in the basic bill or in amendments to that bill.
All of us are interested in making certain of the priority, highest
priority for support payments. I still have reservations about the
workability of the amendment that the gentleman from Florida (Mr. Shaw)
has offered, but he has now created new language which may make it more
acceptable.
I will continue to monitor it between now and the time of conference
and work with the gentleman from Florida (Mr. Shaw) for even more
perfect language, for the perfection that he has already accomplished,
and still reserve the right to work against it if I think it hurts the
overall concept of the bill.
In other words, I do not know where I am on the gentleman's
amendment.
Mr. SHAW. Mr. Chairman, will the gentleman yield?
Mr. GEKAS. I yield to the gentleman from Florida.
Mr. SHAW. Mr. Chairman, I can appreciate the gentleman's position at
this late date, coming in, particularly, with the new language. But I
thank him for his consideration of this new language, and I thank him
for holding fire at this particular time. And also I would like to
thank the gentleman from New York (Mr. Nadler). I think this is a very,
very good addition to the bill that is on the floor.
{time} 1600
The CHAIRMAN. The question is on the amendment offered by the
gentleman from Florida (Mr. Shaw).
The amendment as modified was agreed to.
Mr. GEKAS. Mr. Chairman, I move that the Committee do now rise.
The motion was agreed to.
Accordingly, the Committee rose; and the Speaker pro tempore (Mr.
Shaw) having assumed the chair, Mr. Miller of Florida, Chairman of the
Committee of the Whole House on the State of the Union, reported that
that Committee, having had under consideration the bill (H.R. 3150) to
amend title 11 of the United States Code, and for other purposes, had
come to no resolution thereon.
____________________