[Congressional Record Volume 144, Number 125 (Friday, September 18, 1998)]
[Senate]
[Pages S10579-S10580]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      THE INCREASE IN BANKRUPTCIES

  Mr. SESSIONS. Mr. President, there are a number of problems that have 
contributed to the increase in bankruptcies in this country. We are now 
considering what I believe to be a historic and exceptionally fine 
bankruptcy bill. It came out of the Judiciary Committee with a 16-2 
vote, demonstrating overwhelming support from Democrats and 
Republicans. This legislation is something that we need to pass. But in 
some ways, the filing of a bankruptcy petition is the cleaning up of 
spilled milk. The milk has already been spilled, and it is difficult 
then to have any kind of fair and just determination or allocation of 
assets, and many problems arise from it.
  What we need today is more people who manage their money well. The 
generation that grew up during the Depression, like my father and 
mother, knew how to manage their money. They were cautious. Maybe they 
didn't make great sums of money and great investments, but they took 
care of themselves and their families through frugal living--and I mean 
frugal living. In my background, oftentimes it was very tough for us to 
fund the things that we felt we would like to have. However, what we 
have is a generation that has not been taught how to manage money.
  Today, more people have credit available to them. Frankly, I am not 
one of those who says the problem is that you can get access to credit. 
It would be a terrible thing in this country if you could not get a 
credit card, if you had to have a $40,000-a-year income before anybody 
would give you a credit card. A credit card is a very valuable thing 
for a person on a low income when they are trying to work and take care 
of their families. When they have a flat tire or a $400 car repair bill 
and they don't have $400 in their pocket, they can use a credit card to 
pay for it now and the pay it off over a period of months. This way 
they would not have to deny their family food, or not be able to get to 
work because of an automobile that he does not have the money to fix. 
Those are the kinds of things that are good.
  I don't see how we need to be critical of the fact that many credit 
card companies are offering cards. For the first time, credit card 
companies are beginning to get competitive. I have been very displeased 
with the high rates of interest some of these cards charge. For the 
first time now, they are soliciting business and offering lower 
interest rates. I think that is a good thing, also.
  But, fundamentally, we get into trouble because we don't have enough 
discipline and ability to manage the debt that we face. The way to deal 
with bankruptcy, fundamentally, is to educate the public on how to 
manage money. So this bill, for the first time in history, provides 
debtor education. It provides it both before filing and before you can 
be discharged from bankruptcy.
  I was pleased to offer the consumer credit counseling amendment. I 
was very pleased, and thrilled, actually, that it received so much 
support and was made a part of this bill.
  Let me just say this, Mr. President. I live in Mobile, AL, and I 
began to talk with people I know and respect about debt matters. I 
served with and go to church with an individual who is a bankruptcy 
administrator in Mobile. I know some of the bankruptcy judges. I have 
spent time talking with them about the problems with bankruptcy. Mr. 
Travis Bedsole and I both taught the same Sunday school class together 
over the years. We had some heart-to-hearts about what we really ought 
to do that would help people. When you have the ads that you see in the 
newspapers and on television, ``Come down, and, for $350, we will wipe 
out all your debt,'' that may work just like that advertising lawyer 
says, but it will not leave that debtor with a better understanding of 
how to manage his money.
  What I found was that there are alternatives to bankruptcy. Mr. 
Bedsole and I went to meet Sandra Dunaway in Mobile, who has a credit 
counseling agency. Families, married individuals, people in trouble, go 
to credit counseling agencies. Then, counselors sit down with the 
people who need assistance and help prepare a household budget; the 
lawyers don't do that. They look at all their debts and interest rates 
and figure out a way to save interest rates.
  Credit counseling agencies even have the ability--because of their 
prior relationships with banks and credit card companies and other 
financing companies--to call those institutions and say, ``This person 
is in credit card debt; they are paying 16 percent interest to you. We 
believe we can work them through this if you will cut your interest 
rate to 7 percent.'' They can actually reduce payments in various ways 
through negotiations with creditors. Often, creditors will cooperate 
with that. Then they help the debtor develop a family budget. Sometimes 
they will have them put their paycheck into the credit counseling 
department's account, and the counselor will pay the checks to the 
creditors and give the family what is left over for their normal needs 
and make sure they have enough to meet their household needs in that 
fashion.
  If they can't absolutely work their way out of this debt crisis, then 
they advise them to seek an attorney and file for bankruptcy. What we 
have discovered is that this sytem works. They tell me that there are a 
number of different things that are at work here. One of them is 
gambling. Many people are filing bankruptcy today because of the 
proliferation of gambling. They are addicted to gambling, and they are 
losing large sums of money gambling, and their families are suffering 
from it. So sometimes the way to help a family is to make sure they are 
connected with Gamblers Anonymous or some other State agency or private 
organization that can help those addicted to gambling. Sometimes there 
is a drug problem or an alcohol problem in the family, and these credit 
counseling agencies, who are United Way agencies, for the most part 
filled with people who care about the individuals, in a service 
mentality, not just to get the money and file bankruptcy, but help them 
go to Alcoholics Anonymous or to drug treatment and get in contact with 
mental health agencies if there is a mental health problem in the 
family, and seek other forms of assistance that are already available 
in the community and then help that family develop a plan to get 
through this financial crisis.

  It is a good thing and a lot of people see these ads: ``Bankruptcy 
Can Be a Smart Financial Move''--from $350 and up. This ad has another 
thing in there, by the way. ``Divorce, $300, including court 
appearance.'' ``Injuries, sexual harassment at work, call us. $350.'' 
So they test that. They have a paralegal administrative assistant who 
meets with the person and they fill out all the bankruptcy forms. The 
lawyer may never even see them. He takes the forms. It looks OK. He 
takes them down to the court, files the forms, and, boom. They go to 
bankruptcy. There has been nothing done to deal with the fundamental 
problem that causes them to be in the circumstance they were. So credit 
agencies are really good. People do not realize it. They are in almost 
every city and midsized town in America. Credit counseling agencies are 
readily available.
  This bill says before you file bankruptcy we require that you go by 
and

[[Page S10580]]

talk with a credit counseling agency. But before you commit yourself to 
the lawyer and filing of the bankruptcy and paying his fee, go talk to 
that credit counseling agency. You just may find that they have the 
ability to help you work through this thing, that they will help you 
get some creditors to withhold demands of payment, allow you to get 
caught up, help you set up a budget, and help you figure a way to get a 
side job, or to do the kind of things that most families do to work 
their way out of debt. When they do that, it can actually strengthen 
the family.
  Mr. President, there are some very dramatic numbers on this. But it 
is a major reality that a very large number--in fact, I think the 
highest number of divorces in this country are caused by financial 
disputes and arguments over finances. So this can help strengthen 
families and hold families together.
  I am a real believer in credit counseling. It convinced me. I spent 
several hours talking with them about precisely how they do that. We 
got a number of people from my church together. We met three or four 
times. We want to develop a program that helps train people even more 
in depth about how to manage their property and finances as well so 
that bankruptcy won't be facing them.
  Some have said that this amendment was opposed by the Federation of 
Credit Counselors, a national federation that has crediting standards, 
and that sort of thing. But that is not true. We have met with them. 
This amendment has been refined so that it has, I think, broad-based 
support by now virtually everyone. I am convinced that it has the 
potential for the first time to reduce the ever-increasing number of 
bankruptcies being filed, and for the first time they will have the 
government move more people from a strictly legal situation into a 
situation in which people care about them personally, who will be 
working with them personally, who confront their problems that exist 
within their family, and to help them figure a way out of it. I am 
really excited about that. It does not require a judge to order this to 
happen. If there are no legitimate or effective credit counseling 
agencies in the local communities, the amendment would not apply. But I 
am confident that in most areas it would apply.
  Another thing this new bankruptcy bill does that is excellent is it 
requires that those who file bankruptcy complete a financial management 
course prior to receiving their discharge from bankruptcy. This is 
going to put a new burden on the bankruptcy courts. But many of them 
have already moved in this direction and are working in this direction.
  I believe we owe a responsibility to those who had a circumstance in 
which they were unable to meet their debt to give them some training 
and education in how not to come back again. The truth is we have found 
a very large number of repeat filers in bankruptcies. Some districts 
have reported that 40 percent of their consumer bankruptcies are repeat 
filers. We know that it comprises more than 10 percent nationally. This 
problem will not go away if we don't do something to confront them in 
this process when they are seeking this relief. We want to confront 
them with their difficulties and help them establish a way to avoid 
coming back to bankruptcy.
  That is the kind of thing that I think would deal with the 
fundamental problem of debt in America.
  Mr. President, I believe that the Grassley-Durbin bankruptcy bill is 
an excellent bill. I believe that the 16-to-2 vote that it achieved 
coming out of committee is a strong testament to its fairness and 
objectivity and its ability to improve the bankruptcy court system.
  I believe for the first time we will be reaching out to these 
individuals and families who are in credit difficulties in helping them 
change their lifestyle and helping them find ways to deal with the 
problems--sometimes the fundamental, root causes of their financial 
difficulties so that they won't have to face this problem again; in 
fact, perhaps to be able to live in a family that is not always 
squabbling over money, that maybe does not break up because the family 
has figured out a way to handle its resources in a wise and good manner 
that would benefit children and the entire family.
  Mr. President, I believe that we are on the cusp of the opportunity 
of a great bill. I thank the Members of this body who have worked so 
hard to achieve it. I believe that we will pass it, that it will be law 
soon, and that this Nation will benefit from it.
  I yield the floor.
  Mr. JEFFORDS addressed the Chair.
  The PRESIDING OFFICER. The Senator from Vermont.

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