[Congressional Record Volume 144, Number 127 (Tuesday, September 22, 1998)]
[Senate]
[Pages S10695-S10700]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
CONSUMER BANKRUPTCY REFORM ACT OF 1998
The Senate continued with the consideration of the bill.
Amendment No. 3540
The PRESIDING OFFICER. Under the previous order, the hour of 2:15
p.m. having arrived, there will now be 5 minutes for debate, equally
divided, prior to a vote relative to the Kennedy amendment.
Mr. KENNEDY addressed the Chair.
The PRESIDING OFFICER. The Senator from Massachusetts.
Mr. KENNEDY. Mr. President, I yield myself 2 minutes 15 seconds.
At long last, the Senate is about to vote on raising the minimum
wage. The Nation has enjoyed extraordinary prosperity in recent years.
Unemployment and inflation are at their lowest levels in a generation.
Interest rates are low, and the economy is strong and growing. But 12
million hard-working Americans are left out and left behind. They are
minimum wage workers, and for them, the current prosperity is someone
else's boom. Working 40 hours a week, 52 weeks of the year, minimum
wage workers earn just $10,700 a year, $2,900 below the poverty level
for a family of three.
A full day's work should mean a fair day's pay. But for these 12
million Americans, it does not. These hard-pressed Americans can barely
make ends meet every month. Too often they are forced to choose between
paying the light bill or the phone bill or the heating bill. An
unexpected illness or family crisis is enough to push them over the
edge.
Their plight is shocking and unacceptable. If this country values
work as we say we do, we must be willing to pay these workers a decent
wage. The wealthiest nation on Earth can afford to do better for these
hard-working citizens, and today we have the opportunity to do so. We
can raise the minimum wage.
Giving workers another 50 cents an hour may not sound like much, but
it can make all the difference for these hard-working Americans. It can
help buy groceries or pay the rent or defray the costs of job training
courses at the local community college.
The minimum wage is a women's issue. It is a children's issue. It is
a civil rights issue. It is a labor issue. It is a family issue. Above
all, it is a fairness issue and a dignity issue. Raising the minimum
wage is a matter of fundamental fairness and simple justice.
In a few moments, the Senate will have the opportunity to do more
than pay lip service to these basic principles. If we believe in these
ideals, we will vote to raise the minimum wage. No one who works for a
living should have to live in poverty.
The PRESIDING OFFICER. Who yields time?
[[Page S10696]]
Mr. HATCH addressed the Chair.
The PRESIDING OFFICER. The Senator from Utah.
Mr. HATCH. Mr. President, we know that only about 22 percent of the
American people who are on minimum wage are people who have households
to support. Almost every job on minimum wage is given to somebody who
literally needs a job, would not otherwise have that opportunity and
probably would have his or her job chances diminished if the minimum
wage is increased. We found that to be the case year after year after
year.
You cannot mandate increased labor costs without adverse impacts.
What are those impacts?
Decreased employment opportunities, particularly for teenagers, and
others, who are in the worst condition, with few skills and employment
barriers. In large part, these reductions will be fewer jobs created,
the elimination of certain services, such as bagging groceries or
having them loaded in your car, or having services performed less
frequently.
Higher prices for goods and services. The minimum wage is an
ineffective antipoverty policy. Why? Because three-quarters of those
earning the minimum wage are not heads of households or do not live in
poor families--three-quarters of them. Most of these jobs are taken by
people who are not from the poorest of the poor. Since the minimum wage
increase cannot be targeted only to those who need it, the likelihood
is that those with more experience, maturity, or skills will get or
retain entry-level jobs and those who need a first-chance job the most
are going to lose out.
Also, higher minimum wages stifle entry-level training opportunities.
Workers have typically ``paid for'' their training and introductory
work experience by working at entry-level wages. Mandating a higher
minimum wage makes entry-level opportunities less available and our
workforce less prepared for greater skills and opportunities down the
line.
It is a myth that workers get ``stuck'' at minimum wages. Within a
year, the average minimum wage earners get a 20 percent increase or
even higher wage increase based on his or her greater skill level and
experience.
Higher wages act as an incentive for some youth to leave school to
take jobs.
So what is worse is that this adverse impact is for nothing. Those
very individuals who need entry-level jobs the most are the ones most
likely to be displaced by the increased competition for them. Frankly,
hiking the minimum wage is not the only way to assist working Americans
and those struggling to make ends meet. Let's work on some of these
ideas.
Personally, I would like to raise people's paychecks by cutting their
taxes. That would increase their paychecks without the risk that they
might lose their jobs. And I think we can work together on education.
We passed the A+ education bill. Let's tackle illiteracy, and let's do
it this way rather than through this really untried procedure.
The PRESIDING OFFICER. The Chair announces all time has been used on
the opponents' side, but the Senator from Massachusetts has 18 seconds
remaining.
Mr. LOTT addressed the Chair.
The PRESIDING OFFICER. The majority leader is recognized.
Mr. LOTT. If the Senator would like to use the remainder of his time,
I will use leader time to conclude debate and move to table the
amendment.
Mr. KENNEDY. I yield back and ask for the yeas and nays, Mr.
President.
The PRESIDING OFFICER. All time is yielded back.
Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
Mr. LOTT. Mr. President, I intend to move to table the amendment and
ask for the yeas and nays on the motion to table.
The PRESIDING OFFICER. The majority leader has that right and may
move to table, if he so wishes, after the statement.
Mr. LOTT. Mr. President, before I do that, I want to yield myself
such time as I may consume out of leader time. I will be very brief.
Mr. President, when I became majority leader 2 and a half years ago,
this issue was pending before the Senate and it had caused a lot of
problems and some difficulties in trying to decide how to deal with it.
After a period of weeks and months, we came to the conclusion that we
did need a minimum wage increase at that point, but with a lot of small
business tax provisions being included. And they helped to mitigate the
effect on small business men and women and the jobs they create in
particular.
But we had a minimum wage increase the year before last. We had a
minimum wage increase last year. This increase, in my opinion, would be
bad for the economy, bad for business, and bad for job creation.
I would like to just cite you two examples to think about. I have a
son, first of all, who is a small businessman. And he employs people at
the entry level, people who do not have high school educations--unwed
mothers, people who are desperate to get a start, to get a job. And he
gives them that opportunity. A lot of them go on to wind up being
supervisors and owners of their own companies and create jobs. They
live the American dream.
But I had occasion to hear comments from one lady--I believe she was
from Marietta, GA--named Harriet Cane. She owns a Sweet Life
Restaurant, which she describes as a very small dessert and luncheon
cafe. It seats 45 people. As a result of the last increase in the
minimum wage, she reduced her staff from 16 to 10, by attrition
primarily, raised prices modestly, and had to increase her own hours on
the job to 16 a day. And here is her exact quote:
I will tell you this, that if the next increase does go
through, what will happen to my store. Bottom line: my doors
will close. I've talked with my CPA. We've tried to be
creative. We've tried to find a way to handle the increase in
payroll that it would represent. As a little shop, I have no
option. I just want the world and the communities to
understand that this is a reality and not just rhetoric.
Also, a very impressive statement was given on that occasion when I
heard Harriet Cane by a gentleman from Texas named Jose Cuevas. Jose
Cuevas came with no prepared statement, but he spoke from the heart. He
and his wife, he said, have lived the American dream. He is a Hispanic
restaurant owner in south Texas who is approximately 44 years old. And
he and his wife, at the ages of 22 and 20, saved money and worked
really hard so they could buy their first store. This is what he had to
say:
It became a dream. We now have four locations. We have $2.6
million worth of sales. We have seen a lot of people come
through our door, and a lot of good people. They have all
left something. They have all gone on to better things. I
think of how this minimum wage will affect other people's
dreams of owning their own companies, their own restaurants.
I was fortunate enough that I and my wife worked side by side
with two other employees until we earned a little bit more
and could hire extra people. But at $6 or even $5.50 an hour,
it will make it almost impossible. Our last raise in the
minimum wage cost us $60,000 in labor costs.
In conclusion he said,
So I urge you to continue to fight the battle for us,
because I believe it's true and right. America is built on
small business owners, just like all of us that go out every
day, work hard, and create jobs so that others could live the
American dream like we have.
Mr. President, I think this is the wrong action at the wrong time.
The people who will be hurt the most are the people that well-
intentioned Senators really want to help, because they will wind up not
getting an increase in the minimum wage, they will wind up with no job.
I urge the Senate to vote to table this amendment. I now move to
table the amendment and ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The question is on agreeing to the motion to
lay on the table the amendment No. 3540 offered by the Senator from
Massachusetts. The yeas and nays have been ordered. The clerk will call
the roll.
The legislative clerk called the roll.
Mr. FORD. I announce that the Senator from Ohio (Mr. Glenn) is
necessarily absent.
The result was announced--yeas 55, nays 44, as follows:
[Rollcall Vote No. 278 Leg.]
YEAS--55
Abraham
Allard
Ashcroft
Bennett
Bond
Brownback
Burns
Campbell
Chafee
[[Page S10697]]
Coats
Cochran
Collins
Coverdell
Craig
DeWine
Domenici
Enzi
Faircloth
Frist
Gorton
Graham
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hollings
Hutchinson
Hutchison
Inhofe
Jeffords
Kempthorne
Kyl
Lott
Lugar
Mack
McCain
McConnell
Murkowski
Nickles
Roberts
Roth
Santorum
Sessions
Shelby
Smith (NH)
Smith (OR)
Snowe
Stevens
Thomas
Thompson
Thurmond
Warner
NAYS--44
Akaka
Baucus
Biden
Bingaman
Boxer
Breaux
Bryan
Bumpers
Byrd
Cleland
Conrad
D'Amato
Daschle
Dodd
Dorgan
Durbin
Feingold
Feinstein
Ford
Harkin
Inouye
Johnson
Kennedy
Kerrey
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Mikulski
Moseley-Braun
Moynihan
Murray
Reed
Reid
Robb
Rockefeller
Sarbanes
Specter
Torricelli
Wellstone
Wyden
NOT VOTING--1
Glenn
The motion to lay on the table the amendment (No. 3540) was agreed
to.
Mr. NICKLES. Mr. President, I move to reconsider the vote.
Mr. KENNEDY. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Amendment No. 3602
The PRESIDING OFFICER. Under the previous order, there will now be 10
minutes equally divided on amendment No. 3602 to amendment No. 3559.
The Senate will come to order.
The Senator from Wisconsin is recognized for 5 minutes.
Mr. FEINGOLD. Thank you, Mr. President.
Have the yeas and nays been ordered on these two amendments, Mr.
President?
The PRESIDING OFFICER. They have not been ordered on the pending
amendment.
Mr. FEINGOLD. Mr. President, I ask for the yeas and nays on both of
my amendments.
The PRESIDING OFFICER. Is there objection to the request of ordering
the yeas and nays on the next two amendments offered by the Senator
from Wisconsin?
Without objection, it is so ordered.
Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The Senator from Wisconsin.
Mr. FEINGOLD. Mr. President, the original version of S. 1301 would
have made a debtor's attorney responsible for the panel trustee's costs
and fees if the attorney lost a 707(b) motion brought by the trustee--
not if the filing was made in bad faith, not if the filing was
frivolous, but simply if he or she lost the motion.
Fortunately, an amendment was accepted at the Judiciary Committee
markup which would make the debtor's attorney liable only if he or she
was ``not substantially justified'' in filing the petition. Even this
standard, however, is untenable.
The opponents of the Feingold-Specter amendment argue that debtors
attorneys are notoriously bad actors who abuse the bankruptcy system.
No credible evidence, however--beyond an unsubstantiated story here and
an unsubstantiated story there--has been offered to support the
proposition that debtors attorneys are more likely to act in bad faith
than any other type of attorney.
Why then would we allow this bill to contain a provision which
applies a stricter standard of conduct to consumer debtors' attorneys
than to any other type of attorney--a provision which is, as pridefully
noted by the opponents of my amendment, designed to punish debtors'
attorneys?
I have heard from bankruptcy judges in my home State of Wisconsin and
they strongly object to the premise that debtors' attorneys are by any
measure less admirable or honest than other types of attorneys.
Moreover, they believe that this provision of the bill is fundamentally
wrong and endangers debtors' access to the system.
The conduct of consumer debtors' attorneys should meet the standards
set for all attorneys in Federal Civil Rule of Procedure 11, which is
incorporated in Federal Rule of Bankruptcy Procedures 9011.
Every other fee-shifting provision in Federal law which holds the
attorney liable require affirmative wrongdoing by the attorney. With or
without my amendment--indeed, with or without this bill--if a debtor's
attorney brings a ``frivolous'' or ``improper'' Chapter 7 filing--the
court can order sanctions against that attorney.
Let me be clear--under current law, debtors' attorneys can already be
fined if they act in bad faith. There is simply no legitimate basis for
a different and more punitive standard that only applies to debtors'
attorneys in bankruptcy proceedings.
Should not the purpose of this bill be to rid the bankruptcy system
of abuse, not to punish a particular type of attorney? The basic
premise of this bill--the fundamental tool it uses to weed out abuse--
is the 707(b) motion. That is, the motion which is filed by the panel
trustee when she feels that the debtor is abusing the system.
To supposedly encourage a trustee to file such a motion, this bill
would award her costs and fees only when the debtor's attorney's
actions were not substantially justified. Under the Feingold-Specter
amendment, the trustee would be rewarded for her efforts whenever she
wins a 707(b) motion.
Let me ask you--if you were a panel trustee charged with the duty of
protecting the integrity of the bankruptcy system and your primary tool
for doing so was the 707(b) motion, would you be more likely to file
such a motion when you got paid whenever you won such a motion or only
when the debtor's attorney was demonstrated to have been not
substantially justified?
Before you answer, let me ask you one more question. What if, before
you could get paid--as under the current bill--you, a panel trustee--
not the court or an independent third party--also had to incur the
additional time and cost of bringing and arguing another motion to
prove that the debtor's attorney was not substantially justified?
The answer to these questions is clear. If you were a panel trustee
you would have a stronger incentive to bring a 707(b) motion--that is,
a stronger incentive to rid the bankruptcy system of abuse--under the
Feingold-Specter amendment than you would under the current language of
the bill.
So, the Feingold-Specter amendment seeks to maintain the incentive
for trustees while preserving a debtor's access to justice and
representation. It does so by making the trustee's fees and costs an
administrative expense under Section 503(b) if the trustee is
successful in her 707(b) motion to convert the case into Chapter 13. If
the court dismisses the Chapter 7 filing, the debtor would be required
to pay the trustee's cost and fees.
Your vote on the Feingold-Specter amendment comes down to this--if
you want to muddle the system with needless additional hearings and to
strike a mean-spirited, unfounded blow against debtors attorneys, vote
against our amendment; if on the other hand, you want to rid the
bankruptcy system of abuse in the most equitable and efficient manner,
then vote for our amendment.
The PRESIDING OFFICER. The time of the Senator has expired.
Who yields time? The Senator from Iowa controls 5 minutes in
opposition to the amendment. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I yield myself such time as I might
consume at this point.
The bill that is before us, and it is reported by the Judiciary
Committee, penalizes lawyer misconduct. I think these penalties are
very fair. They are very narrowly focused. Of course, penalties are
very necessary. Many lawyers who specialize in bankruptcy view
bankruptcy as an opportunity to make big money for themselves. This
profit motive causes bankruptcy lawyers to promote bankruptcy as the
only option, even when a financially troubled client might obviously
have the ability to repay some debt.
This profit motive creates a real conflict of interest where
bankruptcy lawyers push people into bankruptcy who do not belong there,
and they do it because they get paid up front. I think that any
reasonable person would say that lawyers who file bankruptcy cases
which are not substantially justified ought to be required to help
defray the costs of their frivolous cases. That is all my bill does.
Senator Feingold's amendment would gut this reasonable effort to
control the bankruptcy bar, which is seriously out of control.
[[Page S10698]]
The Consumer Bankruptcy Reform Act contains reasonable lawyer
misconduct penalties which will cause lawyers to think twice before
they, willy-nilly, cart somebody into chapter 7 and pocket a nice
profit in the process. Some bankruptcy lawyers, in their rush to turn a
profit, operate what are known as bankruptcy mills--nothing more than a
processing center that happens to be for bankruptcy. There is little or
no investigation done as to whether an individual actually needs
bankruptcy protection or whether or not a person is able, at least
partially, to repay their debts.
Recently, one of these bankruptcy attorneys from Texas was sanctioned
by a bankruptcy court. The practices of the bankruptcy mills are so
deceptive and so sleazy that last year the Federal Trade Commission
went so far as to issue a consumer alert, warning consumers of
misleading ads that promise debt consolidation. So I think there is a
widespread recognition that bankruptcy lawyers are preying on
unsophisticated consumers.
Yesterday I spoke about the bankruptcy lawyer who had written a book.
I had this chart up. I spoke about this bankruptcy lawyer who had
written this book entitled, ``Discharging Marital Obligations in
Bankruptcy.'' This author, a bankruptcy lawyer, actually said that he
is going to counsel you on how to avoid your obligations to pay defense
costs, alimony, and child support. So it is all about how high-income
people can get out of paying child support and alimony.
I think it is outrageous that bankruptcy lawyers are helping
deadbeats cheat divorced spouses out of alimony and children out of
child support, so that is why we want to vote this amendment down. I
think my colleague, Senator Kyl, wanted time.
I yield the remainder of my time to Senator Kyl.
The PRESIDING OFFICER. There is currently 1 minute 20 seconds
remaining.
Mr. KYL. Mr. President, I thank the Senator from Iowa.
The key point here is to simply hold the attorney responsible for the
costs of a hearing. That is all we are talking about. It is either
going to be the attorney or it is going to be the people who are owed
money in a bankruptcy, or even the debtor, to be responsible for the
costs of that hearing in the event the attorney has made a wrong filing
here, a filing that was not substantially justified. So, if the
attorney can establish that what he did was substantially justified in
putting his client into chapter 13 bankruptcy as opposed to chapter 7,
then he has no responsibility here and would have no liability for the
costs of the hearing. But if it turns out that he was not substantially
justified in doing that, then this would permit the court to assess the
cost of bringing the motion and having the hearing against that lawyer.
That is all we are talking about here.
In view of the fact that the National Bankruptcy Commission has been
very concerned about these bankruptcy mills, this is a legitimate
concern and a way to avoid this kind of mistake from occurring. It puts
the responsibility where the responsibility ought to lie. I support the
position of the Senator from Iowa in urging opposition to the Feingold
amendment.
Mr. GRASSLEY. Mr. President, I move to table the Feingold amendment
and ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The question is on agreeing to the motion to
lay on the table Feingold amendment No. 3602. The yeas and nays have
been ordered. The clerk will call the roll.
The bill clerk called the roll.
Mr. FORD. I announce that the Senator from Ohio (Mr. Glenn) is
necessarily absent.
The result was announced--yeas 57, nays 42, as follows:
[Rollcall Vote No. 279 Leg.]
YEAS--57
Abraham
Allard
Ashcroft
Bennett
Bond
Breaux
Brownback
Bryan
Burns
Byrd
Campbell
Chafee
Coats
Cochran
Collins
Coverdell
Craig
D'Amato
DeWine
Domenici
Enzi
Faircloth
Frist
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Jeffords
Kempthorne
Kyl
Lott
Lugar
Mack
McCain
McConnell
Murkowski
Nickles
Reid
Roberts
Roth
Santorum
Sessions
Smith (NH)
Smith (OR)
Snowe
Stevens
Thomas
Thompson
Thurmond
Warner
NAYS--42
Akaka
Baucus
Biden
Bingaman
Boxer
Bumpers
Cleland
Conrad
Daschle
Dodd
Dorgan
Durbin
Feingold
Feinstein
Ford
Graham
Harkin
Hollings
Inouye
Johnson
Kennedy
Kerrey
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Mikulski
Moseley-Braun
Moynihan
Murray
Reed
Robb
Rockefeller
Sarbanes
Shelby
Specter
Torricelli
Wellstone
Wyden
NOT VOTING--1
Glenn
The motion to lay on the table the amendment (No. 3602) was agreed
to.
Mr. GRAMM. Mr. President, I move to reconsider the vote.
Mr. GRASSLEY. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Amendment No. 3565
The PRESIDING OFFICER. Under the previous order, there will now be 5
minutes equally divided on Feingold amendment numbered 3565.
The Senator from Wisconsin.
Mr. FEINGOLD. Ironically, bankruptcy is the only Federal civil
proceeding in which a poor person cannot file in forma pauperis.
What this means, in any other Federal civil proceeding you can file a
case without paying filing fees if the court determines you are unable
to afford the fee; but in bankruptcy, you either pay the filing fee or
are denied access to the system. That is right, the bankruptcy system--
which is by definition designed to assist those who have fallen on hard
times--is unavailable to the poorest of the poor.
This prohibition against debtors filing in forma pauperis is a clear
obstacle to their efforts to gain access to justice. The current fee is
$175; $175 is roughly the weekly take-home pay of an employee working a
40-hour week at the minimum wage.
I think it is unrealistic and unreasonable to expect an indigent in
this case to raise such a fee simply to enter the system.
The PRESIDING OFFICER. The Senator has 1 minute 30 seconds remaining.
Mr. FEINGOLD. Given the fact that I have such high regard on behalf
of the leader of this bill on our side, Senator Durbin, I yield the
remaining time to Senator Durbin who will further speak in favor of the
amendment.
The PRESIDING OFFICER. The Senator from Illinois is recognized.
Mr. DURBIN. Mr. President, I thank the Senator from Wisconsin. I rise
in support of this amendment. When you have people who are so dirt poor
that they can't come up with the $175 filing fee, we usually say in
civil actions that we are going to waive the fee in court. For some
reason, that waiver is not in the law in bankruptcy. It certainly
should be. People wouldn't be coming to the bankruptcy court were they
not in dire straits.
I support the Senator from Wisconsin because this has been tried
successfully. It does not result in a mad dash to the courthouse by
people who otherwise would not file for bankruptcy.
Now, the milk of human kindness curdled a few moments ago on the
Senate floor when it came to bankruptcy lawyers, and the poor folks
didn't do too well a few minutes ago when it came to minimum wage.
Please stop and think about this for a minute. The poorest of the poor,
coming to bankruptcy court trying to turn their lives around, want the
same kind of treatment people get in all other civil suits. That is not
unreasonable.
Mr. GRASSLEY. I yield all the time on this side to the Senator from
Alabama.
Mr. SESSIONS. Mr. President, this Feingold amendment is directly
contrary to the purpose of the bill that Senator Grassley has worked so
hard for. It requires no fee for filing under chapter 7, where the
debtor wipes out all his debts. However, the amendment does require a
fee under chapter 13, where the debtor pays back a portion of his debt.
Therefore, it would encourage filings under chapter 7, when we
[[Page S10699]]
believe more people should file under chapter 13.
This Congress has considered this issue before and rejected it. The
National Bankruptcy Commission just completed a long study of
bankruptcy and did not call for the elimination of this fee. The United
States Supreme Court in 1973 squarely held that it is constitutional.
The bankruptcy system should discourage frivolous filings.
Furthermore, this amendment provides no standard for the judge to
decide who in bankruptcy ought to pay and who ought not to pay. And, in
addition to that, it would clog the courts with multiple hearings
regarding who should pay the $160 filing fee. In addition, bankruptcy
law currently allows filing fees to be paid in four installments. When
a person files bankruptcy, they are able to stop paying all of their
debt. Debtors are able to pay the filing fee because all other
obligations have been tolled under the automatic stay.
This amendment will result in additional court hearings that distract
the bankruptcy court from its primary purpose. This practice will be
encourage filings under chapter 7 when filing under chapter 13 would be
more appropriate. People who can pay a portion of their debt ought to
be accountable for that amount.
I believe that this amendment will cost millions. In fact, based on
the number of filings last year, we could be talking about $100 million
in costs.
Thank you, Mr. President.
Mr. GRASSLEY. Mr. President, we yield back our time.
The PRESIDING OFFICER (Mr. Kempthorne). The question is on agreeing
to amendment No. 3565.
Mr. GRASSLEY. Mr. President, I move to table the Feingold amendment
and I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
The PRESIDING OFFICER. The question is on agreeing to the motion of
the Senator from Iowa to lay on the table the amendment of the Senator
from Wisconsin. On this question, the yeas and nays have been ordered,
and the clerk will call the roll.
The assistant legislative clerk called the roll.
Mr. FORD. I announce that the Senator from Ohio (Mr. Glenn) is
necessarily absent.
The result was announced--yeas 47, nays 52, as follows:
[Rollcall Vote No. 280 Leg.]
YEAS--47
Abraham
Allard
Ashcroft
Bennett
Bond
Brownback
Burns
Campbell
Coats
Cochran
Coverdell
Craig
DeWine
Enzi
Faircloth
Frist
Gorton
Gramm
Grams
Grassley
Gregg
Hagel
Hatch
Helms
Hutchinson
Hutchison
Inhofe
Kempthorne
Kyl
Lott
Lugar
Mack
McCain
McConnell
Murkowski
Nickles
Roberts
Roth
Santorum
Sessions
Shelby
Smith (NH)
Stevens
Thomas
Thompson
Thurmond
Warner
NAYS--52
Akaka
Baucus
Biden
Bingaman
Boxer
Breaux
Bryan
Bumpers
Byrd
Chafee
Cleland
Collins
Conrad
D'Amato
Daschle
Dodd
Domenici
Dorgan
Durbin
Feingold
Feinstein
Ford
Graham
Harkin
Hollings
Inouye
Jeffords
Johnson
Kennedy
Kerrey
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Mikulski
Moseley-Braun
Moynihan
Murray
Reed
Reid
Robb
Rockefeller
Sarbanes
Smith (OR)
Snowe
Specter
Torricelli
Wellstone
Wyden
NOT VOTING--1
Glenn
The motion to lay on the table the amendment (No. 3565) was rejected.
Mr. FEINGOLD. Mr. President, I move to reconsider the vote by which
the motion was rejected.
Mr. BREAUX. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. FEINGOLD. I ask unanimous consent that the yeas and nays be
vitiated on the underlying amendment.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
The question now occurs on agreeing to amendment No. 3565.
The amendment (No. 3565) was agreed to.
Amendment No. 3610
The PRESIDING OFFICER. Under the previous order, there will now be 10
minutes for debate, equally divided, on the Reed amendment. The Senator
from Rhode Island is recognized for 5 minutes.
Mr. REED. Mr. President, I yield myself such time as I may consume.
Mr. President, the underlying legislation that we are considering
today will allow a creditor to request a bankruptcy judge to move a
petition in bankruptcy from chapter 7 to chapter 13. As we all realize,
in chapter 7, a debtor may fully discharge his debts, and in chapter
13, there is an obligation to partially pay one's debts.
The focus of this legislation is on the debtor. There are two
conditions which the creditor must show: The creditor must show either
the individual debtor has at least enough assets to pay 30 percent of
the debts or that the debtor has acted in bad faith in applying for
chapter 7 liquidation.
I believe this focus exclusively on the debtor misses half of the
equation. The other important half of the equation is the behavior of
the creditor. My amendment explicitly requires the bankruptcy judge to
consider the behavior of the creditor, whether that creditor acted in
good faith in the extension of credit.
We all know there has been a significant increase in bankruptcy
filings, but what we frequently overlook is the fact that there has
been an extraordinary increase in credit extension. In 1986 through
1996, that 10-year period, filings increased by 122 percent, but
revolving consumer credit increased 238 percent in that same period. As
a result, we have had a situation where much of this credit extension
has been done with very poor underwriting standards, a situation in
which the companies themselves might very well anticipate that the
debtor could not handle the debt.
Those companies that act recklessly and unscrupulously should not
have the option to request that a debtor be thrown into chapter 13 from
chapter 7. As a result, I believe it is incumbent upon the bankruptcy
judge to look explicitly at the issue of the good faith of the
creditor.
This is not just a question of the volume of credit that has been
extended; this is the proliferation of solicitations. Each year, 2
billion credit solicitations are made in this country, many of them
without any concern of the ability of the debtor ultimately to pay. We
don't need a test to establish this fact. We just have to sit home on a
Saturday and at about 10 o'clock, you get the first call from a credit
card company. Then at 10:30, you get the second call. At 11, the mail
comes and you get two or three solicitations, and it goes all the way
through the evening.
What I want to see, and what the amendment requires, is if there is a
consideration to move a debtor from chapter 7 to chapter 13, the judge
should be able to apply a good-faith standard when reviewing the
activities of the creditor. This establishes balance, this establishes
a strong presumption that both sides must be looked at in terms of this
rather unique and novel approach to the bankruptcy code. It is well
within the expertise of the banking judge to make this determination.
I simply conclude by saying that this amendment has the strong
support of the Consumer Federation of America and Consumers Union. This
is an opportunity to vote with consumers with regard to this
legislation.
I now retain the remainder of my time but also ask at this time for
the yeas and nays.
The PRESIDING OFFICER (Mr. Gorton). Is there a sufficient second?
There appears to be a sufficient second.
The yeas and nays were ordered.
Mr. HATCH addressed the Chair.
The PRESIDING OFFICER. The Senator from Utah.
Mr. HATCH. I oppose the amendment. Under the provision, in any 707(b)
case brought by a creditor, the court would consider whether the
creditor had used good faith in the extension of credit. This
determination necessarily would involve looking at underwriting
decisions.
[[Page S10700]]
The bankruptcy court shall not be asked to interfere in the
complicated process of making credit underwriting decisions. This is
particularly true when current underwriting practices are quite
successful, with an average of 95 to 97 percent of consumer credit
extended today repaid on time.
Mr. President, this amendment permits new uncontrolled and virtually
unlimited inquiries into creditor conduct. It encourages complicated
and involved discovery and burdensome court proceedings. It introduces
unwarranted defenses to strong enforcement of the needs-based
provisions of S. 1301, this bill.
The amendment permits a debtor to avoid repaying all his creditors by
attacking the good faith of any creditor who brings a motion to enforce
the needs-based provisions. And the amendment has no standard for what
is good faith. So this is a killer amendment.
Moreover, S. 1301 already contains numerous provisions to make sure
creditors are acting appropriately. As I have noted in my previous
remarks, this is a well balanced bill that is a combination of months
and months of deliberations and cooperation between Senators Grassley
and Durbin and other members of the Senate Judiciary Committee. They,
along with other members of the Judiciary Committee, have done a fine
job in ensuring that this bill is a fair bill. This balanced and
broadly supported legislation not only curbs abuses of the bankruptcy
system but also provides unprecedented consumer protections.
Let me begin by saying being a creditor and winding up in bankruptcy
court to collect unpaid bills is not a desirable situation for any
creditor. Creditors who deal with debtors in bankruptcy, even in the
best of circumstances, are likely to recover only pennies on every
dollar they are owed.
In any event, S. 1301 already contains nine provisions with rather
severe penalties to creditors for improper behavior. We have given due
consideration to these concerns.
First, if a creditor brings a motion to dismiss a chapter 7 case and
fails, the debtor gets attorney's fees and costs if the creditor was
not substantially justified or if the creditor filed the motion in an
effort to coerce the debtor.
Second, if a creditor unreasonably refuses a debtor's offer to work
out a repayment schedule, the creditor is barred from asserting any
claim of nondischargeability or any claim of denial of discharge.
Third, if a creditor willfully violates the automatic stay, the
creditor pays the debtor's attorney's fees, actual damages, and
punitive damages, if appropriate. We have really gone a long way here.
Fourth, if a creditor fails to comply with the requirements for a
reaffirmation agreement, the court can order heavy sanctions and
penalties.
Fifth, the legislation will make it much harder for creditors to get
determinations of nondischargeability. Only false representations by a
debtor that are considered ``material'' will be actionable. If a
creditor makes an unsuccessful claim of nondischargeability or denial
of discharge, the creditor is liable for the debtor's attorney's fees,
costs, and punitive damages, if the creditor's claim is not
substantially justified. The reverse is not true. If the creditor wins
the nondischargeability proceeding, the debtor does not have to pay the
creditor's attorney's fees. So it isn't reversible.
Sixth, if a creditor willfully violates the postdischarge injunction,
the creditor is liable for minimum damages of $5,000 and attorney's
fees and costs, with the possibility of treble damages.
Seventh, if a creditor fails to comply with Truth in Lending Act
requirements for certain mortgage loans, the creditor's claim will not
be recognized or paid in bankruptcy. For instance, if a creditor does
not provide for certain disclosures, or fails to meet the requirements
of the act, even if it is a technical violation, the creditor's claim
will be denied in bankruptcy. In other words, the debt, both principal
and interest, will be completely forgiven. These new penalties are in
addition to those penalties already present in the Truth in Lending Act
itself.
Eighth, if a creditor willfully fails to credit payments to a
bankruptcy plan, the creditor is liable for minimum damages of $5,000
and attorney's fees and costs, with the possibility of treble damages.
And ninth, if a creditor's proof of claim is disallowed or reduced by
21 percent or more, the debtor gets attorney's fees and costs, and so
forth.
The PRESIDING OFFICER. The Senator's time has expired.
Mr. HATCH. As you can see--I hope we can vote down this amendment--a
lot of hard work has been put into this.
Mr. President, I move to table and ask for the yeas and nays.
The PRESIDING OFFICER. There is time remaining.
Mr. REED. How much time is remaining?
The PRESIDING OFFICER. Two minutes 6 seconds.
Mr. REED. Thank you.
I applaud all the consumer protections that the Senator from Utah has
listed, but I would like to add one more. I would like to add, along
with the Consumers Union and the Consumer Federation of America, the
protection of looking at the good-faith operation of a creditor who is
demanding that a debtor be placed from chapter 7 into chapter 13.
With respect to the standard, my standard is as equally well defined
as the bad-faith standard that exists today within the legislation,
because good faith and bad faith are something that the banking judge
should be able to determine, and it does not require an elaborate
searching through of underwriting policies and looking through
documentation and going around the country.
What it does require is that that trier of fact, that bankruptcy
judge, determine whether or not the creditor has abused the
relationship, either by intimidation or deceit. All these things would
rise to the level of a lack of good faith. I suggest very strongly the
bankruptcy judge can do that, and should do that in this context.
Mr. President, I yield the remainder of my time to the Senator from
Illinois.
The PRESIDING OFFICER. The Senator from Illinois.
Mr. DURBIN. How much time is remaining?
The PRESIDING OFFICER. Fifty-two seconds.
Mr. DURBIN. I rise to support this amendment because I think it makes
a good bill even better. We are trying to stop the abuses in
bankruptcy. We say if you want to file for bankruptcy and you do not
have good cause, we are going to throw you out of court. We might
penalize you, and we are going to do the same thing to your attorney.
So from the debtor side--the person who owes the money--it is a pretty
tough standard.
What the Senator from Rhode Island says is, let's have a standard as
well for the collection agencies and the creditors who are not treating
people fairly. I think we want to eliminate all abuses in the
bankruptcy court, not just by the debtors and their attorneys, but by
the creditors, too. What the Senator from Rhode Island suggests is
fairness and balance. It gives the court the ability to look at strong-
arm tactics used by collection agencies and creditors to the detriment
of debtors who are trying to get out of debt.
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