[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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