[Congressional Record Volume 144, Number 129 (Thursday, September 24, 1998)]
[Senate]
[Page S10938]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 CONSUMER BANKRUPTCY REFORM ACT OF 1998

 Mr. DODD. Mr. President, I voted in favor of the Consumer 
Bankruptcy Act of 1998, but I did so with some reservations. I commend 
the efforts of the members of the Judiciary Committee, especially 
Senators Durbin and Grassley and Senators Hatch and Leahy in taking on 
the challenge of reforming this important and highly complex area of 
our laws. They have made an important effort to bring about some badly 
needed reforms and hopefully reduce the number of bankruptcies in our 
country.
  As many of you know, the most recent statistics from the 
Administrative Office of the U.S. Courts state that more than 1.4 
million people filed for bankruptcy during the 12-month period ending 
June 30, 1998, an all-time high. This represents an 8.5% increase from 
the same period last year. Statistics also show that there has been a 
400 percent increase in personal bankruptcies since 1980. Clearly we 
need to reform our bankruptcy laws.
  This bill will provide enhanced procedural protections for consumers, 
and enhanced penalties for creditors who fail to obey the requirements 
of the bankruptcy code. It also will crack down on abusive and repeat 
Chapter 13 filings, discourage predatory home lending practices, and 
provide for the appointment of new bankruptcy judges.
  Perhaps most importantly, this bill, as opposed to prior versions, 
provides stronger safeguards for children and families involved in 
bankruptcy proceedings. Several months ago, I and 30 of my colleagues 
wrote to the Chairman and Ranking Member of the Committee about the 
need for this legislation to include stronger safeguards for the 
children of people involved in bankruptcy proceedings. In simple terms, 
we voiced our concern that children should come before creditors, which 
essentially has been the law for the last 95 years. Under current law, 
outstanding spouse and child support, in addition to back taxes and 
educational loans, are debts that cannot be discharged in bankruptcy 
like other debts. This sound policy is premised on the belief that our 
laws should minimize the risk of impoverishment of our children and 
families.
  In response to that letter, and my conversation with the Committee 
Chairman, the Committee Chairman acknowledged the potential adverse 
consequences the legislation could have upon child support recipients, 
and he offered an amendment at the full committee mark-up which 
addressed these problems. The amendment, which passed by a unanimous 
vote, would raise the legal priority of child support from number 7 to 
number 1; permit the conditioning of a Chapter 13 confirmation upon the 
payment of child support payments; allow the conditioning of a Chapter 
13 discharge upon the payment of all post-petition child support 
obligations; and add other provisions that should help children and 
families collect child support debts.
  I offered and had accepted 3 amendments on the Floor that, in my 
view, further strengthen this bill. The first amendment would: (1) 
protect income from sources legitimately dedicated to the welfare of 
children from being dissipated and misdirected to pay debts and 
expenses unrelated to the care and maintenance of these same children. 
Child support payments, foster care payments, or disability payments 
for a dependent child should go to that child and not to a creditor; 
and (2) ensure that in bankruptcy, children and families are able to 
keep certain household goods which typically have no resale value. I am 
speaking about items such as toys, swings sets, video cassette 
recorders or other items used to help them raise their children.
  The second amendment would protect duly established college savings 
accounts which were set up for the benefit of children from being 
distributed to creditors. Just because a child's family has gone 
through a bankruptcy does not mean a child should not be able to go to 
college.
  Lastly, the third amendment, which I co-authored with Senators 
Sarbanes and Durbin, contains an important new consumer protection 
regarding credit card debt. Today, many consumers are unaware of the 
implications of carrying credit card debt and making only the minimum 
monthly payment on that debt. For instance, assume a consumer has $3000 
in credit card debt. Then assume the interest rate that the consumer is 
paying on that debt is 17\1/2\%, which is roughly the industry average. 
If the consumer makes only the monthly minimum payment on that debt, it 
will take 396 months or 33 years to pay it off. And with interest, the 
consumer will have paid a total of 9,658 dollars. This amendment, which 
I worked on with Senators Sarbanes, Durbin, Grassley and Hatch will 
require credit card issuers to inform consumers on their monthly 
billing statement not only how long it will take them to pay off a debt 
at the minimum monthly rate, but also how much money they will have 
paid in interest and principal on that debt.
  I thank Senators Grassley and Durbin and Senators Hatch and Leahy who 
have worked with me to assure that these protections for children, 
families and consumers were included in the bill.
  I am disappointed that my amendment regarding the extension of credit 
to young people under the age of 21 was tabled. This amendment was 
designed to curtail the most aggressive and abusive credit card 
marketing to people under the age of 21 by requiring that the credit 
card issuer obtain an application that either contained the signature 
of a parent or guardian willing to take financial responsibility for 
the debt, or information indicating an independent means of repaying 
any credit extended. Most responsible credit card issuers already 
obtain this information from their applicants. This amendment would 
have merely required that the less responsible credit card issuers 
follow the ``best practices'' already in place for much of the 
industry.
  I am, at the same time, concerned that this legislation will force 
more debtors into Chapter 13 bankruptcy while eliminating several of 
the provisions that enabled debtors to meet the terms of their Chapter 
13 payment plan considering the fact that two-thirds of the repayment 
plans under current law are not completed, this calls into question 
whether Chapter 13 really results in the repayment of debts, as 
advertised.
  Moreover, I'm concerned, not withstanding strong objections by the 
National Partnership for Women and Families, more than 20 women's 
groups, the Leadership Conference on Civil Rights and a variety of 
other organizations, that new provisions regarding the non-
dischargeability of certain types of unsecured debt remain in the bill. 
These groups expressed their concern that these provisions will impede 
the ability of debtors to pay both for their post-bankruptcy expenses 
and to care for their dependents. I hope the Conference looks into 
these issues more carefully so that we can truly accomplish balanced 
and effective bankruptcy reform.

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