[Congressional Record Volume 144, Number 141 (Friday, October 9, 1998)]
[Senate]
[Pages S12140-S12145]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




            BANKRUPTCY REFORM ACT OF 1998--CONFERENCE REPORT


                           Motion to proceed

  The Senate resumed consideration of the motion to proceed to the 
conference report.
  Mr. GRASSLEY. Mr. President, the business before the Senate is the 
motion to proceed on the bankruptcy conference report.
  The PRESIDING OFFICER. The Senator is correct.
  Mr. GRASSLEY. Mr. President, as we take up the conference report to 
the bankruptcy bill, I want to make clear that this report is a 
balanced and fair compromise between the House and Senate bankruptcy 
bills. The fact of the matter is that the process of a conference is a 
process of joining two bills that have passed both Houses in different 
forms.
  One of the key differences between the House and Senate was the 
question of means testing. The House had a very strict formula, while 
the Senate bill contained a change to a section of the bankruptcy code 
which directs judges to consider repayment capacity.
  On this point of means testing, the House had one provision formula 
driven, very much different from the Senate provision that was more 
subjective in the decision of a judge of whether somebody should be in 
chapter 7 or chapter 13. But, obviously, even in the Senate bill, we 
had penalties and incentives for people who should be filing under 
chapter 13 but, in fact, filed under chapter 7. We had these 
differences on means testing between the House and the Senate.
  Under the conference report that is now before us, a debtor can file 
in any chapter of the bankruptcy code, and before a debtor can be 
transferred from chapter 7 to chapter 13, a judge will review the 
merits of each case.
  Mr. President, I think this is important to understand because we 
provide that every single person who wants their day in court with due 
process will get it, because under the conference report, each debtor 
will receive an individual hearing and get a chance to press his or her 
own case. In other words, the conference report maintains the judicial 
scrutiny that I think was the distinguishing factor of the Senate 
bill's means test. Of course, we have a flexible means test before us 
today that is a product of the conference compromise.
  When the Senate considered my bankruptcy reform bill, I spoke at 
length about the need for reform, and I would like to restate those 
points as we go to final consideration, after this conference report 
was overwhelmingly passed by the House of Representatives just a few 
hours ago.
  The need for this bill is based upon the statistics of bankruptcy, 
and those statistics speak for themselves. The number of bankruptcy 
filings has skyrocketed in recent years. In 1994, the total number of 
nonbusiness filings was just over 780,000, probably thought to be too 
much at that time, and maybe the number was too high at that time. But 
in 1996, this figure jumped to 1.1 million, and, astonishingly, the 
1997 figure was almost 1.35 million. Of course, the trend is 
continuing.
  There is no letup in the dramatic increase in the number of personal 
bankruptcies being filed even this very day in this country, because 
filings for the first quarter of 1998 are over 20,000 higher than for 
the same time last year. They are almost 90,000 ahead of the first 
quarter of 1996. Unfortunately, the future looks even bleaker. A study 
released just a few days ago predicted that the number of personal 
bankruptcies will exceed 2.2 million by the year 2001.
  If there is any better reason or rationale for the adoption of this 
conference report by this body before we go home for recess, it is that 
the high number of personal bankruptcy filings is continuing to shoot 
up at a tremendous rate, unjustified for the economic conditions we are 
in. We think 1.4 million is too high. In 3 years--in 2\1/2\ years--they 
will be well over 2 million if we don't do something about it, and I 
think this legislation will do something about it.
  The interesting and alarming thing is that this unprecedented 
increase in the filings for bankruptcy comes at a time when our economy 
is very, very healthy. Disposable income is up, unemployment is very 
low, and the interest rates are very low.

  Here is something that just does not make sense, then. Common sense 
and basic economics would say that when times are as good as they are 
now--almost the longest peacetime recovery this country has ever had--
when the economy is flourishing, that bankruptcies should not shoot up 
as well; that is, unless there is something wrong. And there is 
something wrong.
  The bankruptcy code is flawed. There is need for reform. There is not 
any shame connected with bankruptcy anymore. There is lack of personal 
responsibility. There is lack of corporate responsibility, as well as 
credit card companies are pushing credit cards into mailboxes every 
day. And the bankruptcy bar is not adequately counseling people as to 
whether or not they should even be in bankruptcy, let alone 
discouraging them from being in chapter 7 when they should be in 
chapter 13. But with all of these put together, Mr. President, in my 
view, the main problem in our bankruptcy law, quite simply, is that 
current law discourages personal responsibility.
  Let me start out by saying that most people who declare bankruptcy 
because of their low incomes, their inability to pay, probably are 
correct in doing so. When I say that, that does not counteract what I 
just said about assuming personal responsibility or not having some 
shame connected with bankruptcy. But as far as our present law is 
concerned, and their ability to repay, I would have to say that that is 
probably where they should be.
  But that does not mean that we do not have a responsibility through 
our society and through the standards set by our Government to do 
something about the fact that so many people are in bankruptcy in the 
first place. We will have to deal with that sometime

[[Page S12141]]

other than in this legislation, because this legislation is dealing 
with the fact that those who have the ability to repay ought to not get 
off scot-free. But if you do not have the ability to repay, then, of 
course, that is another consideration. You have to deal with that in 
some ways differently than what we do in this legislation.
  Estimates vary, but about 80 percent of the people who declare 
bankruptcy are in desperate straits. And then under the principle that 
we have had for the last 100 years in our bankruptcy laws, particularly 
if this is in situations beyond their control--like natural disaster, 
death, divorce, medical problems--then they may need to get a fresh 
start.
  The problem is, Mr. President, as I have already hinted, some people 
use bankruptcy as a financial planning tool. They do it to get out of 
paying off debts which they could pay off. And that is what is pushing 
the desire for bankruptcy reform. We have a bankruptcy system that lets 
higher-income people write off their debts with no questions asked and 
no real way for creditors to prevent this from happening. And this 
legislation deals with that unjust situation--unjust for creditors, 
unjust for consumers, because consumers pay it, and too just for people 
who have the ability to repay.
  As I said so often last year, we had a record number of Americans 
filing for bankruptcy. Of course each bankruptcy case means that 
someone who extended credit in good faith will not get paid. While 
estimates differ as to the exact number, American businesses are losing 
about $40 billion a year as a result of consumer bankruptcy.
  You might say, well, big banks and big businesses are in somewhat of 
a stronger position since they can offset these losses by increasing 
the amount that they charge other customers. That is an important 
point, Mr. President. Under the best of circumstances, where a big 
business can stay afloat in the face of large losses due to 
bankruptcies, then it is simple: Honest customers pay the price because 
there is no free lunch. This is like a hidden tax--a hidden bankruptcy 
tax--which consumers pay, people who play by the rules pay. Because, as 
businesses end up writing off their debts in bankruptcy, the consumers 
make it up.
  So my legislation would reduce this tax by requiring those consumers 
who can afford to pay, who have the capacity to make good on their 
debts, or even some portion thereof, to do so. But that is the 
situation with big businesses that can pass it on. They can survive in 
the face of huge bankruptcy losses. They stay in business. They get 
consumers coming to their door. The consumers pay. But there are a lot 
of small business people who have to close their doors because maybe 
they cannot afford to absorb the loss of so much income and 
consequently do not have the ability to pass it on to their consumers. 
The Bankruptcy Reform Act limits complete debt relief to only those who 
cannot repay their debts. Those who can repay their debts are required 
to do that. And of course, that is common sense.
  That is one important aspect of the legislation, the means testing 
provisions of it. There was a compromise between the House and the 
Senate. The House had that very strict formula that decided whether a 
person was in bankruptcy 13 or bankruptcy 7. We had a subjective 
judgment with encouragement for people to be in chapter 13 and 
penalties to those who went into 7 when they had the ability to repay 
and should have been in 13. But it was very subjective, and it took 
motions by creditors. It took action by trustees to bring that about, 
and it took penalties against lawyers who were not properly counseling 
the debtor. So we joined these together to have the bright line of the 
House version of who should be in chapter 13, but we also make sure 
that every debtor gets their day in court with due process to make sure 
they have been treated fairly.
  So we move on to another hot-button issue. On this issue the Senate 
prevailed. The conference report still provides that child support 
obligations must be paid during any bankruptcy proceeding.
  You can see here in this chart, under the conference report, child 
support and alimony receive first priority. Child support must be paid 
in full before debt forgiveness. You can see across here, under current 
law child support/alimony is seventh in priority. We move that to first 
in priority. You can see that under present law there is no requirement 
to pay child support before debt forgiveness in chapter 13. Child 
support must be paid in full before debt forgiveness. Under the 
conference report, bankruptcy trumps wage garnishment for child 
support. Under the conference report, bankruptcy does not trump wage 
garnishment for child support. And lastly, and added to child support, 
collections are exempt from automatic stay.
  The reason that it is important to put child support claimants at the 
top of the list during bankruptcy proceedings is that most bankrupts do 
not have enough money to pay all creditors in full. So somebody is not 
going to be paid. This bill makes it more certain that child support 
will be paid in full before other creditors can collect a penny. That 
is real progress in making sure that children and former spouses are 
treated fairly.
  I know this was very much a concern of many members of the Judiciary 
Committee, including my distinguished ranking member, Senator Durbin of 
Illinois, and other members of the committee. I know it is very much a 
concern of people at the White House. I hope, first of all, that they 
understand there was no intent of changing this in the original 
legislation, but I guess it is the way combinations can work, that 
there was some suspect that this could happen, but I hope that we make 
it very, very clear that families and children and spouses are first. 
We have moved it from seventh to first.

  Also, the conference report provides that someone owed child support 
can enforce their obligations even against the exempt property of a 
bankrupt. This means that wealthy bankrupts can't hide their assets in 
expensive homes or in pension funds as a way of stiffing their children 
or their ex-spouses. This is another example of how this legislation 
will help--not hurt--child support claimants. And rightly so.
  This conference report states that debtors receiving child support 
don't have to count that income when calculating a repayable schedule.
  Outside the bankruptcy context, when there are delinquent child or 
spousal support obligations, State government agencies often step in 
and try to help collect that child support. The conference report 
exempts these collection efforts from the automatic stay. The automatic 
stay is a court injunction which automatically arises when anyone 
declares bankruptcy, and it prevents creditors from collecting on their 
debts.
  Now, if this legislation were to pass, State agencies would be in a 
much better position to collect past due child support. In practical 
terms, that means that State government agencies attempting to collect 
child support can garnish wages and suspend driver's licenses and 
professional licenses--plenty of incentive for people to get on the 
stick and keep their social obligations to the families they have been 
a part of, benefited from, and to the children that they ought to love 
in the first place.
  Clearly, this will help State governments in catching deadbeats who 
want to use the bankruptcy system to get out of paying child support. 
In fact, the district attorneys who actually collect child support 
strongly support this conference report. So any argument that this 
conference report is bad for child support is empty political rhetoric.
  If I could go to another chart, the conference report also maintains 
tough fines against creditors who misuse their new powers to harass or 
intimidate honest consumers, rather than to stop abuses. I think the 
chart shows what we are doing. I can tell you that this was a very key 
feature of the Senate bill. Whenever we give creditors a new tool, we 
also give debtors a new shield to rein in potential creditor abuses. If 
it is wrong for a debtor to avoid personal responsibility, it is wrong 
for creditors to misuse the bankruptcy code in an unethical way, as 
well.
  I think it is amazing that we hear from our Democratic friends that 
we should oppose this conference report, as I think we will, because we 
limit the ability of unscrupulous trial lawyers to bring class actions 
against the bankruptcy code. Now, I think that is a very

[[Page S12142]]

telling point. It seems that those who oppose this bill do not really 
oppose it because they are worried about consumers. They might oppose 
it because they want to help trial lawyers clean their pockets. I hope 
my colleagues will keep this in mind as we consider this conference 
report.
  There is another example of how the conference report gives debtors 
important new tools to defer, to deter and punish abusive creditor 
conduct. In the last few years, there have been a number of reports 
about creditors coercing debtors into agreeing to paying their debts 
even though the debt could be wiped away in bankruptcy. The bankruptcy 
code allows debtors to reaffirm debts if they choose to do so 
voluntarily. The problem is that some companies have been threatening 
consumers in order to force reaffirmation. The conference report gives 
every debtor the right to a hearing before a bankruptcy judge who will 
review the agreement to make sure that there has been no coercion. This 
is a crucially important change to protect consumers.
  I want to make one last point in regard to this chart. We have 
``truth in advertising'' requirements for bankruptcy lawyers. It seems 
to me this is very, very important. In the original debate on this bill 
before it went to conference, 2 or 3 weeks ago, the point was made that 
some lawyers with the bankruptcy mills were advising people through 
advertising that they had the ability to avoid paying alimony and other 
things. ``Truth in advertising'' is very important in any business. It 
is just as important in the legal profession.
  Debtors get new rights to court hearings to stop unfair debt 
collection practices.
  It promotes out-of-court settlements by punishing creditors who 
refuse to negotiate. We think there ought to be the willingness and the 
obligation, when somebody who is greatly in debt and wants to work 
something out without going through the costly and adversarial 
environment of the court, they ought to be able to. That incentive is 
in here.
  And it requires credit card companies to point out the dangers of 
making only the minimum payments.
  Finally, the conference report makes important changes to help 
prevent the collapse of the financial sector when a party to a swap or 
a repurchase agreement defaults on an obligation. These changes were 
suggested by our Secretary of the Treasury, Robert Rubin. As President 
Clinton put it, we are in a serious financial crisis and we need to 
reduce systematic risk in the financial markets now.
  This conference report, I think, is balanced and fair. I am sure that 
we will hear that it is not. Obviously, it is not entirely to my 
liking. No conference report is to everyone's liking. The essence of 
this legislative process, when a House and a Senate pass different 
versions of the bill, is that there be compromise. Actually, the 
differences in these versions was greater than you would normally have 
between pieces of legislation passed by the respective bodies and much 
more difficult to do.
  I want to repeat for our colleagues, as well as for his constituents 
in Illinois, Senator Durbin has been very, very cooperative throughout 
this process. We have had a bipartisan bill through the Senate. The 
process of compromise detracted from that, I am sorry to say. I was 
hoping that we would have a bill by the last week in July so we could 
have the whole month of September to work on the tremendous differences 
between the House and Senate. But things didn't work out the way I 
wanted them to and I am sure they didn't work out the way our 
distinguished Senate majority leader, Trent Lott, wanted them to work 
out, so this bill came out during the third week of September.
  Now here we are about ready to adjourn for the year and to go home 
and campaign. That process was not handled in the spirit of 
bipartisanship that I had planned a year and a half ago when I started 
working on this legislation, and that has been the practice not only 
through the Senate, but through conference in previous times. Some of 
that probably was within my control, but most of it was outside of my 
control. So the extent to which the last step did not encompass the 
spirit of bipartisanship that I had anticipated a year and a half ago, 
I apologize to my friend, the Senator from Illinois.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. Let me say at the outset, my respect for my colleague, 
Senator Grassley of Iowa, has not been diminished by this experience, 
but enhanced. It has been a joy to work with him over the last year and 
a half in preparing this important legislation. It is complex. It is 
difficult. He has shown both legislative and intellectual stamina 
throughout. He has been fair in his dealings with me, and to the moment 
where we were successful in passing this bill on the floor of the 
Senate by an overwhelming vote of 97-1, a strong bipartisan vote, I 
think we both took pride in the fact that we had given it virtually 
everything that we could to make the best possible legislation for a 
very difficult challenge.

  Having said that, I will knowledge, as the Senator from Iowa has, 
that once that bill left the Senate floor, once the conferees were 
appointed, a totally different process took place, which was very 
disappointing to me. It was totally different in that it was not 
bipartisan. In fact, as I stand here today and look up at the clerk's 
desk and see the conference report from this committee, this is the 
first time I have ever laid eyes on it. I wasn't there. I wasn't 
invited to the conference committee meetings. I wasn't asked to sign 
the conference committee report. In fact, virtually no Democrats--at 
least on the Senate side--were involved in any of that negotiation. 
That is truly unfortunate.
  There is no reason why this had to be a partisan endeavor. Senator 
Grassley and I proved that in working together on a bipartisan basis we 
could come up with a good and balanced bill. In fact, when this issue 
first came to me and people representing banks and the credit industry 
came to my office, I said to them: I agree with you, there are abuses 
in the bankruptcy system that need to be cleaned up. I will help you 
clean them up if, and only if, you will concede that there are also 
abuses when it comes to credit cards in America that need to be cleaned 
up as well.
  Each bank, each merchant, each credit card company said, without 
fail: We agree. We are in for both sides to be repaired, both sides to 
be changed, and reform to come that will really affect bankruptcy in 
the future.
  The Senate bill did that. The Senate bill said: Yes, we will clean up 
the bankruptcy court, but we will also say to the credit card 
companies, you have a responsibility to clean up your act. It also said 
to creditors that when it comes to the whole question of your efforts, 
if there are predatory credit practices that are, in fact, unfair, 
those credit practices will not allow you a ticket into the bankruptcy 
court.


                       Unanimous Consent Request

  Mr. President, before proceeding, I ask unanimous consent that the 
previously scheduled vote now occur at 5:50 p.m. this evening.
  Mr. BAUCUS. Mr. President, reserving the right to object. If I might 
ask the manager if I may speak 5 minutes before 5:50. Otherwise, I will 
object. I ask the managers of the bill if they can assure me they will 
give me 5 minutes.
  Mr. GRASSLEY. I will not speak anymore.
  Mr. BAUCUS. Otherwise, I will object.
  Mr. DURBIN. Mr. President, can we have some indication from other 
Members on the floor of the time they might need? Perhaps we can come 
to some accommodation.
  Mr. SESSIONS. Mr. President, the Senator from Alabama would like 
about 10 minutes on the bankruptcy bill. There are 10 minutes set aside 
for me now.
  Mr. DURBIN. How much time would the Senator from Ohio need?
  Mr. DeWINE. I would like 8 minutes.
  Mr. DURBIN. That is 23 minutes. I would have to sit down, and that 
would be a painful experience at this moment. I will withdraw the 
unanimous consent request at this point.
  The PRESIDING OFFICER. The request is withdrawn.
  Mr. DURBIN. Mr. President, I am concerned that when we set about 
dealing with the bankruptcy code and reform, we tried to do it in a 
balanced fashion in the Senate bill.
  Tonight, when you go home, open the mailbox, and you know what you 
are

[[Page S12143]]

going to find--preapproved credit card applications. If you are an 
average American, you get 28 a year. If you happen to be in the prime 
target group, you get many more. A college student, in the first 6 
months they are in college, can expect to be inundated. You are 18 
years old and you can sign a contract; they can't wait to get you. The 
dean of students at the University of Indiana tells us that the No. 1 
reason kids are leaving school at Indiana is not grades, it is credit 
card debt. That is what is happening.
  So when there is a speech made about the shame of bankruptcy, what 
about the shame of some of these credit practices?
  So what did we suggest be changed as part of this debate? Let me give 
you an idea of one thing in the Senate bill that was totally rejected 
by the conference committee. The banks and credit card companies said: 
This is unreasonable, we don't want it in the bill. This example credit 
card statement belongs to a staff member who probably used this as a 
basis for acquiring more salary. We have added to this a provision that 
would have been from the Senate bill. We would put it at the bottom of 
your statement, a tiny paragraph, which says: if you pay only the 
minimum payment due and make no new purchases or advances, it will take 
you x number of months to pay off your balance, and the total cost will 
be approximately x.
  Does that sound like an outrageous request of a credit card company--
that we as consumers would know what the minimum monthly payment means 
in terms of indebtedness?
  This individual has a balance of $1,295. They asked him to make a 
minimum payment of $26. If we put our provision on this, we would be 
telling him it would take him 93 months--almost 8 years--to pay off the 
bill. When it is all said and done, he would be paying $2,418, or 
almost double the amount of the current balance.
  I don't think consumers should be in any way tricked or deceived or 
the facts concealed. Yet, that is what is happening because this 
conference committee felt that it was unreasonable to put that burden 
on a credit card company.
  We had another provision that said that these predatory lenders that 
go after senior citizens--primarily widows in their late years--in the 
family home, and sign them up for siding and roofs and home repair with 
a second mortgage with a balloon, and take the house away because they 
have deceived some poor person, should not be able to walk into 
bankruptcy court and execute their claim against that person and their 
home. Predatory credit practices would not allow you a ticket to the 
bankruptcy court. As soon as this got in conference committee, they 
ripped it out and said: We don't want to go that far.
  Let me tell you what happened as a result. We received a letter from 
the Director of the Office of Management and Budget. Mr. Lew has 
written to us--in fact, to the leaders of Congress --within the last 2 
days, to say that if this conference report is presented to the 
President, his senior advisers will recommend that he veto it. Why? 
Because it is unreasonable. This conference report could have been so 
good, could have been so fair and so balanced, and it is not.
  When it comes to the test that they are going to put someone in 
bankruptcy court, this is inflexible and unforgiving. Frankly, as a 
result of it, a lot of people who don't have resources and should not 
be put through this wringer will face it.
  In addition to that is the whole question of class actions. I will 
concede to the Senator from Iowa that there are undoubtedly class 
action lawyers who are unscrupulous, but there are also class action 
lawyers who stand up for consumers who could not afford a day in court 
by themselves.
  Consider this: A major retailer in the United States of America, as a 
matter of policy, has a coercive practice that when you are in 
bankruptcy court, they put the hammer on you as a debtor and say: We 
don't want you to have our debt written off. We want to tell you that 
you have to re-sign up to pay off this debt on this refrigerator--or 
car, or set of tools. They put the pressure on them. The person, under 
pressure, signs it. And it turns out to be a national policy. In fact, 
it is a national scandal. Only by class action suits on behalf of 
debtors across America can you go after these major banks and major 
retailers.
  This conference report removes the right of debtors, through classes, 
to come to court. That was a right under the law before we even 
considered bankruptcy code reform. And so not only does this bill take 
away new protections for consumers, it takes away the existing 
protections for consumers--another reason why the President's Director 
of the Office of Management and Budget says they will veto this bill, 
as I believe they should.
  There has been a lot said about child support and alimony. Consider 
how many of the people who go into bankruptcy court have an obligation 
to pay for the debts of their children and are, frankly, facing a lot 
of other debts and wondering how they will pay them off. The bottom 
line on this bill, as the letter from Mr. Lew indicates, is that they 
are putting more people in line to draw from the limited assets of 
estates. So a spouse trying to raise children and looking for child 
support, when they walk out the door in bankruptcy, has less money to 
turn to.

  This bill, unfortunately, does not provide the kind of protection 
that I believe is absolutely necessary.
  When we came to this Senate floor, we adopted a variety of consumer 
protection provisions that really gave balance to this bill. Almost 
without exception every single one of them was removed in this 
conference committee.
  The credit industry that promised us they would give us a balanced 
bill, that they would agree to end abusive practices in their own 
industry--when they went into that conference committee and closed the 
door, they basically broke the deal. They walked out of that door with 
the conference committee report to their liking. The conference 
committee report, which they are lauding, is one which most of us 
believe is, frankly, a bill that should not be signed into law.
  It is one sided. It is designed to reward the credit industry and to 
penalize the average consumer. They save the worst treatment for the 
unlucky families facing bankruptcy. They held aside the mother who 
depends on child support so that coercive creditors can claim the 
limited assets of bankrupt spouses. They refuse to protect the widow 
bilked out of her home by a home repair con artist. They refuse to 
provide any new credit card disclosure so that consumers can better 
understand the termination of their card agreements, or monthly bills.
  Our purpose in this bill on this side was never to ration credit, but 
only to say that credit should be more rational, that each of us, as we 
enter into agreements for credit cards, should be able to understand 
the terms of the those credit cards and make our own decisions for 
ourselves, our families, and our businesses. Each and every time we 
attempted to do that in the bankruptcy bill, it was stripped out in the 
conference report.
  What did they put in instead? A study--a study. So when it comes to 
nailing the consumers going into bankruptcy court, we need laws. When 
it comes to protecting the consumers who are trying to understand the 
terms of credit, they need studies.
  That isn't balanced. And that isn't fair.
  I think, frankly, that they have gutted the current law which 
protects consumers in bankruptcy from creditor abuse and manipulation.
  This bill rips into low- and middle-income families and still lets 
the Florida and Texas millionaires hide their assets in mansions 
featured in Architectural Digest.
  What am I talking about? Let's get specific.
  There is an actor we have all heard of named Burt Reynolds. Mr. 
Reynolds is going through bankruptcy. He had a chain of restaurants and 
that chain of restaurants, unfortunately for him, failed. So when he 
reached the end of his rope, he decided to file for bankruptcy. But Mr. 
Reynolds happens to be a resident in the State of Florida.
  If you happen to be a lucky resident of a State like Florida or Texas 
or Kansas, you can buy whatever size home at whatever expense you care 
to, and basically it is protected from bankruptcy. The rest of us 
living in other States would find in bankruptcy court that we are only 
protected to a limited extent. In those States, you are virtually 
unprotected.

[[Page S12144]]

  Mr. Reynolds--this is reported in the newspaper; it is not some 
privileged information--is going to be able to protect a home in 
bankruptcy valued at $2.5 million.
  This has been called the worst single scandal and abuse in the 
bankruptcy system.
  If we set out to clean up the system, how did we overlook this 
glaring problem? Because, frankly, there are an awful lot of 
politically powerful people who do not want to see this changed.
  We see a former commissioner of baseball moving to Florida and filing 
for bankruptcy so he can put as much of his assets as possible into a 
home that can't be attached under bankruptcy.
  A former Governor of Texas filing for bankruptcy is buying 200 acres 
of ranch land protected from bankruptcy. And the average person walking 
into a bankruptcy court across America doesn't have that kind of a 
sweetheart deal.
  We cleaned that up in the Senate bill. And the conference committee, 
when they closed the door, basically stripped it out. They made some 
changes--I will give them credit for that--some modifications.
  But when it comes to dealing with the amendment offered by Senator 
Kohl of Wisconsin, Senator Sessions of Alabama, they are not even 
close.
  If you are talking the shame of bankruptcy, I think it is shameful 
that we would allow that kind of loophole to continue and say that we 
have passed a meaningful reform bill.
  I come here today in opposition to this bill. I am glad that the 
administration has indicated that it will veto the bill.
  I have said to Senator Grassley and all others who are interested in 
this subject that I want a fair bill, one that is fair to consumers as 
well as to creditors. The door is still open for us to come and sit 
together and try to achieve that.
  But those who think they can push this through, that they can slam-
dunk this change without taking into consideration the protection of 
consumers, I think have really done a disservice to families across 
America--families who count on this Senate and their House of 
Representatives to listen to their interests, not just to the interests 
of the banks and the credit industry and the institutions which can 
afford the high-paid lobbyists in this town.
  A few days after our bill passed in the Senate, I ran into a banking 
lobbyist in this town who said to me with a smile, ``When it is all 
said and done, your consumer protections are gone.'' She seemed to know 
already what the outcome would be. I didn't think that was going to 
happen. I thought when we got into conference we would be able to 
protect consumers. It didn't happen. What we got was a study--a study 
instead of a law. A law doesn't protect anybody unless it is enforced. 
And a study has never protected anybody even if it is enforced.
  We need to make certain that if we are going to have real bankruptcy 
reform, it is balanced reform.
  I hope this conference report is ultimately defeated. I hope it is 
vetoed by the President. I hope we will return to the table and in the 
spirit of bipartisanship guide us to a Senate bill that passed 97 to 1 
on a bipartisan basis. I hope we will come up with that balanced 
legislation.
  I yield the floor.
  Mr. SESSIONS addressed the Chair.
  The PRESIDING OFFICER. The Senator from Alabama.
  Mr. SESSIONS. Mr. President, I thank the distinguished Senator from 
Illinois. He did a good amount of work. He worked hard on this bill in 
committee. He worked hard on it to the very end. He was a champion of 
it in the committee. It came out of our committee by a 17-to-2 vote. It 
passed in the Senate with only one negative vote. Then we went into 
conference with the House. I am convinced that the bill is better today 
after having been be in conference than it was before it left, even 
though I had to give up some things that I favored.
  I certainly agree with the idea that this homestead situation, where 
millionaires move off, buy mansions, and then declare bankruptcy, is a 
scandal.
  But I am telling you, I was amazed how many Senators from States who 
have those homestead exemptions, mistakenly in my view, felt very 
strongly that this somehow abrogated their State law, their State 
constitutions. Their opposition, as Senator Grassley knows, jeopardized 
the ability of the bill to pass. We made some modest progress towards 
restraining this abuse.
  Senator Grassley said he was prepared to let us take it up again next 
year and see what we could do then. But in order to move the bill, we 
made some progress rather than no progress on this issue. I certainly 
believe we can do better.
  This bill passed the House with 300 affirmative votes; 75 Democrats 
supported it. I really do not agree with the assertions that this is 
not good bipartisan legislation.
  It really hurts me to hear the Senator say that this bill guts the 
protections that were in the Senate version. This bill institutes 
protections for debtors, but it does set some standards in bankruptcy. 
It will not let an individual come in and wipe out all of their debt 
without any explanation or any justification for it. They have to 
justify that they need this radical protection.
  With regard to the question of fairness, we have been on this bill 
for years now. Senator Grassley has met and met and met. He worked very 
hard and had the bipartisan support of his Senate Judiciary Committee 
and his subcommittee on this bill. Senator Durbin is the ranking member 
of it. The staff on Sunday met for 7 hours. They met 10 hours with the 
Democratic staff between Sunday and Wednesday of this week discussing 
this bill. They were asked to sign the conference report and they chose 
not to. Those of us who supported the bill signed it. The Democrats 
refused to do so. Obviously, at some point, they made a decision they 
were going to object to this bill. I don't believe the majority of the 
Senators want to do that in either party. It came out of this body and 
the other body with overwhelming support.
  It is stunning to me. I know there is a campaign theme about this 
``do-nothing Congress.'' The President has been suggesting that.
  This is a good historic piece of legislation. We haven't made a major 
improvement bankruptcy laws since 1978. A lot of work has gone into 
this reform. This is major legislation setting forth major progress. 
And, all of a sudden now, at the last minute, all of the objections 
come up. I suppose they will accuse us of not being able too pass the 
bankruptcy legislation.
  But I want to say this: I think some people who killed this bill are 
going to have to answer why. I don't believe it is going to be a 
satisfactory explanation to say that they voted against it because it 
prohibited trial lawyers from bringing a bunch of class actions. Only 
within the area of a finite part of the bankruptcy law are class 
actions prohibited.
  That is almost an insignificant part of this bill. And to raise that 
now and suggest it is a basis to oppose this bill suggests to me just 
how good a bill it is, if that is all they can find to fuss about. 
Maybe this suggests that it is trial lawyers making the phone calls and 
stirring up the opposition. It really is frustrating to see a man of 
the ability, the patience and the integrity of Senator Grassley bring 
this bill up with the great support he had from both parties and see it 
now being jeopardized by a Presidential veto.
  I would hate for that to happen. I believe when the President 
actually studies this bill carefully, he is going to conclude ti is a 
historic improvement over the present law, that he cannot justify not 
signing it, that it will be good for America and that he will sign it. 
I certainly hope that is true.
  Let me mention a couple of things about the bill. We have several 
pages of restrictions on credit. There is a whole section of this bill 
entitled ``Enhanced Disclosures on the Open End Credit Plan.'' We went 
into credit cards and some of that stuff, but this is not a banking 
bill. This is not a credit card bill. This is a bill to improve 
bankruptcy, not credit cards. Attaching and raising all those issues is 
something that ought to be done by the Banking Committee. But we 
included some restrictions, a number of restrictions, and we put in 
this bill a study required to be done by the Federal Reserve Board to 
help us develop a way to control any abuses in the credit card 
industry. I think it will be a step forward.

[[Page S12145]]

  This is a not a stonewall. Here at the last minute we don't have to 
be creating movement from bankruptcy to credit cards. I feel strongly 
about that.
  Let me just mention a couple of things the bill does. It, for the 
first time, states that if you have plenty of money to pay back a lot 
of your debts, you ought to do so. So if you can pay back 50 percent, 
70 percent of your debts, you ought to go into chapter 13. The court 
will protect you from lawsuits and creditors, and you set up a payment 
plan and you can pay back those creditors a portion of what you owe if 
you have sufficient income.
  Now, the standard used for income is the national median income for a 
family of four. This means that the person would have to make over 
$50,000 a year to be required to pay any back. If they make less than 
that, they can stay in the chapter 7 and wipe out all of their debts. 
So I don't think the standard is very high at all. But people who are 
wealthy, have money, ought to pay back some of their debts. And many of 
them can pay all of their debts back.
  That is the historic step. It is only fair. And it is just not moral 
to allow people to not pay their just debts when they are capable of 
doing so.
  I see the distinguished chairman of the Senate Judiciary Committee 
has come in the Chamber. I have a couple of minutes remaining. I will 
be delighted to yield for any comments he has. He has been a strong 
leader in this legislation.
  I yield the floor.
  Mr. HATCH addressed the Chair.
  the PRESIDING OFFICER. the Senator from Utah is recognized.
  Mr. BAUCUS. Mr. President, will the Senator yield?
  Mr. HATCH. Without losing my right to the floor.
  Mr. BAUCUS. I just wonder if the Senator will give am a few minutes. 
I have been in the Chamber for over a half hour waiting. I would 
appreciate the Senator yielding.

  Mr. HATCH. how much time would the Senator want?
  Mr. BAUCUS. Three to 4 minutes.
  Mr. HATCH. Could the Senator do it in 2?
  Mr. BAUCUS. Three.
  Mr. HATCH. Three. Three minutes. Go ahead.
  Mr. BAUCUS. I thank the Senator very much.
  Mr. HATCH. Without losing my right to the floor.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Montana is recognized.
  Mr. BAUCUS. Mr. President, I thank my good friend from Utah for his 
graciousness in yielding me 3 minutes.

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