[Congressional Record Volume 144, Number 151 (Wednesday, October 21, 1998)]
[Extensions of Remarks]
[Page E2295]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              H.R. 3150, THE BANKRUPTCY REFORM ACT OF 1998

                                 ______
                                 

                          HON. GEORGE W. GEKAS

                            of pennsylvania

                    in the house of representatives

                      Wednesday, October 21, 1998

  Mr. GEKAS. Mr. Speaker, I rise today to express my disappointment 
that the President refused to endorse bankruptcy reform legislation 
which passed overwhelmingly with bipartisan support in both the House 
and the Senate. The conference report to H.R. 3150, the Bankruptcy 
Reform Act of 1998, would have restored personal responsibility to our 
bankruptcy laws, protecting women and children, small businesses, 
consumers, the financial markets, state and local governments and all 
taxpayers who pay a $400-a-year bankruptcy tax on goods and services. 
Now that the groundwork for bankruptcy reform has been laid, I plan to 
reintroduce bankruptcy reform legislation next year.
  Despite economic growth, low unemployment and rising disposable 
personal income, personal bankruptcies are soaring, reaching a record 
1.42 million and costing consumers more than $40 billion in the past 
year. This problem continues to worsen. In fact, the Administrative 
Office of the U.S. courts recently reported the highest number of 
consumer bankruptcy filings ever in the last quarter. Over the past 
decade the number of personal bankruptcy filings has doubled.
  I am deeply concerned about the fact that we have had such a 
tremendous increase in bankruptcy filings during a time of economic 
prosperity. When the economy begins to turn, absent reform, we will 
have many, many more bankruptcy filings. The White House could have 
played a part in preventing that--along with encouraging basic personal 
responsibility--but they chose not to work with us. Instead of taking 
the high road of reform, they chose to take the low road of political 
spin and emotionally heavy, but factually light, rhetoric based on 
untruths about the bill. One can only presume that the White House is 
so political that they reject any Congressional, i.e. Republican, idea 
out of hand, even if that idea is firmly bipartisan, i.e. Republican 
and Democrat. This political fact, obvious to all, is sadly noted. But, 
with the also obvious fact of increasing bankruptcies, I urge the White 
House to work with us next year to stem this tide before it becomes 
uncontrollable.
  There are a host of societal reasons causing more Americans to file 
bankruptcy including, divorce, gambling, credit practices, student 
loans, health care expenses, and aggressive attorney practices. 
Congress should address each of these causes of bankruptcy as they 
merit individual attention. After the National Bankruptcy Review 
Commission issued its report last October, the Judiciary Subcommittee 
on Commercial and Administrative Law--the subcommittee I chair which 
has primary jurisdiction over bankruptcy legislation--was tasked to use 
the Commission Report as a starting point to formulate fair and 
effective bankruptcy reforms. The Bankruptcy Reform Act of 1998 was 
intended to help people get the relief they need--no more, no less--
once they have filed for bankruptcy.

  This legislation contains provisions endorsed by the National 
Association of Attorneys General and child support agencies throughout 
the country that close the ``loopholes'' which exist in bankruptcy 
making it nearly impossible for ex-spouses to collect child support and 
alimony payments. Current bankruptcy law protects debtors and in some 
instances places ex-spouses in competition with other creditors, 
including the big banks and credit card companies. H.R. 3150 states 
unequivocally that alimony payments and child support would receive the 
number-one priority in determining which debts are repaid. Without this 
legislation, child support and alimony payments will continue to rank 
seventh on the list of priority payments in a bankruptcy proceeding, 
while payments to bankruptcy attorneys continue to receive the number-
one priority. This legislation would have given added protection to 
families dependent on this income. I am disheartened and saddened by 
the fact that the White House would use political scare tactics and 
demagoguery at the expense of women and children on this issue. 
America's women and children deserve better.
  Moreover, H.R. 3150 incorporates provisions from H.R. 4393, the 
Financial Contract Netting Improvement Act to control systemic risk in 
the financial markets. The current bankruptcy code does not cover many 
new financial instruments such as asset backed securities which play a 
major role in the modern financial world. These provisions define these 
new financial instruments, promoting liquidity and legal certainty, two 
important components of risk management. With the current instability 
of the global market, these provisions are necessary to provide market 
participants with certainty that their contractual arrangements will be 
honored, and to minimize the risk that the bankruptcy of one party to a 
transaction will cause negative ripple effects in the financial system.
  The legislation also includes provisions that help state and local 
government save tax dollars by closing the loopholes that limit the 
government's ability to collect taxes when someone files bankruptcy. To 
the extent that debtors in bankruptcy are freed from paying their tax 
liabilities, the burden of making up the revenues lost must be shifted 
to other taxpayers. H.R. 3150 includes language that ensures that local 
school districts, police and fire departments, and a wide variety of 
community services are given priority in bankruptcy proceedings to 
recover back property taxes. School districts around the country are 
losing money because they tend to be last in line to collect back taxes 
owed by property owners who have filed for bankruptcy. It is 
unfortunate that we were unable to enact bankruptcy legislation which 
ensures that more money is put back into our schools.
  Under our current bankruptcy laws, women and children, small 
businesses, school districts, and consumers are the losers when an 
individual or business decides to file bankruptcy. The conference 
report to H.R. 3150 contains provisions that ensure that women and 
children receive alimony and child support payments; protect small 
businesses by simplifying the process by which they collect payments 
from debtors; protect consumers filing for bankruptcy from aggressive 
attorneys; and ensure that state and local government do not lose tax 
revenues because of loopholes that allow debtors to avoid paying taxes. 
I am hopeful that we will be successful in enacting these important 
reforms next year.
  Nonetheless, I am pleased that Chapter 12--a part of the Bankruptcy 
Code tailored to the special financial circumstances of farmers--has 
been extended for six months under an agreement reached in the Omnibus 
Appropriations Act. This extension is a positive sign that bankruptcy 
reform will be addressed again in the Spring.
  As Chairman of the Judiciary Subcommittee on Commercial and 
Administrative Law, I am committed to making bankruptcy reform a top 
priority for the subcommittee during the 106th Congress. Over the 
recess, my subcommittee will begin the process of redrafting bankruptcy 
legislation and organizing hearings. The legislation will revisit many 
of the issues we focused on in this Congress as well as other issues 
that have been brought to my attention throughout the process. With 
signs of an economic downturn, which will increase the number of 
consumer and business bankruptcy filings, we will hold a series of 
hearings on a variety of bankruptcy issues, focusing not only on 
consumer bankruptcies, but the impact of bankruptcies on business, such 
as the telecommunications and health care industry.
  Mr. Speaker, let me take this opportunity to thank all of the 
Members, their staffs and the outside groups who spent countless hours 
working on this much-needed legislation. The strong bipartisan support 
that we received on this legislation is a reassurance that we will 
enact fair and meaningful bankruptcy reforms next year.




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