[Congressional Record Volume 145, Number 65 (Thursday, May 6, 1999)]
[Extensions of Remarks]
[Page E891]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      BANKUPTCY REFORM ACT OF 1999

                                 ______
                                 

                               speech of

                        HON. PATRICK J. KENNEDY

                            of rhode island

                    in the house of representatives

                         Wednesday, May 5, 1999

       The House in Committee of the Whole House on the State of 
     the Union had under consideration the bill (H.R. 833) to 
     amend title II of the United States Code, and for further 
     purposes:

  Mr. KENNEDY. Mr. Chairman, H.R. 833 provides fair and reasonable 
bankruptcy reform to a system that is badly in need of repair. Chapter 
7 of the Bankruptcy Code was established to help honest, debt burdened 
individuals gain a fresh start. In 1982, when economic times were 
tough, less than 400,000 individuals used this portion of the Code, 
which forgives all existing debts.
  Oddly, in today's economy in which real per capita annual disposable 
income is growing, unemployment rates are low, and the market is 
strong, Chapter 7 fillings are at a record high with over 1.4 million 
people asking to be discharged from about $50 billion in debt. 
Currently it is estimated that over 70% of bankruptcy filers use 
Chapter 7. Last year, 1.4 million personal bankruptcies were filed, an 
increase of 94.7 percent over 1990. By contrast business filings have 
remained steady over the last two decades. As my House colleague 
Congressman Rick Boucher aptly said, ``bankruptcy was never meant to be 
used as a financial planning tool, but it is becoming a first stop 
rather than a last resort'' to those who have the ability to pay a 
portion of their debts, but choose to ignore their responsibilities.
  Clearly, the Congress has a responsibility to address this issue. Our 
nation simply cannot afford widespread abuse in our bankruptcy system. 
Consumers pay an estimated $500 dollars per year in additional ``hidden 
taxes'' by companies trying to make up for the cost of bankruptcy 
losses. For this reason, I have joined the fight in promoting federal 
legislation that actively seeks to reform the Code and target those who 
abuse the system at the expense of others.
  The Bankruptcy Reform Act, which passed yesterday with overwhelming 
bipartisan support will force those who should file under Chapter 13, 
and pay a portion of their debt, to meet their responsibilities. It 
insists that a debtor demonstrate that full bankruptcy relief under 
Chapter 7 is warranted. Those who do not meet this needs-based test 
will be subject to a formula based on the debtor's income and 
obligations. The bill also ensures that debtors know all their 
financial options before they file bankruptcy. Often, debtors are the 
prey of entities that push debtors into bankruptcy without an 
explanation. This initiative will crack down on these practices. The 
bill also includes a House passed amendment that will require greater 
disclosure to debtors by credit card companies and other creditors 
about the types of fees and payments schedules that consumers may 
incur. By balancing the needs of creditors and debtors, this bill 
achieves meaningful bankruptcy reform.

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