[Congressional Record Volume 145, Number 155 (Friday, November 5, 1999)]
[Senate]
[Pages S14052-S14077]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                     BANKRUPTCY REFORM ACT OF 1999

  The PRESIDING OFFICER. Under the previous order, the Senate will now 
resume consideration of S. 625, which the clerk will report.
  The legislative clerk read as follows:

       A bill (S. 625) to amend title 11, United States Code, and 
     for other purposes.

  The PRESIDING OFFICER. The Senator from Vermont.
  Mr. LEAHY. Mr. President, what is the parliamentary situation on 
time, or is there a time limitation?
  The PRESIDING OFFICER. The Chair knows of no time limits.
  Mr. LEAHY. That is my understanding.
  Mr. President, I see my good friend, the Senator from Iowa, on the 
floor. I will speak in my capacity as ranking member of the Senate 
Judiciary Committee. I know Senator Hatch has spoken in his capacity as 
chairman of the committee. I know the Senator from Iowa, Mr. Grassley, 
is here as chairman of the appropriate subcommittee, and Senator 
Torricelli of New Jersey will be here as ranking member of that 
subcommittee.
  This is an important issue. It is safe to say every American agrees 
with the basic principle that debts should be repaid. It certainly is a 
principle I was brought up to believe and one my fellow Vermonters 
share. In fact, this country is blessed with prosperity, and the vast 
majority of Americans are able to meet their obligations. But for those 
who fall on financial hard times, bankruptcy should be available in a 
fair and balanced way. In fact, our country's founders believed the 
principle was so important they enshrined it in the Constitution, one 
of the few such specific reliefs enshrined in the Constitution.
  Article I, section 8, of the Constitution explicitly grants Congress 
power to establish uniform laws on the subject of bankruptcies 
throughout the United States.
  We in Congress have a constitutional responsibility to oversee our 
Nation's bankruptcy laws. Unfortunately, more and more Americans are 
filing for bankruptcy. In fact, 1.4 million Americans filed for 
bankruptcy last year. That was an increase in the number of filings 
from 1997, and in 1997 there was an increase in the number of filings 
from 1996. I find this trend extremely disturbing because the economy 
is doing so well. Even this morning, we hear of unemployment at an all-
time low, inflation is steady, and the economy is booming. The 
unemployment rate keeps going down, inflation remains low, and the 
Nation's personal bankruptcies keep going up.

  Vermont has traditionally had one of the lowest rates of bankruptcy 
per capita in the Nation. But in my home State of Vermont, personal 
bankruptcies have increased in each of the last 4 years, with annual 
personal bankruptcies more than doubling since 1994. I said this has 
occurred even though we have kept our low ranking compared to other 
States in the number of personal bankruptcy filings per capita. We will 
be able to keep that ranking because personal bankruptcy rates have 
gone up far more dramatically in other States.
  If the rise in personal bankruptcy is caused in part by some 
Americans abusing the bankruptcy system, then we in Congress should 
move in a major, balanced way to correct our bankruptcy laws. Working 
together, we saw a way we could do this. We did last year. Democrats 
and Republicans molded a bill that corrected abuses by debtors and 
creditors, and it preserved access to the bankruptcy system for honest 
debtors.
  The distinguished senior Senator from Illinois, Mr. Durbin, who 
worked with the distinguished Senator from Iowa, Mr. Grassley, did 
yeoman's work on last year's bill. They produced a bipartisan bill. As 
I recall--my colleague from Iowa can correct me if I am wrong--I 
believe it passed the Senate with something like 97 votes and only 1 or 
2 votes against it. It is pretty amazing to have that strong support 
when we have a piece of legislation that balances such contrasting, 
sometimes conflicting, interests around the country. It is a credit to 
the two Senators who crafted it. They balanced the competing interests 
of debtors and creditors to put together a bill that is fair to all.
  I am on the floor today because I have a concern that the bill before 
us strays from the blueprint of last year's balanced reforms in the 
Senate. For example, today's bill requires the means

[[Page S14053]]

testing of debtors to complete chapter 7 filings based on expense 
standards that are formulated by the Internal Revenue Service.
  Last year, Congress was exposing the IRS as an agency out of control 
in its enforcement of the Internal Revenue Code, but now we say we will 
trust the IRS with enforcement of the bankruptcy code. We were saying 
last year they could not enforce the Internal Revenue Code, the area of 
their own expertise, but now we say we will let them help enforce the 
bankruptcy code, an area in which they have no expertise or 
jurisdiction. In my State, we say that lacks common sense.
  This means testing severely restricts a judge's discretion to take 
into account individual debtors' circumstances. As a result, it has the 
potential to cause an unforgiving and inflexible result of denying 
honest debtors access to a postbankruptcy fresh start and would go 
against basically the way the bankruptcy code has been followed since 
the beginning of this country.
  I believe most Americans, perhaps not all but most Americans, who 
file for bankruptcy honestly need relief from their creditors to get 
back on their feet financially. We have recent research that shows 
stagnant wages and consumer credit card debt are the primary reasons 
for the rise in bankruptcy filings. If there are abuses in the credit 
industry, then we should move in a major and balanced way to correct 
them.

  I believe last year's Senate consumer bankruptcy reform bill, which, 
as I said, passed this Chamber by a near unanimous vote of 97-1, 
provides us with a blueprint for balanced reforms.
  Moreover, the latest study by the nonpartisan American Bankruptcy 
Institute found that only 3 percent of chapter 7 filers could afford to 
repay some portion of their debt. To force the other 97 percent of 
chapter 7 debtors to submit to this arbitrary means test in trying to 
reach 3 percent lacks common sense and poses an additional burden on 
the 97 percent for something that does not apply to them. The Congress 
seems to be stepping on people it should not.
  To the credit of the Senator from Iowa and the Senator from New 
Jersey, they are working to moderate the bill's arbitrary means testing 
provisions, and I commend them for working together to improve the 
underlying bill. I also commend the Senator from Illinois, Mr. Durbin, 
and the Senator from New York, Mr. Schumer, for their leadership on 
this issue. I hope we can significantly improve the bill's means test 
provisions in the coming days, and we can if we want to work at it.
  I am also concerned that today's bill, at least as it is now, prior 
to any amendments, is missing a key ingredient from last year's 
balanced reforms in the Senate: consumer credit information and 
protection.
  Last year's Senate-passed bill required the disclosure of information 
on credit card fees and charges and also protection against unjustified 
credit industry practices. As the Department of Justice stated in its 
written views on the bill:

       The challenge posed by the unprecedented level of 
     bankruptcy filings requires us to ask for greater 
     responsibility from both debtors and creditors. Credit card 
     companies must give consumers more and better information so 
     they can understand and better manage their debt.

  The administration has made it clear that for the President to sign 
bankruptcy reform legislation into law, it has to contain strong 
consumer credit disclosure and protection provisions. I agree with 
that. The credit card industry has to shoulder some responsibility for 
the nationwide rise in personal bankruptcy filings.
  Last year, credit card lenders sent out 3.4 billion solicitations--
3.4 billion. There are only 260 million people in this country, from 
the child born this morning on through. We are talking about 12 credit 
card solicitations per year for every man, woman, and child in America.
  I constantly hear from parents that their 10-year-old child may 
receive a letter: You have been preapproved for credit; X number 
thousands of dollars. Here is your credit card.
  I am not as concerned about the 10-year-old because usually the 
parent will grab that. I am a little bit concerned about the 16- or 17-
year-old who has been eyeing a stereo set, or whatever, and they get 
the credit card preapproved. How about the college kids who get four or 
five of those in the mail: You have been preapproved. Suddenly they 
say: Wow, I'm worth $75,000. I have it right here in plastic. 
Unfortunately, when they spend it, they have to pay it back. We need a 
little more responsibility on this.
  Do we want to send a 10-year-old down to the store with $3,000 worth 
of credit in their credit card? I would think not. But I also don't 
want the credit card companies crying when they do this and then the 
bills do not get paid. A little bit of effort should be made first to 
make sure you know who you are preapproving.
  I add, there are times when somebody's pet has been preapproved. My 
eldest son has two beautiful Labrador retrievers--nice dogs, friendly 
dogs but, as most labs, probably more friendly than bright. I am not 
sure I want to give them credit cards. And for all the Labrador 
retriever owners who might have heard that and will call my office, 
please understand, I do like those dogs, but I am still not going to 
give them a credit card.
  Clearly, the billions of credit card solicitations that are sent to 
Americans every year have contributed to an era of lax credit 
practices. That, in turn, contributes to the steep rise in personal 
bankruptcy filings. I am hopeful we can add credit industry reforms to 
this bill in the coming days.
  Senators Torricelli and Grassley have prepared a managers' amendment 
that incorporates many credit industry reforms proposed by Senators 
Schumer, Reed, Dodd, and others. I commend these Senators for working 
together on these bipartisan credit card reforms. I am pleased, 
actually, to cosponsor the amendment I have just referred to because it 
adds more balance to the bill.
  Another area where we can add needed balanced reform to this 
legislation is in the homestead exemption. You have States--Florida and 
Texas, for example--where debtors are permitted to take an unlimited 
exemption from their creditors for the value of their home. We 
understand the policy reasons for protecting one's home. But I think 
the policy was determined when you think of the average home. 
Unfortunately, this exemption has led to wealthy debtors abusing their 
State laws to protect multimillion-dollar mansions from their 
creditors.
  I do not think we intend somebody to be able to run up millions of 
dollars of debt, have a multi-multimillion-dollar mansion and say: Wait 
a minute. I need my humble home.
  Home may be where the heart is, but it is not necessarily where the 
bankruptcy protection should be. This is a real abuse of bankruptcy's 
fresh start protection.
  The distinguished Senator from Wisconsin, Mr. Kohl, has been a leader 
in trying to end homestead bankruptcy abuses. He has, again, prepared a 
bipartisan amendment to cap any homestead exemption at $100,000. I hope 
the full Senate will adopt the Kohl amendment to place reasonable 
limits on homestead exemptions.

  The distinguished Senator from Massachusetts, Mr. Kennedy, plans to 
offer an amendment to increase the minimum wage over the next 2 years 
from $5.15 to $6.15 an hour. I am proud to be a cosponsor of this 
amendment, as I have been before.
  It is more than appropriate to help working men and women earn a 
living wage on a bill related to bankruptcy. These minimum-wage workers 
are some of the same Americans who are struggling to make a living 
every day and might be forced into bankruptcy by job loss or divorce or 
other unexpected economic event.
  More than 11 million workers will get a pay raise as a result of a $1 
increase in the minimum wage. We ought to agree to help millions of 
hard-working American families live in dignity.
  I plan to offer an amendment that would save the taxpayers millions 
of dollars in wasteful spending and improve the bill by revising the 
requirement for all debtors to file with the court copies of their tax 
returns for the past 3 years. If the requirement was in effect last 
year, the 1.4 million Americans who filed for bankruptcy would have 
produced at least 4.2 million copies of their tax returns.
  It might sound like a great idea, but the Congressional Budget Office 
estimates it will cost taxpayers about $34

[[Page S14054]]

million over the next 5 years for the courts to store and provide 
access to more than 20 million tax returns. It is a pretty big expense 
for very little benefit.
  Every time we do something with one of these mandates, it may sound 
great, but we ought to ask ourselves, what does this cost? What do we 
get out of it? My amendment makes more sense. It does what the original 
amendment wanted to do but without the cost. It would strike the 
requirement. It would, instead, permit any party in interest--a 
creditor, judge, trustee or whoever--to request copies of a debtor's 
tax returns once the bankruptcy is filed. It is a targeted approach, 
targeted to verify a debtor's assets and income. I think it is workable 
and efficient because most bankruptcy cases involve debtors with no 
assets and little income, thus no need for the review of tax returns 
and no need for the taxpayers to spend $34 million to store paper 
nobody is ever going to look at.
  So let's not pile up millions and millions and millions of these 
pieces of paper, hire hundreds and hundreds of people to store them, 
and then have something nobody is ever going to look at anyway.
  I have consulted with our bankruptcy judge and trustee in Vermont. I 
will continue to do so. They caution that we remember the purpose 
bankruptcy serves: a safety net for many of our constituents. Those who 
are using it are usually the most vulnerable of America's middle class. 
They are older Americans who have lost their jobs or are unable to pay 
their medical debts. They are women attempting to raise their families 
or to secure alimony or child support after divorce. They are 
individuals struggling to recover from unemployment.
  As we move forward with reforms that are appropriate to eliminate 
abuses in the system--and we should eliminate such abuses--we need to 
remember that people use the system, both the debtors and the 
creditors. We need to balance the interests of creditors with those of 
middle-class Americans who need the opportunity to resolve overwhelming 
financial burdens.
  On a personal note, I welcome the distinguished Senator from New 
Jersey, Mr. Torricelli, who is the new ranking member of the 
Administrative Oversight and the Courts Subcommittee, to the challenges 
this matter presents. I know he and his staff have been working hard in 
good faith to improve this bill.
  As the last Congress proved, there are many competing interests in 
the bankruptcy reform debate that make it difficult to enact a balanced 
and bipartisan bill into law. Unfortunately, overall, the Congress 
failed to meet that challenge last year, even though I believe we met 
it here in the Senate, in the Grassley-Durbin bill, which passed 97 to 
1. I was pleased and proud to be a supporter of that. The mistake came 
in the conference. It broke down into a partisan fight, as though there 
is a difference between a Republican or a Democrat who is seeking 
bankruptcy relief or a difference between a Republican or a Democrat 
creditor whose interests have to be protected in bankruptcy.

  This is an American issue. We handled it as such in the Senate a year 
ago. We should do it again. I hope we can set, again, the standard, 
Republicans and Democrats in the Senate working together to pass and 
enact into law balanced legislation that will correct abuses by both 
debtors and creditors in the bankruptcy system. We are going to be 
better off for it. I hope that is what we can do.
  Mr. President, I yield to the distinguished Senator from Iowa.
  Mr. GRASSLEY. Mr. President, before the Senator from Vermont leaves 
the floor, I want to thank him for his comments. He has expressed very 
well some statements about parts of the bill on which he has questions. 
I want to assure him, most of those--in fact, the way the Senate works, 
probably all of those--will have to be addressed in some way through 
the various amendments which are likely to be adopted. We do have a 
very close working relationship, even at this point, on some of those 
things with people on the Senator's side of the aisle. We will try to 
do that.
  If I could also make the Senator from Vermont aware of a study he 
referenced, the study done by the American Bankruptcy Institute on the 
utility of chapter 7 debtors to repay their debts--the Senator may not 
know this, but we have had the General Accounting Office look at this 
study; in fact, all the studies on this question. The General 
Accounting Office has concluded that this specific study by the 
American Bankruptcy Institute was flawed. In fact, it understated the 
repayment ability in a very significant way.
  I do not expect the Senator to accept that right now, just because I 
have said it. I hope he will be able to take a look at that and see if 
there are any remaining questions that he might have which we could 
address, and if we can't do that and the Senator might be considering 
some amendments that are a direct result of the American Bankruptcy 
Institute study, that we would have an opportunity to talk about it 
before he might move in that direction.
  Overall, his statement is very accurate, stating some disagreements, 
some questions he has. Hopefully, we will be able to address those 
questions.
  Mr. LEAHY. Mr. President, I appreciate the words of the Senator from 
Iowa. He and I have been here for a long time. We have worked on an 
awful lot of issues, from defense matters to agricultural matters. Over 
those years, I have always enjoyed working with him. We will continue 
on this. I realize there will not be votes today, but I think this 
would be a good time for Senators who are trying to reach areas of 
accommodation and agreement to do so. Either I or my staff will be here 
to work with the staff of the Senator from New Jersey and the Senator 
from Iowa in any way we can be helpful.
  I yield the floor.
  Mr. GRASSLEY addressed the Chair.
  The PRESIDING OFFICER (Mr. Thomas). The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I know Senator Torricelli is expected to 
come to the floor to make a statement. While we are awaiting his 
arrival, I will address the Senate on a small but very important part 
of this legislation. That is the one that deals with chapter 12, making 
it permanent, as part of the bankruptcy reform legislation, so we do 
not have to, every 4 or 5 years or, as has been the case in the last 12 
months, since it has sunsetted, had to reauthorize it two or three 
times on a short-term basis.
  We are all in agreement it should be made permanent. People who have 
opposed making it permanent as a separate bill have thought it was 
necessary to do it at the same time as we offer the overall bankruptcy 
reform legislation. Hopefully, with this bill, S. 625, being adopted, 
we will never in the future have to deal with a separate 
reauthorization of a sunset chapter 12 because why should we have to 
sunset chapter 12, a provision that is made specifically for farming, 
when we don't do it for chapter 13, that is made specifically for 
individuals or small businesses, or chapter 11 that works very well for 
major corporations in America.
  I want to visit with my colleagues about some very important 
provisions in the bill before us that are vital to family farmers in 
the Midwest generally, in Iowa in particular, as well as the country as 
a whole. Agriculture, wherever it is, is something unique and different 
from a lot of businesses in their situations, where sometimes they have 
a decline not only in income that might make bankruptcy be considered 
but also a decline in value of real estate that, previous to chapter 
12, made it very difficult to keep up with the needs of a chapter 11 
bankruptcy procedure.
  As we all know from the recent debate we had within the last month on 
the emergency Ag appropriations bill, many of America's farmers are 
facing financial ruin. We have some of the lowest commodity prices in 
30 years. Pork producers have lost billions of dollars in equity, not 
just in income but billions of dollars of equity, with the lowest 
prices of pork in 60 years that we had just 12 months ago. Pork 
producers have not only lost, but the price of corn is currently well 
under the cost of production. The cash market for soybeans has reached 
a 23-year low. This is all in addition to poor weather conditions in 
parts of the United States, particularly the drought of the East Coast, 
the drought of Texas, the fires in Florida, and flooding in various 
parts of the Midwest.

[[Page S14055]]

  These circumstances have sent many farming operations in a tailspin. 
Clearly, we need to make sure family farmers continue to have 
bankruptcy protection available to them and a protection that satisfies 
the uniqueness of farming, as we have had other sections of the code 
try to be written to meet the uniqueness of other business arrangements 
within our society and our economy.
  Particularly, chapter 12 is going to be needed in good times as well 
as bad times--maybe not used in good times, but it needs to be there to 
meet the different arrangements of the different segments of the 
country and also the different drought and flooding conditions that 
happen from time to time, as well as the unpredictability of the 
economy, particularly the international economy, when the Southeast 
Asian financial crisis brought a downturn in our exports and squeezed 
the farmers' income at this particular time.
  Title X of S. 625 of this bill makes chapter 12 permanent and makes 
several changes to chapter 12 to make it more accessible for farmers 
and to give farmers new tools to assist in reorganizing their financial 
affairs.
  Back in the mid-1980s when Iowa was in the midst of another 
devastating farm crisis, I wrote chapter 12 to make sure family farmers 
would receive a fair shake when dealing with the banks and the Federal 
Government. At that time, I didn't know if chapter 12 was going to work 
or not, so it was only enacted on a temporary basis.
  Chapter 12 has been an unmitigated success. As a result of chapter 
12, many farmers in Iowa and across the country are still farming and 
contributing to America's economy. With a new crisis in farm country 
now, just 15 years from the last one, we need to make sure chapter 12 
is a permanent part of Federal law, and this bankruptcy bill does 
exactly that.
  As was the case with the dark days of the mid-1980s, some are 
predicting that family farms should consolidate and we should turn to 
corporate farming to supply our food and agricultural products. As with 
the 1980s, some people seem to think family farms are inefficient 
relics that should be allowed to go out of business. This would mean 
the end of an important part of our Nation's economy and a certain 
heritage that is connected with it. And it would put many hard-working 
American families--those who farm and those whose jobs depend on a 
healthy agricultural sector--out of work.
  But the family farm didn't disappear in the 1980s, and that crisis 
was very bad as well. It was not only an income crisis, as is the 
situation now, but there was a tremendous drop in equity at that 
particular time.
  I believe chapter 12 is a major reason for the survival of many 
financially troubled family farms. We have an Iowa State University 
study prepared by the outstanding Professor Neil Harl. He found that 84 
percent of the Iowa farmers who used chapter 12 were able to continue 
farming. Those are real jobs for all sorts of Iowans in agriculture and 
in industries that depend upon agriculture. According to the same 
study, 63 percent of the farmers who used chapter 12 found it helpful 
in getting them back on their feet. In short, I think it is fair to say 
chapter 12 worked in the mid 1980s and it should be made permanent so 
family farmers in trouble today can get breathing room and a fresh 
start if that is what they need to make it.
  But the most obvious reason for having it is that chapter 11, written 
for corporate America, does not fit the needs of agriculture or the 
economics of agriculture.
  The Bankruptcy Reform Act before us doesn't just make chapter 12 
permanent. Instead, the bill makes improvements to chapter 12 so it 
will be more accessible and helpful for those in the agricultural 
community. First, the definition of the family farmer is widened so 
that more farmers can qualify for chapter 12 bankruptcy protection. 
Second, and perhaps most important, my bankruptcy bill reduces the 
priority of capital gains tax liabilities for farm assets sold as part 
of a reorganization plan. This will have the beneficial effect of 
allowing cash-strapped farmers to sell livestock, grain, and other farm 
assets to generate cash flow when liquidity is essential to maintaining 
a family farm operation. These reforms will make chapter 12 even more 
effective in protecting America's family farms during this difficult 
period.
  So it is really imperative that we keep chapter 12 alive. Before we 
had chapter 12, banks held a veto over reorganization plans. They would 
not negotiate with people in agriculture, and the farmer would be 
forced to auction off the farm, even if the farm had been in the family 
for generations. Now, because of chapter 12, the banks are willing to 
come to terms. We must pass S. 625 to make sure America's family farms 
have a fighting chance to reorganize their financial affairs.

  Before I yield the floor, I see my good friend and coworker on this 
legislation, the Senator from New Jersey, Mr. Torricelli, has come to 
the floor to make some remarks. As I said last night and I want to say 
today, because he wasn't able to be here last night, I really 
appreciate that from day 1 of our even visiting about the possibility 
of putting together a bipartisan bill, as we had done in the previous 
Congress, because he was new to the committee and to this effort, not 
participating at the committee level in the efforts I had with Senator 
Durbin of Illinois during the previous Congress on a bill that just 
about made it through--not knowing those things could work out, we sat 
down and visited about that possibility.
  That initial visit brought us to putting together the legislation 
that is before us, legislation as introduced with the idea that he and 
I may not have agreed to everything down to the last jot and tittle 
with that legislation, but that we would be able, through the ensuing 
months, to work out differences and come to an agreement and get a bill 
out of committee. He has kept his word, and he has worked with us.
  I don't know whether people who don't participate in the legislative 
process know how much easier that is, such a better environment in 
which to write legislation and to make public policy. I don't see that 
often enough. I see it in this legislation through the cooperation of 
Senator Torricelli. Obviously, that sort of cooperation is two ways: He 
gives; I give. People who look to him for leadership--he has to carry 
some water for colleagues of his who want him to work things out. I 
have to do the same thing. But whether it is as a water carrier for our 
colleagues or whether it is for the individual philosophy of Senator 
Torricelli or myself, we have been able to bring this together. I thank 
him for that cooperation.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from New Jersey is recognized.
  Mr. TORRICELLI. Mr. President, I thank Senator Grassley for what has 
been a valuable partnership in crafting what I believe to be extremely 
important legislation. It would be fair to conclude that without the 
tenacity of Senator Grassley, this Senate would not be considering 
bankruptcy legislation. Without his reasonableness in reaching some of 
these provisions, it would not be the kind of progressive legislation 
that I believe is before us today.
  I also note that I am a successor to Senator Durbin who, like Senator 
Grassley, has invested not months but more than a year in crafting this 
legislation. Senator Durbin's contributions are on virtually every 
page. Working with Senator Durbin and, indeed, with Senator Grassley 
has not only been a pleasure; it has been a productive exercise. For 
that, I am very grateful.
  These are unusual times in our country, such an extraordinary 
combination of economic circumstances. Unemployment is low, home 
ownership is at record levels, and, for the first time in years, the 
Federal Government is operating with a surplus. This would lead many to 
believe these are not only good economic times but perfect economic 
times. This, of course does bear closer scrutiny.
  There are several troubling aspects with the modern American economy. 
They are not unrelated. One is a rapidly declining rate of personal 
savings--indeed, in the last quarter, the lowest savings rate by 
American families in our history.
  The second is the rapid, almost inexplicable rise in consumer 
bankruptcies. In 1998 alone, 1.4 million Americans sought bankruptcy 
protection. This represented a 20-percent increase since 1996 and a 
staggering 350-percent increase since 1980.

[[Page S14056]]

  We can differ on the reasons. We can have our own theories. But 
something is wrong. That ``something'' is not only jeopardizing the 
economic security of American families, it is providing a staggering 
financial burden on small businesses and American financial 
institutions.
  It is estimated 70 percent of the these bankruptcy situations were 
filed in chapter 7, which provides relief for most unsecured debt. Just 
30 percent of these petitions were filed under chapter 13, which 
requires a repayment plan.
  There are, obviously, disagreements about what has caused this 
dramatic increase. It is probable there is no one reason but a 
confluence of problems. Some suggest that culturally the stigma of 
bankruptcy has been removed and people no longer feel any inhibition in 
admitting their financial circumstances and seeking total relief from 
personal obligations. Others believe it is simply abuse of a system in 
which it is too simple to avoid responsibility. Others argue that a 
reliance on debt and a decrease in personal savings has left record 
numbers of Americans vulnerable to this change and leading to these 
extraordinary levels of bankruptcy.
  Obviously, in the complexities of modern life--with low savings 
rates, high levels of debt, attentions of our current culture, 
unexpected events, divorce, a health crisis, given the enormous cost of 
health care in the Nation, the loss of a job or the loss of job skills 
because of changes of technology--any one of them, no less a 
combination of them, can take an American family who believes it is 
living with financial security and force them under a crushing debt 
into bankruptcy.
  The reality, of course, is a majority of these bankruptcies are hard-
working American people, low- or middle-class families, who largely, 
through no fault of their own, sometimes due to these circumstances 
that I have outlined, find themselves with overwhelming financial 
problems and they simply cannot deal with the crushing blow. For all 
the abuses, the fact remains that accounts for most of these 
bankruptcies.
  At the same time, in a recent study the Department of Justice has 
found that 13 percent of all those debtors filing under chapter 7, or 
an incredible 182,000 people, can afford to repay a significant amount 
of this debt. This would mean to creditors, family-owned businesses, 
small retailers, and important financial institutions, an incredible $4 
billion that could be returned to creditors but is avoided through what 
I perceive to be a misuse of the bankruptcy system.
  These are the factors, the statistics, and the concerns that led 
Senator Grassley and I to offer this comprehensive bankruptcy reform.
  The bill before the Senate strikes a balance making it more difficult 
for the unscrupulous to abuse the system, while ensuring that 
bankruptcy protection for families who need it will find it available.
  These abuses which result in this $4 billion loss to creditors is not 
paid by some distant institution off our shores separated from the 
realities of American life or our economy. This is money avoided 
through the unscrupulous use of the bankruptcy system that is added 
onto every piece of clothing you buy in the store, every automobile you 
purchase from a show room, every credit card you use, and every bank 
loan that you take.
  Those hard-working Americans who pay their bills are forced, through 
bankruptcy, through no fault of their own, to share these costs. That 
is what brings us here today.

  At its core, the Grassley-Torricelli bill is designed to assure that 
those with the ability to repay a portion of their debts do so by 
establishing clear and reasonable criteria to determine repayment 
obligations.
  It provides judicial discretion to ensure that no one genuinely in 
need of debt cancellation will be prevented from receiving a fresh 
start. Recognizing that a fresh start and an ability to have a new life 
have been at the core in this country, that has been the reason for 
bankruptcy protection since the establishment of the Republic. We 
believe in second chances in life. We also don't believe in people 
escaping obligations they can meet or misusing the legal system.
  It is because, however, of our concern that vulnerable people who 
genuinely use the system for a new start in life would have their 
position jeopardized by our legitimate efforts to find those who are 
abusing the system that we have designed a flexible means testing 
system in the bankruptcy bill for the first time. Under current law, 
virtually anyone who files for complete debt relief under chapter 7 
will receive it.
  The Grassley-Torricelli bill creates a needs-based system by 
establishing a presumption that a chapter 7 filing should be either 
dismissed or converted to a chapter 13 when the debtor has sufficient 
income to repay at least $15,000, or 25 percent of their outstanding 
debt. That is the essence of the needs-based system. It is a simple 
presumption. You can pay $15,000, or 25 percent. It is not closed to 
you. There is no prohibition. But there is a presumption that you can 
pay. You need to meet that presumption only for those individuals.
  I believe this is a flexible yet very efficient screen to move 
debtors to the ability to repay a portion of their debt into a 
repayment plan, while at the same time ensuring judicial discretion and 
a fair review given the debtor's individual circumstances.
  In addition, the bill contains several important consumer safeguards 
to prevent unfair harassment by creditors. It requires the Attorney 
General and the FBI Director to designate one prosecutor and one agent 
in every district to investigate reaffirmation practices that violate 
Federal law.
  This is an important element of this bill to ensure that individual 
creditors do not seek their own remedy outside of the law, forcing 
people who cannot repay or should not be repaying, given their 
individual circumstances and income, to do so.
  It penalizes creditors who refuse to negotiate reasonable repayment 
schedules prior to bankruptcy.
  The emphasis remains on settlement through negotiations--not 
litigation and conflict.
  Importantly, the bill also does everything possible to guarantee that 
child support payments in bankruptcy are not jeopardized, are a 
priority, and continue.
  This was the priority in the Judiciary Committee--that we would 
reform this system, we would provide new opportunities for debtors to 
collect, new safeguards for people in bankruptcy, but that child 
support payments and family obligations will remain paramount.
  I believe in the balance that is achieved in this legislation, and 
that Senator Grassley and I have met that objective. It was critical to 
do so because more than one-third of bankruptcies in the United States 
involve spousal or child support orders. This bill will not be a 
vehicle for people escaping their family obligations.
  In half of these cases, women are creditors trying to collect court-
ordered support from their former husbands. These support orders are a 
lifeline for these families. I believe this legislation has protected 
it, recognizing the vulnerability of these families, and why this was a 
priority in the legislation.
  Mr. President, 44 percent of single parent families with children 
under the age of 18 had incomes below the poverty line in recent years. 
The child support amounting to an average of nearly $3,000 is often the 
only thing that keeps a single parent and a dependent child off public 
assistance. Senator Grassley and I have achieved this protection and I 
believe this fair provision of protecting these families by elevating 
child support from its current place as seventh on the repayment 
priority list to first place. This is critical for Members of the 
Senate to understand. Currently, these child support payments are 
seventh on the list of priorities. Under the Grassley-Torricelli 
legislation, it will now be first priority. No bank, no insurance 
company, no credit card company, no retailer--no one--will have higher 
priority than the children or the spouses involved in these cases.
  There were other concerns in the Judiciary Committee which needed to 
be addressed, other balances that have been achieved that the Senate 
should recognize. First, the managers' amendment that will be offered 
incorporates the language offered by Senator Feingold to remedy a 
provision in the bill carried over from the legislation of a previous 
year which would have made

[[Page S14057]]

debtors' attorneys responsible for costs and fees. That provision would 
have made it impossible for many middle-income people, people of modest 
means, to ever get an attorney. In cases where there is any judgment to 
be reached, any questions on the merits, it would have been impossible 
to get an attorney, disenfranchising many Americans from the entire 
bankruptcy system. A motion brought by the trustee to move the debtor 
from chapter 7 into chapter 13 and the original filing was, we found, 
not substantially justified. Those costs would have been incurred by 
the attorney. The managers' amendment will protect against this 
provision.
  Second, the managers' amendment will include a safe harbor, exempting 
every debtor with income below the median income from the means test. 
This provision will ensure low-income people with no hope of prepaying 
their debts are not swept into the means test.
  A final point I raised that is resolved by the managers' amendment is 
the use of IRS standards in the bill. Currently, the bill uses living 
expense standards formulated by the IRS in determining what portion of 
their debts an individual has the ability to repay. These standards 
were not formulated with bankruptcy in mind and provide virtually no 
flexibility to account for the debtor's actual expenses. They were, 
therefore, not appropriate. The managers' amendment will clarify the 
Justice Department and Treasury have the authority to draft bankruptcy 
appropriate standards and not use the IRS standards previously used.
  For each of these provisions and their incorporation in this 
legislation, we are very indebted to members of the Judiciary 
Committee: Senator Feingold, for his efforts in recognizing the 
possible abuses of putting these costs on to bankruptcy attorneys if 
the cases were lost; and Senator Durbin, at his insistence and my own, 
we provided for an appropriate means test; and for the Department of 
Justice coming up with its own means test standards. Senator Durbin, in 
particular, was very helpful with these provisions. Senator Grassley, 
recognizing their merits, has brought them into the legislation. It is, 
therefore, far better legislation because of each of these provisions.

  There is, however, one final area which also must be addressed to 
ensure the bill is both balanced and bipartisan. It is critical the 
bill not only address the debtor's abuse of bankruptcy but also 
overreaching and sometimes abusive practices of the credit industry. 
Any American who gets their own mail understands some change is taking 
place in the American economy--the extraordinary solicitation of 
customers, by the 3.5 billion individual efforts by the credit card 
industry to get new customers. This represents 41 mailings for every 
American household every year; 14 for every man, woman, and child in 
the Nation. No one disputes both the right and the advisability of the 
credit card industry seeking solicitation of new customers who are 
creditworthy, have incomes and the need for available consumer credit. 
It is right and an important part of our economy. That is not the 
objective of this legislation.
  Our concern in balancing provisions dealing with consumer abuse of 
the bankruptcy laws with credit industry abuse of consumers focuses 
instead on people of modest incomes who are offered credit they could 
never afford, debt they will incur that they can never deal with, young 
people and the elderly, in credit obligations they do not even 
understand. The situation, indeed, has become so serious with students 
that 450 colleges nationwide have banned the marketing of credit cards 
on their campuses. Low-income families are being targeted with the same 
frequency as students--the endless solicitation of debt they cannot 
meet and should not incur.
  Since this decade began, Americans with incomes below the poverty 
line have doubled their credit usage. The result is entirely 
predictable. Mr. President, 27 percent of families earning less than 
$10,000 have consumer debt that is more than 40 percent of their 
income. Modest-income families, sometimes high school students, often 
people on public assistance, receiving hundreds if not thousands of 
credit solicitations by companies that should recognize with any due 
diligence that is fully available to the industry that these debts can 
never be paid. I have granted to the industry that unfortunate changes 
in our culture, abuses of the bankruptcy laws, and a host of other 
reasons have led to needed changes in the bankruptcy laws to avoid 
these abuses. No one can credibly argue there is not some need of the 
industry to do so as well.
  In this legislation we offer the consumers must be given information 
about the consequences of their debt: fair disclosure if only the 
minimum debt is paid as required by the credit card company or the 
bank; how long will it take for repayment to be made; and what will it 
cost, information that should be made available to every consumer, 
people believing if they make the minimum payments they will actually 
ever be out of debt. We want them to recognize the years and the 
enormous costs of doing so.
  Senator Grassley, working with Senator Schumer, Senator Durbin, and 
others, has reached an accommodation that I think is fair to the 
industry but will provide real consumer protection through disclosure. 
The adoption of that amendment is as vital to a balanced bill as the 
protection of child support, the moving of people into repayment 
schedules, and a means test.
  This is an extraordinary piece of legislation. It is a challenge to 
all those who believe this Senate cannot operate on a bipartisan basis. 
There will be opposition to bankruptcy reform. It may be 5, 10, 15 or 
20 votes, but it will be a small minority. This is genuinely bipartisan 
legislation. It can be adopted without rancor after months, if not 
years, of effort by Senators from both sides of the aisle. It is fair; 
it is balanced for the credit card industry and consumers.
  I end as I began, expressing my gratitude to Senator Grassley and 
members of the Judiciary Committee, and I compliment the Senate on what 
I believe will be a worthwhile and informative debate as we adopt this 
comprehensive bankruptcy reform.
  I yield the floor.
  Mr. GRASSLEY. Mr. President, there does not appear to be an effort on 
the part of Members to consider this bill which is up for discussion. 
It will take a few days to get through all the amendments. Given the 
lateness of the year as far as the total legislative session is 
concerned and considering all the other work that needs to be done to 
wind up this legislative session, there may not be an appreciation of 
all the amendments we have to deal with on this bill. I encourage 
Members who have amendments to come here on the floor to offer their 
amendments. This bill is very complex. Some of the amendments are also 
going to be very complex. So please come here and offer your 
amendments.


                           Amendment No. 1730

(Purpose: To amend title 11, United States Code, to provide for health 
          care and employee benefits, and for other purposes)

  Mr. GRASSLEY. Mr. President, I call up amendment No. 1730 and ask for 
its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The legislative assistant read as follows:

       The Senator from Iowa [Mr. Grassley], for himself, Mr. 
     Torricelli, and Mr. Leahy, proposes an amendment numbered 
     1730.

  Mr. GRASSLEY. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The text of the amendment is printed in today's Record under 
``Amendments Submitted.'')
  Mr. GRASSLEY. Mr. President, we have a situation now in which several 
nursing home chains, maybe even some independent nursing homes, are 
going into bankruptcy. When this happens, we do not have public policy 
in place to guarantee the economic and accounting decisions that the 
bankruptcy involves take into consideration the needs of the residents 
of these nursing homes.
  If a hospital goes bankrupt, the basic question then is, What happens 
to the patients? The moving of elderly patients, particularly those who 
have been in a single nursing home for a long period of time, is a very 
traumatic experience. Many times, the trauma that results from that 
removal leads to almost immediate death. I suppose a more accurate 
statement would be that under any circumstance, patients' welfare 
varies from case to case.

[[Page S14058]]

  If a bankruptcy trustee is thinking about patients, he may act to 
protect them. If he is not thinking about the patients, they could end 
up on the street. This has happened before, and it could happen again. 
The amendment I am offering today with Senator Torricelli and Senator 
Leahy would modify our bankruptcy laws to deal with the failures of 
health care businesses. Our intent is simply to protect patients in a 
system that is not designed to protect them.
  The fate of patients caught in business failures does not always make 
headlines. But when it does, the stories can be quite moving. The Los 
Angeles times on September 28, just 2 years ago, described the terrible 
consequences of a sudden nursing home closing:

       It could not be determined Saturday how many more elderly 
     and chronically ill patients may be affected by the health 
     care company's financial problems. Those at the Reseda Care 
     Center in the San Fernando Valley, including a 106-year-old 
     woman, were rolled into the street late Friday in wheelchairs 
     and on hospital beds, bundled in blankets, as relatives 
     scurried to gather up clothes and other personal belongings.

  As horrifying as this example is, it could easily be repeated. What 
happened at the Reseda Care Center, less than 2 years ago, could happen 
again and again across the country.
  The Nation's bankruptcy laws are geared towards creditors and 
debtors. One purpose of the bankruptcy system is to ensure that 
creditors receive what debtors owe them. To this end, bankruptcy 
trustees concentrate narrowly on the bottom line. They try to maximize 
the amount of money returned to creditors. In a system so focused on 
finances, the human toll is often merely an ancillary concern.
  Unfortunately, the poor financial conditions that led to the Reseda 
Care Center's collapse are increasing. Large portions of the health 
care industry are financially ailing. Almost one-third of our hospitals 
could face foreclosure. At least two of the Nation's largest nursing 
home chains are in deep financial trouble and may file for bankruptcy. 
We have had some chains already do that. Two large nursing home chains 
that declared bankruptcy, before they declared bankruptcy, had already 
cut 10,000 jobs. An increasing number of home health agencies are 
shutting their doors. All in all, health care business failures were up 
15.5 percent between 1996 and 1997.
  Thousands of patients tie their fate to health care providers. They 
have no alternative. Yet Federal law shows absolutely no consideration 
for patients' well-being during the process of bankruptcy. While the 
State of California has tried to prevent any more surprise nursing home 
evictions, each Federal bankruptcy judge decides whether any State law 
applies in an individual case. No Federal law protects patients in 
bankruptcy cases. With simple changes to the bankruptcy code, our 
amendment will fill this very dangerous gap in patient protection.

  Specifically, one section covers the disposal of patient records. It 
provides clear and specific guidance to trustees who may not be aware 
of State or Federal requirements for maintaining these records, or 
confidentiality issues associated with patient records. Another section 
of our amendment makes the cost of closing a health care business, such 
as transferring patients to another health care facility, a top 
priority debt. This ensures these expenses will actually be paid.
  In the ideal situation, though, we want to even keep these patients 
from being moved if that is possible, and I think it is possible. In 
fact, we have had the assurances of some of these chains that have gone 
into bankruptcy already that they are providing for the continuing care 
of their patients.
  But perhaps the heart of this amendment, as I point to the third and 
main part of it, is the requirement that the bankruptcy judge appoint 
an ombudsman to act as an advocate for patients of health care 
businesses in bankruptcy. This ensures judges are fully aware of all 
the facts when they guide health care providers through bankruptcy. 
Prior to a chapter 11 filing, or immediately thereafter, the debtor may 
employ a consultant to help in its reorganization effort. The first 
step is usually cutting costs. Sometimes this step may result in a 
lower quality of patient care. An ombudsman, under our amendment, would 
provide an institutional voice for the patients to help ensure an 
acceptable level of patient care.
  Our amendment also requires a trustee to make the best effort to 
transfer patients to another facility in the face of a health care 
business closing. This is designed to prevent a trustee from putting 
patients out on the street.
  Our amendment provides a tremendous benefit for patients with a 
minimal impact on creditors and debtors. As policymakers, we must 
eliminate the possibility of midnight evictions at bankrupt nursing 
homes and hospitals. We must ease the fear of abandonment in 
individuals who are at a very vulnerable stage in their lives.
  This is the amendment. We have had about 6 months pass since the 
first talk of bankruptcies by some major chains in the United States 
took place. I happen to also be chairman of the Senate Aging Committee. 
In that capacity, I consulted with HCFA when these first threats of 
bankruptcy came forth and we did not have the bankruptcy protection for 
the patients that our amendment proposes. I asked HCFA about plans for 
this, or what plans each of the States had for States that would have 
nursing homes in bankruptcy. We found a total vacuum of either Federal 
concern or Federal policy and, also in most States, that to be the 
situation.
  Last spring, I asked the Health Care Financing Administration to 
start instituting a process that the States will go through as they 
license nursing homes. They should be concerned with the quality of 
care in nursing homes and have an interim plan for those nursing homes 
that go into bankruptcy, pending adoption of our legislation.
  HCFA has carried out that responsibility very well. We now have word 
that each of the States have such a plan in place. We want to make sure 
this is a permanent part of the consideration of bankruptcy courts and, 
hence, the necessity of our legislation which goes beyond what the 
Federal Government, through HCFA, and the States through their 
licensing and quality control departments, has a responsibility to do. 
They now have in place a plan to deal with nursing home bankruptcies.
  Mr. TORRICELLI. Will the Senator yield?
  Mr. GRASSLEY. I yield.
  Mr. TORRICELLI. Mr. President, I congratulate Senator Grassley on 
offering the amendment. I am proud to offer it with him.
  We could not do comprehensive bankruptcy reform without dealing with 
the crisis in the health care industry. Last year, bankruptcies by 
health care providers were up 15 percent. One nursing home company 
alone, which has 300 nursing homes, left an estimated 37,000 people 
without beds when it filed for bankruptcy. One, the Doctors Network in 
California, when it went into bankruptcy, left 1.3 million people 
without health care.
  As the Senator pointed out in his remarks, the bankruptcy laws are 
designed for creditors and they are designed for people who are 
debtors, but the customers, in this case the patients, are not provided 
for.
  One of the worst cases in the country was when the HIP health care 
plan in New Jersey went bankrupt leaving 194,000 subscribers without 
clear health care provisions. Indeed, it has left New Jersey hospitals, 
almost all of them, in the red this year because their bills were not 
being paid.
  I am very grateful we have been able to join together in offering 
this amendment to ensure there is an ombudsman; that there is help in 
getting people into new plans; that their records are protected in 
privacy. I believe we made a real contribution to helping in these 
difficult moments in the health care industry, and we will have a 
better bankruptcy reform bill because of it. I am very happy to work 
with Senator Grassley and grateful for his leadership.
  Mr. GRASSLEY. Mr. President, this is one more example of the 
bipartisan cooperation we have had on this bill. I hope my colleagues 
will look at this amendment and that it will not become controversial 
and we can adopt it. When the overall bankruptcy legislation becomes 
law, we will have appropriate protection, beyond the protection we give 
to creditors and debtors in this legislation, for the needs of patients 
as well.
  We should not have these traumatic experiences that happened in 
Reseda

[[Page S14059]]

Nursing Home in San Fernando Valley and the over 100,000 patients who 
were in jeopardy in the example of the Senator from New Jersey.
  I yield the floor.
  Mr. LEAHY. Mr. President, I am pleased to join Senator Grassley and 
Senator Torricelli in offering the ``Nursing Home Patients Protection 
Act'' to S. 625, the Bankruptcy Reform Act of 1999. Our amendment 
protects nursing home patients in a business liquidation in three 
fundamental areas: patient privacy, patient rights and prompt transfers 
to new facilities.


                            Patient privacy

  First of all, our amendment ensures patient privacy when a hospital, 
nursing home, HMO or other institution holding medical records is 
involved in a bankruptcy proceeding that leads to liquidation. Medical 
privacy is an issue very important to me, and ensuring that the 
confidentiality of patients records is maintained should be of 
paramount importance.


                       Defending Patients Rights

  We have ensured that patients rights are defended as well. Cost 
cutting is always an issue in the health care system and that can 
translate into lower patient care quality--a fear to all health care 
patients. Our amendment establishes an ombudsman to provide a voice for 
all health care patients, making sure that judges are aware of all the 
facts in balancing the interests between the creditor and the patients.


                       New Nursing Home Transfer

  Finally, our amendment requires that the bankruptcy trustee make all 
reasonable efforts to transfer all of the bankrupt nursing home's 
patients to a nearby health care business. The prompt transferring of 
patients to a new health care facility must be addressed properly 
during a business liquidation under our legislation.
  Mr. President, in my home State of Vermont, two nursing homes in 
Burlington recently made news due to a bankruptcy proceeding. Birchwood 
Terrace Healthcare and the Staff Farm Nursing Center are two very 
excellent nursing home facilities. Each has a corporate connection to 
the Vencor Corporation, a nationwide healthcare and nursing home 
provider that recently filed for protection under Federal bankruptcy 
protection under Chapter 11 of the Bankruptcy Code. While Vencor has 
pledged these Vermont nursing homes will not be affected by its plans 
to reorganize while in bankruptcy, I am sure that many Vermonters are 
alarmed at the prospect of a nursing home with their loved ones filing 
for bankruptcy. Our amendment should reassure Vermonters that even if a 
nursing home files for business liquidation under our bankruptcy laws, 
their loved ones will be protected.
  I have been working on the overall issue of medical privacy for many 
years and I am particularly pleased that our amendment adds new 
protections for patient medical records for nursing homes in bankruptcy 
liquidation.
  Of course, in the best case scenario any institution holding patient 
health care records would continue to follow applicable state or 
federal law requiring proper storage and safeguards. The fact is, 
however, under current law during a business liquidation an individual 
would have to wait until there has been a serious breach of their 
privacy rights before anyone stepped in to ensure that patient privacy 
is protected. Under current law it is questionable what protection 
these most sensitive personal records would have during a liquidation.
  The reality of this situation and the practical questions of what 
recourse an individual would have if their personal medical records 
were not properly safeguarded against a business that is going out of 
business makes this provision essential. Our legislation would set in 
law the procedure that an institution holding medical records would 
have to follow during a liquidation proceeding.
  The bottom line is that we do not want to have to wait until there 
has been a breach of privacy before steps are taken to protect patient 
privacy. Once privacy is breached--there is nothing one can really do 
to give that back to an individual.
  I urge my colleagues to support our amendment to make sure that 
nursing home patients privacy and rights are protected during a 
bankruptcy proceeding.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. HARKIN. Mr. President, I am fortunate the remarks I am about to 
make follow the remarks of my colleagues from Iowa and New Jersey in 
talking about nursing homes because I want to take a few minutes to 
talk about another aspect of how the elderly are getting ripped off in 
this country and what has happened with HCFA, the Health Care Financing 
Administration, and what they have been trying to do to stop this. What 
the Senate is doing and what the House has done recently is going to 
turn the clock back on our attempts to cut out waste, fraud, and abuse 
in Medicare.
  I have been working for over a decade to identify and eliminate 
waste, fraud, and abuse in the Medicare system. It is a big problem. 
The Office of Inspector General estimates that last year, Medicare lost 
nearly $13 billion--that is with a B, billion dollars--to waste, fraud, 
and abuse in Medicare.
  A few years ago, it was over $23 billion a year. So we have made some 
progress. It is still a huge annual waste of our tax dollars. I call it 
the Medicare waste tax, and we need to cut the Medicare waste tax.
  Since 1989, I have held hearing after hearing, released report after 
report documenting unnecessary losses to the Medicare program. I 
commissioned the Office of Inspector General and the General Accounting 
Office to research and review these unnecessary payments and to make 
recommendations. On July 28 of this year, I introduced S. 1451, the 
Medicare Waste Tax Reduction Act of 1999 which incorporates many of 
these GAO and IG recommendations. If enacted, it would save Medicare 
and our taxpayers billions of dollars every year.
  Medicare fraud is what we hear the most about, some egregious cases 
where a scam artist has found yet another way to skim millions from the 
Medicare trust fund. Those are the cases that make the headlines. But 
my years of investigation and review of this problem indicate that by 
far the greatest losses to Medicare are not in fraud, but they are due 
simply to waste and abusive practices. These losses are often directly 
due to or are encouraged by wasteful Medicare payment policies and 
practices and a laxity in oversight, as well as weaknesses in the 
Medicare law that restrict the program's ability to get the best deal 
possible when purchasing goods and services.
  To examine this further, in 1996, my staff and I undertook a study of 
Medicare payments for medical supplies. This followed a study by the 
GAO that I had requested earlier on the same topic. We compared 
Medicare's payment rates for 18 commonly used medical supply and 
equipment items with what the Veterans' Administration paid. Then we 
compared it to the wholesale rate and the retail rate.
  What we found was startling. This is a chart that depicts what we 
found. For example, an irrigation syringe--a small syringe like this 
little one right here, these little plastic syringes--we found that 
Medicare is paying $2.93 for each one. The Veterans' Administration is 
paying $1.89. The wholesale price was $1.10. The retail price was 
$1.95. One can walk into a drugstore and buy one for $1.95. Medicare 
was paying $2.93 for each one. The potential savings from that alone, 
if we base it on the wholesale price, is $4.4 million every year just 
on little plastic syringes.
  We had a walker. The Medicare purchase price was 75 bucks. The VA 
price was $25 for the walker. The wholesale price was $39, and the 
potential savings was about $17 million a year.
  Again, this is not an elaborate device. This is just a simple 
aluminum holding walker. Medicare was paying $75 each. The wholesale 
price was $39.
  This is a commode chair. This is even more egregious. The commode 
chair was being paid for by Medicare at the rate of $99.35 each. The VA 
was paying $24.12 each. The potential savings was $30.6 million a year. 
This is a commode chair; we have all seen them. A lot of people use 
them in hospitals and nursing homes.
  Potential savings: If Medicare just paid the VA price, not the 
wholesale price, just what the Veterans' Administration is buying them 
for, there would be a savings of $30 million a year just for the 
commode chair.

[[Page S14060]]

  Those are some of the items we found were being grossly overpaid for 
by the Medicare system.
  So, armed with this information, we began to work to cut this waste. 
First, I pushed an idea I have advocated for over a decade: Competitive 
bidding. Competitive bidding, that is how the Veterans' Administration 
gets the rates it does--good old-fashioned American free enterprise; 
put them out there for competitive bids.
  While Medicare pays bloated prices based on historical charges, the 
VA, which has much less purchasing power than Medicare, puts out bids 
that provide for both quality and cost control.
  So I wanted to get through competitive bidding. But all we could get 
through the Congress was a demonstration on competitive bidding.
  I do want to point out one of the items on which we were successful 
in reducing the price on this idea of competitive bidding. One of the 
demonstration programs we did was oxygen. We found that for oxygen, 
Medicare was paying more than 50 percent more than the Veterans' 
Administration. So we had a debate here about reducing the Medicare 
rate for oxygen. We had a compromise. We cut the rate by 30 percent. 
That was in the Balanced Budget Act of 1997. We said we were going to 
reduce the oxygen payments by 30 percent and put it out for competitive 
bids.
  We just got the first bids in on the competitive bidding 
demonstration for oxygen. Guess what. The suppliers bid to provide home 
oxygen for about 25 percent less than the 30-percent cut we put in. On 
top of the 30-percent cut, the bids came in at 25 percent less than 
that. They are still making money. And they will still be providing 
regular servicing of equipment, doing it for that much less.
  Let me get this straight. A lot of the oxygen suppliers said they 
could not do this because they would lose money. We did not listen. We 
went ahead and put through the 30-percent cut. Then we put it out for 
competitive bids. They then cut it 25 percent more than that.
  So look at it this way. If the home oxygen people were making 50 
percent more off Medicare than they were making off the Veterans' 
Administration, and we cut it by 30 percent, put it out for competitive 
bids, and they came in 25 percent even lower than that, that means they 
are now 5 percent under the Veterans' Administration. They were making 
money off VA before, and now they are even less than what VA is on 
competitive bids. And you know darn well they are not going to bid that 
unless they are making money on it. They are not going to put a bid out 
there to lose money.
  That is just an indication of how much waste and abuse there is in 
the Medicare system and why competitive bidding ought not to be a 
demonstration project but it ought to be the norm, the standard for all 
of our purchases for Medicare.
  We got the demonstration program. However, as a part of the Balanced 
Budget Act of 1997, we did succeed in giving Medicare a modest version 
of another waste-fighting weapon I have been pushing for a long time. 
We provided HCFA, the Health Care Financing Administration, with 
enhanced ``inherent reasonableness'' authority to reduce Medicare 
payments when it is clear that current Medicare payment levels are 
``grossly excessive.'' In other words, Medicare, HCFA, has an 
``inherent reasonableness'' clause. We enhanced that to say they could 
reduce Medicare payments when they were clearly grossly excessive. I 
would have liked to have done much more--obviously, put it out for 
competitive bids--but it is a step in the right direction.

  Specifically, what this does is provide Medicare with the authority 
to reduce payments by up to 15 percent a year for items where Medicare 
believes there are gross overpayments. That was 2 years ago. After 2 
years of prodding, HCFA has finally begun the process of using its new 
authority to make Medicare a more prudent purchaser. They published a 
notice of proposed rulemaking on August 13 of this year. This followed 
an extensive investigation reviewing retail prices, wholesale prices 
paid by payers other than Medicare, and, of course, the payment amounts 
made by the Veterans' Administration.
  HCFA and their intermediaries then came up with an initial list of 12 
items of durable medical equipment and 1 prosthetic device for which 
Medicare currently pays a grossly excessive amount. HCFA recommended 
reducing these exorbitant rates, and they projected over a 5-year 
period, just making these modest adjustments, it would save Medicare 
and the taxpayers over $487 million--just in the next 5 years.
  This chart will begin to show some of these items.
  For example, the items here: Lancers, enteral nutrients, eyeglass 
frames, catheters, test strips, albuterol sulfate; the overpayments 
are: 36 percent, 16 percent, 21 percent, 24 percent, et cetera. This 
chart shows the 5-year savings we would get off them. Then this chart 
shows the overpayment for the folding walkers I just talked about, the 
commode chairs, and others, for another $120 million. It is a total 5-
year savings of almost half a billion dollars just from these items 
alone.
  Let me make it clear, we are only talking about the right of HCFA to 
reduce grossly excessive payments. Excessive pricing is not determined 
by comparing prices paid by Medicare to wholesale prices. That is not 
how we determine excessive pricing. HCFA, in its proposed rule, takes 
the Veterans' Administration price--what the VA is paying for these 
same items--and then it adds 67 percent.
  Keep this in mind. I will get my commode chair back out here again. 
For an item such as this commode chair, what the HCFA has said is: We 
will see what VA is paying for it, not what the wholesale price is. 
What is the Veterans' Administration paying for it? Then we will add 67 
percent over that. That is what we will now pay for that commode chair.
  Keep in mind, the companies making these commode chairs are not 
losing money in the VA system. They would not be selling them to the VA 
if they were losing money. So you know they are making money off the 
VA.
  Now HCFA says: OK, they were so grossly overpriced before, we are now 
going to cut it; we are only going to allow a 67-percent markup. 
Wouldn't you like to have that guarantee in everything you sell the 
Government?
  I see no reason we should pay more than the VA. Medicare is the 
largest purchaser of medical supplies and equipment in the Nation. 
Because of this purchasing power, it ought to be able to demand better 
prices than anyone else. Medicare should not pay any more than any 
other Federal program does, whether it is VA, CHAMPUS, the Federal 
Employees Health Benefits Program, or others.
  Now, guess what. Even with the 67-percent markup over the VA rate, 
Medicare is currently paying even more. It is hard to believe.

  Now, here are the folding walkers. The VA payment on those is $30.24. 
The proposed Medicare payment is $50.50. That is with a 67-percent 
markup. So if they are making money on VA, they are making a killing 
off of Medicare. Here is the commode chair. VA is paying $37.64; the 
Medicare payment is $62.85. What a deal. And this is a result of us 
saying they shouldn't pay grossly exaggerated prices. Evidently paying 
$62.85 for a commode chair for which the VA is paying $37 is not 
grossly exaggerated. I think it is. There are a lot of other things, 
folding walkers and everything else. Here is a folding walker that has 
a wheel on it. The VA is paying $45.94; the proposed Medicare payment, 
$75.88.
  Even with that, HCFA is moving ahead, barely, to save Medicare and 
taxpayers a lot of money. We need to do more, and we need to do more 
rapidly.
  If my colleagues think that is bad news, get ready for the really bad 
news. With almost no discussion, last week the House Ways and Means 
Committee added a little special interest provision to the Medicare 
Balanced Budget Refinement Act of 1999. This provision would 
indefinitely delay cutting this wasteful spending. It would deny 
Medicare and the taxpayers $\1/2\ billion of savings. It does this 
simply by stopping HCFA from moving ahead. It stops Medicare, its 
intermediaries and carriers from using this inherent reasonableness 
authority until the Secretary has published a new rule and those rules 
are finalized.
  Medicare says this would mean a delay of maybe 18, 22, 24 months, 
another a couple years. If their track record is any indicator, the 
delay would be a lot longer than that.

[[Page S14061]]

  I suppose a lot of people on that House Ways and Means Committee got 
a lot of phone calls from the people who make walkers and commodes and 
these syringes who said do something about this. It is in the House 
Ways and Means Committee bill. It would block just these modest 
attempts to safeguard Medicare. We would still allow them to make 67 
percent more than what they are making from VA. That is not enough for 
them. So they got a little provision slipped in that House bill. Talk 
about special interest legislation and a rip-off of our elderly and a 
rip-off of our taxpayers.
  What did the Senate do? Well, they tried to do the same thing. The 
Senate counterpart to that bill, called the Medicare, Medicaid and 
SCHIP Adjustment Act of 1999, would prohibit use of this inherent 
reasonableness authority until 90 days after the Comptroller General of 
the United States releases a report of its proposed impact. That would 
delay this implementation probably for another year. So the House, if 
we took the best case scenario, probably would delay it for 2 to 3 
years. The Senate bill would delay it for at least a year. I am sure a 
compromise will be made leaning towards the House side, when this bill 
goes to conference, by members of the Finance Committee. I want members 
of the Finance Committee to know we are watching. We want to know what 
they are going to do to start reducing these exorbitant prices people 
pay for medical equipment. It is not right to stop or further delay 
HCFA from implementing at least these modest savings.
  We gave HCFA the authority in 1997; 2 years later, they just started 
to act on this. You can see how long it takes them to do something. 
Just when they are getting ready to make these cuts, to put more 
reasonableness in the amounts of money we pay, the Congress says, no, 
stop; put on the brakes. We can't do this. The Congress is standing 
by--let me rephrase that. The Congress is not standing by. The 
Congress, under the bills in the Senate Finance Committee and the House 
Ways and Means Committee, is actively stopping the progress and the 
process by which we will save taxpayers billions of dollars, an added 
tax not only on our taxpayers but on our elderly.

  We can do something about it. We have shown we can do something about 
it. We have shown how much we can reduce costs in oxygen and these 
other items. But now there are elements in this Congress who say, no, 
we can't do that.
  Well, we are going to watch. We will see what the Ways and Means 
Committee and the Finance Committee do to stop this rip-off of our 
taxpayers. We have grappled with ways to reduce Medicare expenditures. 
We passed this limited provision 2 years ago, giving them the authority 
just so they wouldn't pay grossly exaggerated prices. HCFA said: OK, we 
are not going to pay grossly exaggerated prices; we will just pay 67 
percent more than VA. That is grossly exaggerated. But even to that 
modest amount of reduction, the House Ways and Means Committee says no.
  We all remember the Pentagon and the $500 toilet seats the Pentagon 
was buying some years ago. It is great news for all of us that the 
Pentagon isn't buying them anymore. Unfortunately, Medicare is. 
Taxpayers don't deserve to be ripped off and to have all of their money 
go for this gross waste and abuse in the Medicare system. Again, I know 
it is the waning hours of the Congress. We are all going to be getting 
out of here, I guess next week, they tell us. There is going to be a 
balanced budget amendment fix. We are going to look to see whether or 
not the special interests have gotten their way once again to rip off 
the taxpayers of this country and the Medicare system.
  I may not have the opportunity to take the floor after that is done. 
We may be recessed or adjourned until next year. But we will be back, 
as will the taxpayers of this country and the elderly people and their 
families who have been getting ripped off for far too long. We will be 
back to make sure we get competitive bidding once and for all to save 
our taxpayers a lot of money.
  I yield the floor.
  Mr. GRASSLEY. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. DURBIN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DURBIN. Mr. President, before us is S. 625, a bill relating to 
bankruptcy. It is a bill with which I have some knowledge and 
experience because last year I was a member of the Senate Judiciary 
Committee and a member of Senator Grassley's subcommittee. We spent a 
great deal of time preparing this bill for consideration on the floor 
of the Senate. I enjoyed very much working with Senator Grassley on the 
bill. He has become not only a trusted colleague but a good friend in 
the process. We have had our disagreements, but we have tried to 
resolve them amicably and in the best interest of the legislation.
  I also salute a number of staff people who have been at this task for 
a long time: John McMickle, a member of Senator Grassley's staff; Kolan 
Davis; Jennifer Leach, who now works for Senator Torricelli on the 
Democratic side; Darla Silva, a member of my staff who is with me today 
on the floor; her predecessor, Victoria Bassetti, now legislative 
director for Senator John Edwards. All of these staff people have put 
in so many hours that we could not calculate it to consider this 
significant revision of the bankruptcy law in the United States of 
America.
  As this bill comes to the floor, I still have many concerns about it. 
I think most honest critics would suggest this was not a bill that came 
from the demands of our mailbag or the American people. I scarcely find 
any members of the bar living in the State of Illinois who are begging 
me for a big change in the bankruptcy law. No, this law was inspired 
and has been pushed for several years by the credit industry. The 
credit industry was becoming increasingly concerned that more and more 
people were filing for bankruptcy. As these people filed for bankruptcy 
and are discharged from their debts, their creditors and credit card 
companies receive less money. So they came to Congress and said: We 
want to change the law and make it more difficult for people to file 
for bankruptcy.
  In other words, when you are down and out and cannot pay your bills, 
when your income is such that you cannot meet your obligations, when 
you have tried everything and you have given up hope and you finally 
have said, ``We have no choice but to declare bankruptcy and to try to 
start over,'' this law is going to say, stop, we may not let you do it 
because there are two different kinds of bankruptcy at issue. One is 
the so-called chapter 7 bankruptcy, where you walk in and, after a 
court proceeding and all the evidence is presented, the final act of 
the court is to clear your debt and to say now you can start over. Of 
course, you start over with very few assets and with that specter of 
having filed for bankruptcy over your head.
  The alternative is something called chapter 13. Chapter 13 says, 
stop, we won't let you declare bankruptcy, we won't clear off all of 
your debts, and we are going to make you pay all or part of those debts 
over a lengthy period of time.
  Those are two different outcomes. With one, the slate is wiped clean 
and the other the slate is still filled with many debts that have to be 
paid off. This bill attempts to define which people belong in which 
category, which Americans should be so down and out and up against it 
that they are allowed to have their debts wiped out completely and 
those who will continue to pay. It is no surprise that the credit 
industry is determined to keep as many people as possible on the hook 
and paying off these debts for a lengthy period of time.

  Now, in some cases this is warranted. In some cases, people file for 
bankruptcy when they have assets and they have the means by which they 
can pay off at least a substantial portion of their debt. As this bill 
addresses that problem, I applaud it. I think they are right. People 
who are gaming the bankruptcy system to avoid paying their honest debts 
are, frankly, a burden on all of us as consumers, as those who are 
debtors as well. Those people should be excluded from the process. Life 
should be difficult for them, no matter how good their attorney, if

[[Page S14062]]

they try to walk away from a debt they can pay. But that represents an 
extraordinarily small minority of those in bankruptcy court. The vast 
majority of those who walk through the doors of bankruptcy courts in 
America are in big trouble; they need help and need it quickly.
  Unfortunately, this lengthy bill will create a process where some 
families who are absolutely out of options and have nowhere to turn 
have to walk through a new process of proof before they will even be 
considered to be discharged in bankruptcy.
  Bankruptcy is an interesting concept, not new to the United States. 
It has been discussed at length throughout history. The history of the 
relationship between those who borrow and those who loan goes back to 
ancient times. Throughout history, those who borrow have not always 
been treated fairly. Under early Roman law, creditors who were unable 
to collect the debts owed to them were permitted to cut up the debtor's 
body and divide the pieces, or leave the debtor alive and sell him into 
slavery.
  Thank goodness things have improved. In America, the delegates of the 
Constitutional Convention gave Congress the power to establish uniform 
laws on the subject of bankruptcy. Only one delegate to America's 
Constitutional Convention objected--Roger Sherman of Connecticut. It is 
said he was concerned that they didn't make it clear that if you file 
for bankruptcy, you would not be subjected to the death penalty. That 
is how onerous debt and collection was in those days. Mr. Sherman 
observed that bankruptcy was in some cases punishable by death under 
the laws of England, and he did not choose to grant a power by which 
that might be done in the United States. In response, Gouverneur Morris 
said he would agree to a bankruptcy clause because he saw no danger of 
abuse of power by the legislature of the Government of the U.S. I hope 
Gouverneur Morris' trust was not misplaced.
  I have a statement from a bankruptcy judge in Chicago by the name of 
Joan Lefkow. Judge Lefkow, when she was inducted to be a part of the 
bankruptcy judiciary, gave an extraordinary statement about the history 
of this subject. She talked about Charles Dickens and his Pickwick 
Papers, of the ``Old Man's Tale About the Queer Client.'' It is a story 
of a man who is cast into debtors prison by his father-in-law and left 
by his own father to languish in desperation, while his wife and child 
starved. Dickens wrote: ``It was no figure of speech to say that 
debtors rotted in prison.''
  In a twist of fate, in this story, the debtor's father, although he 
had ``the heart to leave his son a beggar,'' put off arranging it until 
it was too late. Thus, the man was freed from prison and provided a 
means by which he could exact revenge on the father-in-law who cast him 
into prison. He hired a lawyer to drive his father-in-law into 
bankruptcy so he could suffer the same fate as the son-in-law. He 
directed the lawyer, ``Put every engine of the law in force, every 
trick that ingenuity can devise and rascality execute; aided by all the 
craft of its most ingenious practitioners, ruin him! Seize and sell his 
lands and goods, drive him from house and home, and drag him forth a 
beggar in his old age to die in a common jail!''

  Those were the good old days when a debt led to a big problem when 
people could end up literally rotting in prison.
  We decided in the United States to take a different course of action 
and to establish a bankruptcy procedure so that American families and 
businesses faced with that awkward and painful and embarrassing moment 
might have recourse. Our bankruptcy system is part of it.
  But bankruptcy has become extremely technical and convoluted. During 
the course of this debate, we talk about cram-downs and reaffirmations 
and panel trustees and automatic stays, nonchargeable debt, prior debt, 
secured debt, and even something known as ``supper discharge.''
  The bankruptcy code is a delicate balance. When you push in one area 
to create greater rights, or take rights away, it has an impact on 
another area. That is because no matter how hard you try at bankruptcy 
court, there is a very limited pie. All we can do is increase the 
fighting over that small pie, and usually no one wins that fight.
  Mr. President, I note that my colleague from Wisconsin is on the 
floor. I believe he is prepared to offer an amendment. I ask permission 
of the Chair to yield the floor to my colleague from Wisconsin, and I 
ask consent that after he has completed his statement, I reclaim my 
time and continue.
  The PRESIDING OFFICER (Mr. Bennett). Without objection, it is so 
ordered.
  Mr. KOHL. I thank Senator Durbin very much.
  Mr. President, I rise to offer an amendment with Senator Sessions to 
eliminate one of the most flagrant abuses of the bankruptcy system--
which is the unlimited homestead exemption. This bipartisan measure 
will cap the homestead exemption at $100,000, which is more than 
generous. Last year, the full Senate unanimously went on record in 
favor of the $100,000 cap and emphasized that ``meaningful bankruptcy 
reform cannot be achieved without capping the homestead exemption.'' I 
am proud that Senator Grassley--the underlying bill's lead sponsor--is 
a cosponsor of this measure. Our proposal closes an inexcusable 
loophole that allows too many debtors to keep their luxury homes, while 
their legitimate creditors--like children owed child support, ex-
spouses owed alimony, State governments, small businesses, and banks--
get left out in the cold. Currently, a handful of States allow debtors 
to protect their homes no matter how high their value. And all too 
often, millionaire debtors take advantage of this loophole by moving to 
expensive homes in states with unlimited exemptions like Florida and 
Texas, and declaring bankruptcy--and then continue to live in a style 
that is no longer appropriate. Let me give you a few of the literally 
countless examples:
  The owner of a failed Ohio S&L, who was convicted of securities 
fraud, wrote off most of $300 million in bankruptcy claims, but still 
held on the multimillion dollar ranch he bought in Florida. A convicted 
Wall Street Financier filed bankruptcy while owing at least $50 million 
in debts and fines, but still he kept his $5 million Florida home--with 
11 bedrooms and 21 bathrooms. And just last year, movie star Burt 
Reynolds wrote off over $8 million in debt through bankruptcy, but he 
still held onto his $2.5 million Florida estate.
  Sadly, those examples are just the tip of the iceberg. We asked the 
GAO to study this problem and, based on their estimates, 4 homeowners 
in Florida and Texas--all with over $100,000 in home equity--profit 
from this unlimited exemption and each every year. And while they 
continue to live in luxury, they write off annually an estimated $120 
million in debt that is owned to honest creditors.
  My favorite GAO example is a Texas bankruptcy attorney who boasts of 
refusing representation to anyone who piles up credit card debt on the 
eve of filing bankruptcy. For that stand against abuse, she deserves 
credit. But when her own finances went sour, she took a dramatically 
different view: she wrote off $1.2 million in debt, while holding onto 
her $400,000 home.
  Mr. President, this is not only wrong, it is unacceptable. As you can 
see, while the unlimited homestead exemption may not be the most common 
abuse of the bankruptcy system, it is clearly the most egregious. If we 
really want to restore the stigma attached to bankruptcy--as this bill 
purports to do--then these high profile cases are the best place to 
start. Mr. President, we need to stop this high living at the expense 
of legitimate creditors. But the pending bill falls short. Instead of a 
cap, it only imposes a 2 year residency requirement to qualify for a 
State exemption. And while that's a step, it will not deter a savvy 
debtor who plans ahead for bankruptcy and it will not do anything about 
in-state abusers such as Burt Reynolds. This $100,000 cap will stop 
these abuses, without affecting the great majority of States, two-
thirds of which responsibly cap the exemption at $40,000 or less.
  Let me make one additional point, and respond in advance to the most 
spurious--of the many spurious--arguments made by the other side: that 
this issue is really about States rights. Mr. President, that is pure 
hokum. Anyone who files for bankruptcy is choosing to invoke Federal 
law in a Federal court to get a uniquely Federal benefit--a

[[Page S14063]]

``fresh start'' through a huge debt write-off. In these circumstances, 
it's only to impose Federal limits. And just because something is in a 
State ``constitution'' doesn't make it sacrosanct. A cap is not only 
the best policy, it is sends the best message: That bankruptcy is a 
tool of last resort, not just a tool for financial planning. And it 
gives credibility to reform by going after the worst abusers, no matter 
how wealthy they are. So honestly, this amendment should be a no-
brainer. Indeed, if we want to apply antiquated bankruptcy laws, maybe 
we should resurrect ``the debtors' prison.'' At least then we would be 
punishing the worst offenders, rather than rewarding them.


                           Amendment No. 2516

  (Purpose: To limit the value of certain real or personal property a 
          debtor may elect to exempt under State or local law)

  Mr. KOHL. Mr. President, I ask unanimous consent to set aside the 
pending amendment, and I send an amendment to the desk.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will report.
  The bill clerk read as follows:

       The Senator from Wisconsin (Mr. Kohl), for himself, Mr. 
     Sessions, and Mr. Grassley, proposes an amendment numbered 
     2516.

  Mr. KOHL. Mr. President, I ask unanimous consent that reading of the 
amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       At the appropriate place in title III, insert the 
     following:

     SEC. 3  . LIMITATION.

       Section 522 of title 11, United States Code, as amended by 
     sections 224 and 307 of this Act, is amended--
       (1) in subsection (b)(3)(A), by inserting ``subject to 
     subsection (n),'' before ``any property''; and
       (2) by adding at the end the following:
       ``(n)(1) Except as provided in paragraph (2), as a result 
     of electing under subsection (b)(3)(A) to exempt property 
     under State or local law, a debtor may not exempt any amount 
     of interest that exceeds in the aggregate $100,000 in value 
     in--
       ``(A) real or personal property that the debtor or a 
     dependent of the debtor uses as a residence;
       ``(B) a cooperative that owns property that the debtor or a 
     dependent of the debtor uses as a residence; or
       ``(C) a burial plot for the debtor or a dependent of the 
     debtor.
       ``(2) The limitation under paragraph (1) shall not apply to 
     an exemption claimed under subsection (b)(3)(A) by a family 
     farmer for the principal residence of that farmer.''.

  Mr. KOHL. Thank you, Mr. President.
  I thank the Senator from Illinois.
  The PRESIDING OFFICER. The Senator from Illinois, under the previous 
order, is recognized.
  Mr. DURBIN. Thank you, Mr. President.
  I fully support the amendment offered by Senator Kohl and Senator 
Sessions. This gets to the heart of it. This would be a real test as to 
whether or not we are going to close one of the major loopholes in the 
bankruptcy law, a homestead exemption loophole where a person goes into 
the bankruptcy court and says: I am broke. I can't pay my debts.
  The court says: Well, I guess we will have to discharge these debts. 
You can't pay them. But, of course, you keep your home.
  Different States define how much value there could be in that home. 
We have seen in case after case where some have received a lot of 
publicity and we have people who are holding back homes that are worth 
hundreds of thousands if not millions of dollars under this homestead 
exemption and keeping that out of court. This is a ruse. It is a fraud.
  I thank Senator Kohl and Senator Sessions for their leadership in 
introducing this amendment. I hope it passes.
  Incidentally, this same amendment was defeated in the House of 
Representatives in the last session. I am not sure if they voted 
directly on it in this session. But it gives you an indication that 
some in the House who pound the table for reform in bankruptcy are the 
last in line when it is going to stop the fattest of cats from 
protecting themselves from bankruptcy by buying these huge homes and 
ranches.
  I hope Senator Kohl is successful. I will be supporting him in every 
way I can.
  Let me tell you one of the reasons I am here today to discuss this 
bankruptcy code. It is because of the increase in filings over the last 
several year. It is true that more people have gone into bankruptcy 
court.
  It is an interesting thing that as our economy improves more people 
file for bankruptcy. Logic would argue just the opposite. But 
apparently people get into a frame of mind where they are so optimistic 
that they get strung out with too much debt. They never think they are 
going to lose a job.
  They never think they will face a divorce. They never anticipate the 
possibility of medical expenses for which they cannot pay.
  Mr. SESSIONS. Will the Senator yield?
  Mr. DURBIN. I yield for a question.
  Mr. SESSIONS. I ask if I might offer briefly a second-degree 
amendment to this and then return the floor to the Senator from 
Illinois.
  Mr. DURBIN. I am happy to yield to the Senator for that purpose, with 
consent I reclaim the floor.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                Amendment No. 2518 to Amendment No. 2516

  (Purpose: To limit the value of certain real or personal property a 
          debtor may elect to exempt under State or local law)

  Mr. SESSIONS. Mr. President, I send a second-degree amendment to the 
Kohl amendment to the floor.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Alabama [Mr. Sessions], for himself, Mr. 
     Kohl, and Mr. Grassley, proposes an amendment numbered 2518 
     to amendment No. 2516.

  Mr. SESSIONS. Mr. President, I ask unanimous consent reading of the 
amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:
       In the amendment strike all after the first word and insert 
     the following:

     3__. LIMITATION.

       (a) Exemptions.--Section 522 of title 11, United States 
     Code, as amended by sections 224 and 307 of this Act, is 
     amended--
       (1) in subsection (b)(3)(A), by inserting ``subject to 
     subsection (n),'' before ``any property''; and
       (2) by adding at the end the following:
       ``(n)(1) Except as provided in paragraph (2), as a result 
     of electing under subsection (b)(3)(A) to exempt property 
     under State or local law, a debtor may not exempt any amount 
     of interest that exceeds in the aggregate $100,000 in value 
     in--
       ``(A) real or personal property that the debtor or a 
     dependent of the debtor uses as a residence;
       ``(B) a cooperative that owns property that the debtor or a 
     dependent of the debtor uses as a residence; or
       ``(C) a burial plot for the debtor or a dependent of the 
     debtor.
       ``(2) The limitation under paragraph (1) shall not apply to 
     an exemption claimed under subsection (b)(3)(A) by a family 
     farmer for the principal residence of that farmer.''.
       (b) Adjustment of Dollar Amounts.--Section 104(b) of title 
     11, United States Code, is amended--
       (1) in paragraph (1), by striking ``522(d),'' and inserting 
     ``522 (d) or (n),''; and
       (2) in paragraph (3), by striking ``522(d),'' and inserting 
     ``522 (d) or (n),''.

  Mr. SESSIONS. I yield the floor.
  Mr. DURBIN. Mr. President, as I mentioned earlier, there has been a 
dramatic increase in filings for bankruptcy over the last several 
years--30 percent in some years.
  People ask, How can this be? Of course, I think it is overoptimism. 
Folks in a good economy don't think anything will go bad; sometimes 
they do, and people who thought they had the world by the tail end up 
in bankruptcy court.
  There is another factor at work here, as well. As Senator Torricelli 
of New Jersey, the Democratic minority spokesman on this committee, 
noted earlier, everyone who has a mailbox knows what is going on when 
it comes to credit cards. There is scarcely a day that goes by in my 
home in Springfield, IL, that there is not another solicitation for 
another credit card. In fact, some of the solicitations come in the 
name of my daughter who married years ago and hasn't been at that 
address for a long time. Some group has captured her name and address 
and continues to offer her credit cards on a monthly basis.
  I asked my staff how many of them had been solicited likewise. It 
turned out everybody has received these solicitations. In fact, one of 
my staffers sent me a recent offer for a credit card that was sent to 
my godson. He is about 6 years old. I don't think he is creditworthy 
yet, but obviously some

[[Page S14064]]

companies have taken a hard look at him and are considering whether or 
not Neil Houlihan needs to have a MasterCard at the age of 6. I hope 
that isn't an indication of what is happening across America.
  I think we all know that part of the reason so many people end up in 
bankruptcy court is because we are flooded with easy credit. Easy 
credit has a good side and a bad side. Easy credit says to a person who 
traditionally could not qualify for credit that they now have a chance. 
I am told historically a waiter or waitress was unlikely to get a 
credit card because they didn't have a steady and predictable income. 
Those days have changed, thank goodness. People in those professions 
and occupations are given that opportunity for credit.
  The bad side is that it extends credit, easy credit, to people who 
are already in over their heads. It doesn't parse out those who deserve 
credit and who can use it responsibly from those who are just going to 
dig a deeper hole and find themselves in short order facing a 
bankruptcy court judge. That, I think, is an indication of why so many 
people are starting, or did start, to use the bankruptcy courts.
  The latest statistics for filings in bankruptcy have started to trail 
off. What appeared to be a national growing trend has changed. This 
year, second quarter filing reports show a drop in 42 States, including 
double-digit decreases in 14 States. We have to ferret out those people 
who abuse the bankruptcy system, but not at the expense of those 
families and businesses that need it.
  The sad but obvious fact is that the people who declare bankruptcy 
are poor. The average income of a person who declares bankruptcy is 
$17,652. In 1981, the average income was $23,254. People in our 
bankruptcy system are just getting poorer. One would not believe that 
to be the case listening to the debate, the suggestion that so many 
people are coming into the bankruptcy court who are loaded with money, 
who, through crafty attorneys and their own ingenuity, are able to 
avoid their responsibility.
  However, statistics tell a different story. By and large, the people 
showing up in bankruptcy court are poor people, with $17,652 as the 
average income of a person filing bankruptcy. If memory serves me, 
average indebtedness is roughly $25,000. These people have more than a 
year's income in debt before they finally show up in bankruptcy court.

  As distasteful as bankruptcy is, the fact remains: We need the 
system. We shouldn't change it radically. By and large, it works. Let 
me give a few examples of people who are filing.
  The three major reasons for filing bankruptcy are employment, health 
care costs, and divorce. Older Americans are less likely to end up in 
bankruptcy than their younger counterparts. But when they do file, a 
larger fraction of senior citizens--nearly 40 percent--give medical 
debt as the major reason for filing. Think about it: A catastrophic 
illness catching a family by surprise, particularly a senior with 
limited income and fixed resources, ends up in bankruptcy court because 
there is no place else to turn.
  The second category is women raising families. Both men and women are 
likely to declare bankruptcy following divorce. Collectively, the 
bankruptcy sample has 300 percent more divorced people than the 
population in general. Families already stuck with consumer debt cannot 
divide their income to support two households and survive economically. 
Divorced women file bankruptcy in greater proportion than divorced men.
  Before being elected to Congress, I was a practicing attorney in 
Springfield, IL. I was an attorney in hundreds of divorce cases. Almost 
without fail, the woman at the end of the divorce case had less money 
to try to meet the needs of her children and herself. Sometimes they 
are pushed too far. Many times, they end up in bankruptcy court.
  Keep in mind as we debate these bills and whether we are going to run 
people through a means test with all sorts of questions to be answered 
and, if they miss an answer, thrown out of court, we are talking about 
older Americans and divorced women who are struggling to keep their 
family together.
  Unemployed workers: More than half the debtors who file for 
bankruptcy report a significant period of unemployment preceding their 
filings. For single-parent households, a period of unemployment can be 
devastating.
  Let me comment on this current bill. I favor the bill we passed last 
year. I think the Senate favored the bill we passed last year by a vote 
of 97-1. It is pretty odd in this Chamber to have 97 Senators agree on 
a bankruptcy bill. I think it was a better bill, better than the bill 
now before the Senate. I hope we make changes in this bill to bring it 
closer to last year's bill.
  The changes should center around three themes: First, ensure fairness 
to women and children while ensuring that wealthy debtors pay their 
fair share. This can be accomplished by Senator Kohl's amendment, which 
Senator Sessions has cosponsored, which establishes a cap on the 
homestead exemption of $100,000 and ensures as well that women are not 
competing with credit card companies in collecting child support after 
the bankruptcy is over. This is a critical point that has been raised 
by Elizabeth Warren of Harvard as well as some 82 different bankruptcy 
professors across the United States who have written to Members of the 
Senate and asked them to be very sensitive to the fact that what we do 
in this law could make life more difficult, if not impossible, for 
women trying to raise their children after a divorce.
  Alimony and child support payments oftentimes are a major part of the 
income on which they live. When we allow credit card companies and 
finance companies to grab more in bankruptcy and hang on to more after 
bankruptcy, it lessens the likelihood that the divorced woman trying to 
raise a child is going to be able to have any pot of money to draw from 
for help. It is just the bottom line. This is a pie of limited 
proportions after a bankruptcy. If the credit card companies can stay 
there, taking the money away from that former husband who filed for 
bankruptcy, many times it will be at the expense of his children and 
his former wife. That is a fact. It is a cruel fact. It is one that has 
not been overcome to date by anything suggested in this bill or on the 
floor.
  Merely changing the priorities in the bankruptcy system, making the 
alimony and child support payments a higher priority, takes care of 
what happens in court, but after bankruptcy, then we have a problem. 
The same mother of the children trying to draw money from what is left 
after bankruptcy and income finds she is competing with credit card 
companies and others that have been given more rights under this bill 
to claim more money after the bankruptcy has been initiated.
  Second, this bill needs to be more cost effective and less expensive 
for taxpayers. This can be accomplished by providing a safe harbor for 
means testing for a below-median debtor and streamlining the tests for 
debtors above the median income to eliminate needless paperwork.
  A cliche I learned as a kid, as everybody learned, I am sure, over 
and over again: You can't draw blood from a turnip. In some cases, 
people in bankruptcy court, no matter how hard we try or how hard we 
look, are never going to have the money to pay off the debt. It is more 
sensible for us to step back and say, let's focus on those who are 
abusing the system rather than adding more paperwork requirements on 
those who will never be able to pay off their debts.
  Let me give an illustration from the same law school professors who 
wrote to every Member of Congress about a recently completed study. 
Since last year's debate on bankruptcy reform, a study was funded by 
the independent, nonpartisan American Bankruptcy Institute. They found 
that less than 4 percent of consumer debtors could repay even 25 
percent of their unsecured nonpriority debts, even if they could 
dedicate every penny of income to a repayment plan for a full 5 years. 
In short, for about 96 percent of consumer debtors, chapter 7 
bankruptcy is an urgent necessity.
  The fact that most debtors cannot pay more does not mean this means 
test will not affect them, though. Mr. President, 96 percent of those 
who file in bankruptcy court cannot pay more, according to the study. 
They are really up against it. They need to file for bankruptcy. Yet we 
find in this law the

[[Page S14065]]

requirement that they still go through this rigorous standard of means 
testing and examination to question whether or not they can file for 
bankruptcy. I hope we will adopt the House standard at least, which 
says those at median income will be absolved from going through this 
lengthy test in bankruptcy court. People making median income in this 
country, filing for bankruptcy, are not likely to be able to pay off 
many of their debts.
  Further, we ought to require that those earning up to 150 percent of 
median income should be subject to a reasonable screening to determine 
if it is possible they could pay back some of these debts. But to make 
every single person who walks into that court go through this process 
is unfair, it is burdensome, and it is not of any benefit to taxpayers 
or, ultimately, to creditors.
  In addition, this bill needs to acknowledge the credit industry's 
role in increasing the number of bankruptcy filings. In order for this 
bill to be balanced, we have to enact additional disclosures on credit 
cards to allow debtors to make an informed choice about their credit. I 
had a lengthy list of disclosures included in last year's bill. Some 
have survived; some have been changed; some will be offered again on 
the floor. But is it unreasonable for us to say to these credit card 
companies that shove these credit cards at us faster than we can put 
them in our wallets, that they at least have to give us an honest 
monthly statement which tells us a few basic things? Isn't it 
reasonable to look at that statement, where it lists ``minimum monthly 
payment,'' and then say: If you make the minimum monthly payment, it 
will take X months to pay off the balance, and when you pay off the 
balance, you will have paid X dollars in interest and X dollars on 
principal?
  That is not a tough calculation in the world of computers. The people 
who send us the bills have all sorts of information they want us to 
read and absorb. Shouldn't we at least know the bottom line? We may be 
too deep in debt. Maybe another credit card is not a good idea. That is 
not an outrageous suggestion where I live. But when we suggested that 
to the credit industry, they blanched and said: Oh, never can we do 
that; we cannot make that kind of disclosure.

  They certainly can. The question is whether they will. That question 
will be answered by the Senate when it decides whether the consumers 
deserve more information so they can make informed credit choices. This 
is not a question of rationing credit. It is a question of informing 
debtors and informing those who are going to buy the credit cards as to 
what their obligations are going to be.
  Let me give one example on a chart which is an illustration of the 
credit card debt in America charted against bankruptcy cases. I think 
this chart tells the story about why we have more bankruptcy cases in 
the United States. If you will notice the blue line here, it represents 
bankruptcy cases from 1962 to 1995. The red line indicates debt-to-
income ratio.
  Do you want to know why there are more cases being filed in 
bankruptcy court? People are getting deeper in debt; they have more 
credit cards. That is what it is all about. When we had the first 
hearing on the subject, some of the people from the credit industry 
came in and said:

       American families just don't think there is a moral stigma 
     attached to bankruptcy any longer. They are filing for 
     bankruptcy without really feeling bad about it.

  I take exception to that. I am sure there are some who are gaming the 
system and trying to figure out how to win, but the folks I have run 
into, filing for bankruptcy was a sad day when they finally had to 
concede they just hadn't handled things right, or faced a problem they 
couldn't manage, and had to go to bankruptcy court. It wasn't a proud 
day for the family. You don't hold a party when you go into bankruptcy 
court.
  When it comes to moral stigma, I said to the people in the credit 
industry: You say folks are taking bankruptcy more lightly these days. 
Let me ask about the credit cards you are sending college kids and kids 
who have virtually no income and no credit history, with no questions 
asked? And what about those ATM machines at the casinos. You are 
talking about moral stigma. Is your industry sensitive to the mores of 
America in the way you offer credit and money to people regardless of 
whether it is a good idea or not?
  I think there are two sides to the story. I think, unfortunately, 
this bill only addresses one side of it. According to the Federal 
Reserve Board, there are 429.2 million Visa and MasterCards in 
circulation in the United States. The number of cards per cardholder 
increased in 1998 to a total of 4.2 credit cards per person.
  In addition to the solicitations we receive in the mail, telephone 
calls are made. In fact, 1998 was a banner year for solicitations for 
credit cards. The credit industry sent out 3.45 billion direct mail 
solicitations during 1998, an increase of 15 percent from the 3 billion 
in the previous year, and 2.4 billion in 1996.
  Interestingly enough, there are only 78 million creditworthy 
households in the United States. Yet, as you can see by the numbers, 
there were 3.45 billion credit card solicitations. That is why your 
mailbox is full at home.
  We even have proof the credit industry is targeting people in 
bankruptcy. Let me show you this. Talk about moral stigma. This is a 
solicitation offered by FirstConsumers National Bank in Portland, OR, 
and Beaverton, OR. To whom do they send this solicitation? People who 
file for bankruptcy. They want them back in debt. Let's get them back 
into debt.

  In case you think it is easy to file for bankruptcy and pick up a 
credit card, they generously offer you an annual percentage of 20.5 
percent, and if you stumble, it goes up to 25 percent interest. So the 
credit card companies that talk about the morality of the situation are 
quick to jump on the folks coming out of bankruptcy court and give them 
a very expensive credit card. That is not much of a fresh start as far 
as I am concerned.
  Why is this occurring? We often debate these issues and don't get 
down to the bottom line. Why is the credit card industry so intent on 
reducing the number of people in bankruptcy courts who can discharge 
their debts? Why do they want to keep people paying on the debts? There 
is money to be made.
  Between 1980 and 1992, the rate at which banks borrowed money fell 
from 13.4 percent to 3.5 percent. During the same period, the average 
credit card interest rate rose from 17.3 percent to 17.8 percent. 
Notice the spread. It used to be you had credit card interest rates of 
17.3 percent when the banks were borrowing money at 13.4 percent. Now 
the credit card interest rate average goes up to 17.8 percent and the 
banks are borrowing the money they give to you at 3.5 percent. This is 
a big winner for these credit card companies. They want to keep people 
getting credit cards as they walk out of the bankruptcy courts. There 
is money to be made. It is a profitable business. The aggressive 
marketing campaign is going to continue as long as there is money to be 
made.
  Of course, it is going to mean people are going to get in over their 
heads. You basically cannot have it both ways. You cannot recklessly 
offer credit to financially vulnerable people without increasing the 
number of bankruptcies. The credit industry knows this and so do a lot 
of conservative magazines. The London-based Economist, in a recent 
editorial about the reckless marketing of credit cards, wrote:

       Given its readiness to hand out money with almost no 
     questions asked, the credit card industry's demands that 
     Congress stop the rapid increases in filings for personal 
     bankruptcy ring hollow.
       No doubt many people have benefited from the credit 
     revolution that gave them an ability to borrow they have been 
     denied in the past. And certainly, borrowers unable to meet 
     their obligations bear some responsibility for their woes.
       Yet it is pure hypocrisy for credit card firms to complain 
     that personal bankruptcy has lost its traditional stigma. For 
     they have been deliberately directing their sales efforts at 
     people on the edge of financial distress.

  The rise in bankruptcies tracks consumer debts, and that is a fact. 
So in these times it is even more important for people to be fully 
informed about and careful about the credit card debt they rack 
up. That is why this legislation, which gives the consumer as much 
information as possible, is more important than ever.

  I am confident we can approve this bill on a bipartisan basis. I pray 
we will

[[Page S14066]]

not have the same experience as last year. We passed a bankruptcy bill 
in the Senate by a vote of 97-1. It went to the conference committee, 
and I was a part of and assigned to that conference committee. We had 
an introductory session where we smiled at one another, shook hands, 
and left the room. That was the only meeting of that conference 
committee.
  Within a matter of hours, that same conference committee, with only 
one political party represented--not my own--came back with a bill and 
said: Take it or leave it. Thank goodness the Senate said leave it. It 
was a bad bill. If this bill is going to escape a similar fate, it 
needs to be negotiated in good faith on a bipartisan basis.
  I am offering an amendment designed to penalize a growing category of 
high-cost mortgage lenders who lead vulnerable borrowers down a rose 
garden path to foreclosure and bankruptcy. These lenders prey with 
shame on low-income elderly and financially unsophisticated people, 
jeopardizing their lifelong investments and hard work in home 
ownership.
  The number of older Americans who are so financially vulnerable that 
they end up going to bankruptcy court to deal with overwhelming debt is 
considerable. In 1998, more than 280,000 Americans age 50 or older 
filed for bankruptcy. The number of Americans age 55 and older filing 
has grown by more than 120 percent since 1991. Those age 50 and 55 is 
the fastest growing age group in bankruptcy.
  Last year, during the Senate Judiciary's Committee debate on 
bankruptcy, I offered an amendment designed to curtail one terrible 
practice that plagues senior citizens: predatory high-cost mortgage 
loans targeted to the low-income elderly and financially 
unsophisticated. The amendment was part of the bill that passed 97-1. 
My colleagues may already be aware of the problems that are cropping up 
in the home mortgage industry. Let me explain.
  In recent years, there has been an explosion in subprime high-
interest loan markets. In the Chicago area, these lenders made 50,000 
loans in 1997. This map shows foreclosures on subprime loans in Chicago 
in a 12-month period of time.
  In the Chicago area, there were more than 50,000 loans in 1997, 15 
times as many as in 1991, when they originated 3,137 loans. Even more 
dramatic than the increase in subprime loans has been the increase in 
foreclosures. Subprime lenders foreclosed on 30 loans in the Chicago 
region in 1993, 2 percent of the foreclosures that year.
  In June of 1998 to June 1999, the subprime lenders foreclosed on 
1,917 loans, 30 percent of the year's total foreclosures. Why is the 
growth of this industry of concern? Two reasons: First, these companies 
use reprehensible tactics and predatory lending practices to conduct 
their business and, second, because of the vulnerable victims--senior 
citizens and low-income people--whom they target.
  I will tell a story that demonstrates the problem. In Decatur, GA, a 
70-year-old woman named Jeannie McNab, retired, living on Social 
Security benefits, in November 1996 with the help of a mortgage broker 
obtained a 15-year mortgage loan from a large national finance company 
in the amount of $54,300. Her annual percentage rate on this mortgage 
loan was 12.85 percent, and under the terms of the loan, she would pay 
$596.49 a month until the year 2011 when she then would be required to 
make a total final payment of $47,599. Think about it: 15 years from 
now, when this woman is 85 years old, she will be saddled with a 
balloon payment that she can never possibly make and face the loss of 
her home and her financial security, not to mention her dignity and her 
sense of well-being.

  She paid a mortgage broker $700 to find and fund this unconscionable 
loan, a mortgage broker who, to add insult to injury, collected a 
$1,100 fee from the mortgage lender.
  Unfortunately, Mrs. McNab is a typical target of high-cost mortgage 
lenders. She is an elderly person living alone on fixed income, just 
the type of person who may suddenly encounter a financial obstacle and 
turn to this type of loan for assistance.
  According to a former career employee of the subprime mortgage 
industry who testified anonymously last year before Senator Grassley's 
Special Committee on Aging--this may sadden you:

       My perfect customer would be an uneducated woman who is 
     living on a fixed income, hopefully from her deceased 
     husband's pension, and Social Security, who has her house 
     paid off, living off credit cards but having a difficult time 
     keeping up with credit card payments.

  The perfect target, according to this anonymous witness before 
Senator Grassley's committee. This industry professional candidly 
acknowledged that unscrupulous lenders specifically market their loans 
to elderly widowed women, blue-collar workers, people with limited 
education, people on fixed income, non-English speaking people, and 
people who have significant equity in their homes. With lump sum 
balloon payments and terms that cannot be rationalized, they ensnare 
these folks and take away the only asset they have left on Earth--their 
home.
  When that occurs, these people should not be able to go into court, 
once that person has defaulted on this mortgage, and recover. They have 
defrauded the individual who has borrowed the money. They are guilty of 
predatory loan practices and they should not receive the same treatment 
as an honest creditor who comes to court looking for compensation.
  The amendment which I will offer will do several things. When a 
person such as Jeannie McNab goes to bankruptcy court seeking help from 
overwhelming financial distress the lenders caused her, the claim of 
the predatory home lender is not going to be allowed. If a lender has 
failed to comply with the requirements of the Truth in Lending Act for 
high-cost second mortgages, the lender will have absolutely no claim 
against the bankruptcy estate. The unscrupulous high-cost mortgage 
lender will not recover the fruits of their ill-gotten gain.
  This amendment has been opposed by a lot of mortgage companies and 
banks that ought to know better. They are standing in defense of these 
predatory lenders who are taking advantage of vulnerable people and 
saying: We cannot treat them any differently; we cannot treat them 
harshly even if they abuse the system.
  That is a sad commentary on the credit industry and it is a sad 
commentary on the mortgage industry that they will not join me and the 
Members of the Senate in ferreting out those who are exploiting people 
across America with these second mortgages and subprime mortgages which 
ultimately are indefensible--absolutely indefensible--as we found time 
and again. If the credit industry wants to defend those loans, it casts 
a real question and suspicion and doubt as to their sincerity in 
dealing with borrowers across America. I hope they will change their 
point of view and support this amendment.

  I made some changes in the amendment to accommodate the industry to 
make it clear we are not going to deal with technical violations to 
disqualify those who try to collect in bankruptcy court. We are going 
after the bad guys.
  I added a materiality requirement so the violations must be a 
material violation in order for the claim to be invalid. The amendment 
will apply to situations where a lender engages in the practice of 
lending based on home equity without regard to the borrower's ability 
to repay, or a lender makes direct payments to a home improvement 
contractor instead of to the borrower, or when the lender imposes 
illegal fees, such as prepayment penalties or increased interest rates 
at default, or imposes a balloon payment due in less than 5 years.
  These illegal practices are not technical violations. I ask my 
colleagues to join me in this effort to protect the elderly by stopping 
predatory lending practices by adopting this amendment.
  I send my amendment to the desk.
  The PRESIDING OFFICER (Mr. Roberts). The amendment will be filed.
  Mr. DURBIN. I thank the Chair.
  The PRESIDING OFFICER. The distinguished Senator from Wisconsin is 
recognized.
  Mr. FEINGOLD. Mr. President, I am pleased to have the opportunity to 
speak generally on the bankruptcy legislation that is now before the 
Senate.
  First, I praise my friend and colleague from Illinois who has, on all 
issues, been extremely dedicated, hard-working, and effective on this 
bankruptcy issue. This is an important

[[Page S14067]]

issue and a complex area of the law that has an impact on millions of 
Americans and, of course, on businesses all across the country.
  This is an important debate, and I expect we will be on the floor for 
some time, because many of us have serious concerns about this bill and 
expect to offer quite a number of amendments to try to improve it.
  As I said, the issues raised by bankruptcy legislation are extremely 
complicated. The stakes are high. The different viewpoints are 
passionately expressed by all of the players involved, from the 
different types of creditors to bankruptcy judges, trustees, and 
practitioners, to consumers and potential debtors.
  We have a long legislative history to contend with here. We have been 
working on bankruptcy reform legislation for some time now, beginning 
with the appointment of the National Bankruptcy Review Commission in 
1994, and the issuance of the commission's report in 1997. In the last 
Congress, the Senate passed reform legislation by an overwhelming 
margin. That bill was itself a compromise among the various interests. 
But a conference committee sent a much different, much more one-sided 
bill back to us, and I am happy to say, that bill died at the end of 
the session.
  My view is that the legislation before us is only slightly less 
objectionable than the legislation that came out of conference last 
year. S. 625 is not a balanced piece of legislation. It tilts the 
scales too far in favor of certain types of creditors, and denies 
reasonable protections of the law not just to those trying unfairly to 
evade financial obligations they really can afford to meet, but also to 
honest hardworking families and single parents, who have come upon hard 
times and need the fresh start and breathing room that our bankruptcy 
system offers to give them a chance to survive. In too many cases, I am 
afraid, that will hinder families' ability to meet other obligations, 
particularly their obligations to their own children and to local 
taxing authorities.
  In many ways, this is a bill at war with itself. Many of the 
provisions are designed to shift more money into the hands of unsecured 
creditors, while other provisions are designed to shift that same pot 
of money back to car lenders and different unsecured creditors. The 
bill is supposedly intended to move more debtors from the complete 
discharge of debts available under chapter 7 of the code into chapter 
13 repayment plans. But chapter 13 trustees and others have testified 
that many provisions in the bill will decrease the success of chapter 
13 repayment. The bill supposedly increases personal responsibility, 
and yet it would favor people who have two new cars over people who own 
older cars or who take public transportation. And the bill is said to 
be aimed at deadbeats and abusers of the system, not honest but 
financially troubled low-income people, and yet it penalizes renters, 
as opposed to homeowners. And whereas we often try to promote small 
business entrepreneurship in legislation, in this bill we sometimes 
seem to impose stricter rules on small businesses than we do on large 
businesses.
  So, does the Senate really want to endorse these policies? Is it 
really our goal to send these mixed messages? I urge my colleagues to 
pay close attention to this very important debate. We do a lot in this 
body that in the end seems to just be symbolic. This bill is not 
symbolism. We cannot simply pass this bill and say we have struck a 
blow for personal responsibility. Because this bill will have real 
consequences in the real lives of real people. And I fear that in too 
many cases those consequences will be very damaging.
  I do want to comment for a moment on the process that has brought us 
here. I mentioned before that the Senate considered bankruptcy 
legislation in the last Congress. But in this Congress, we didn't have 
a single hearing on this bill. Let me repeat that because it is so 
disturbing for a bill of this magnitude and complexity. The Senate 
Judiciary Committee did not have a single hearing on bankruptcy reform 
or S. 625--not one.
  Now, to be fair, there was one joint hearing that was held over at 
the House with two subcommittees of jurisdiction--one hearing. And it 
occurred on a day that Senators happened to be involved in a very long 
series of votes--I believe it was one of our so-called ``vote-arama'' 
sessions--which meant that none of the Senators on the subcommittee 
could take advantage of the lone opportunity for public discussion of 
this bill. Other than that one hearing, the Senate of the United States 
had no hearings whatsoever on bankruptcy reform this year.
  I did not understand the rush to report this bill from committee 
without hearings, and I still don't. Why didn't we hear from the 
bankruptcy judges, and the trustees, and the disinterested academics, 
and the practitioners about how and whether this bill will work? Why 
didn't we get their views in a formal and considered way, and try to 
address their concerns?
  To say that this bill is just a repeat of last year's bankruptcy 
debate is just not right. This legislation is far too complicated and 
far too reaching to make that facile claim. This bill is actually 
different from last year's Senate bill in more ways than it is similar. 
In many ways, it is a brand new piece of legislation for this body. 
Last year's Senate bill was almost exclusively consumer bankruptcy 
oriented. This bill not only takes a different approach to consumer 
bankruptcy, but it has dozens of provisions affecting a variety of tax 
issues, municipal bankruptcy cases, single asset real estate cases, 
small business cases, and health care cases, in addition to a host of 
changes to general chapter 11 bankruptcy that may dramatically change 
the rules governing the reorganization of our Nation's largest 
businesses. We never discussed most of these issues at the committee 
level. We have received many warning signs from those who understand 
the bankruptcy system far better than any of us do. I am afraid to say, 
what is being done here is actually irresponsible.

  Why has this happened? Well, the sad truth is that all of us know 
why. A very wealthy and powerful industry has pushed and pushed and 
pushed for this bill, and so far the Congress has ignored the experts 
and done the industry's bidding. The credit card industry wants this 
reform because it wants protection from its own excesses. You see, the 
industry has flooded the mailboxes, and the phones, and the e-mail in 
boxes of America with offers of easy credit. Americans received over 
3.45 billion credit card solicitations in 1998. Anyone can get a credit 
cared, even children, even people who have just filed for bankruptcy.
  I favor empowering citizens and broadening their options using credit 
to bring more convenience to their lives as consumers. But the industry 
has been irresponsible in extending credit to those who cannot handle 
it. And now the industry has come to Congress for help. Now the 
industry wants the bankruptcy system to protect it. I say to you, Mr. 
President, that is not right.
  The industry hasn't come to us hat in hand, however. It has come with 
an open checkbook. As you know, Mr. President, from time to time on the 
floor in recent months, I have noted that contributions of different 
players in the legislative process that seek to influence our work here 
with campaign contributions. This bill is a poster child for the 
``Calling of the Bankroll.''
  Like so many issues, bankruptcy reform has been transformed from a 
policy debate to a vehicle for a special interest agenda. The key 
ingredient in that transformation is money, plain and simple.
  In the last election cycle, according to the Center for Responsive 
Politics, the members of the National Consumer Bankruptcy Coalition, an 
industry lobbying group made up of the major credit card companies such 
as Visa and MasterCard and associations representing the Nation's big 
banks and retailers, gave nearly $4.5 million in contributions to 
parties and candidates.
  How can a single mother in West Allis, WI, for example, who faces 
overwhelming debt from medical bills and the loss of child support, 
compete with the might and financial power of this industry? Her 
family, and her future will be affected by this bill every bit as much 
as the credit industry, yet she is not represented in the campaign 
finance game. And I am afraid that this bill in its current form very 
much reflects her lack of power.
  Some of the campaign contributions from these companies seem to be 
carefully timed to have a maximum effect.

[[Page S14068]]

  It is very hard to argue that the financial largess of this industry 
has nothing to do with its interest in our consideration of bankruptcy 
legislation. For example, on the very day that the House passed the 
conference report last year and sent it to the Senate, MBNA Corporation 
gave a $200,000 soft money contribution to the National Republican 
Senatorial Committee.
  In connection with the joint hearing that was held earlier this year, 
I submitted a written question to Bruce Hammond, the chief operating 
officer of MBNA. I asked him about the $200,000 contribution to the 
NRSC in October 9, 1998, just days after the conference committee 
reached agreement on a version of this bill that everyone agreed was 
more favorable to the credit card companies than the bill that the 
Senate had passed.
  This is what I asked him:

       (A) As CEO, are you involved generally in the decisions to 
     make soft money contributions to the political parties?
       (B) Were you involved in the decision to make this 
     particular donation?
       (C) How are decisions on soft money contributions made in 
     your company? Who participates in such decisions? What 
     criteria are followed in making such decisions?
       (D) Why did MBNA make a $200,000 donation to the NRSC on 
     October 9, 1998?

  Mr. Hammond's written response to the questions was very 
illuminating. Basically, he decided to ignore these direct and simple 
questions about the soft money donations of his company, and instead 
wrote the following:

       I find the premise for this question troubling, I hope 
     there is no intention to place bankruptcy reform in a 
     partisan political context. All of us who have worked in 
     support of these legislative reforms have been pleased by the 
     support, cooperation and encouragement we have received on 
     both sides of the political aisle. It has been particularly 
     pleasing to note that in this Congress both the House and 
     Senate bills have had as their original co-sponsors prominent 
     and respected Members of Congress from both political 
     parties.

  With all due respect, Mr. Hammond has made my point for me. As I 
noted, the soft money contributions of this industry have gone to both 
parties. Actually, MBNA Corp. has only given to the Republican party 
committees in the last few cycles. But other big lenders, such as Visa 
USA, BankAmerica Corp., and Citigroup, are giving to both parties. That 
is what is so insidious about these contributions. They aren't about 
politics, they are about policy. These companies don't just want to 
influence elections, they want to influence legislation directly.
  So the premise of my questions to the chief operating officer of MBNA 
Corp. was not to suggest that this bankruptcy bill was partisan, it was 
to get at the bipartisan problem of soft money and its insidious 
relationship to the legislative process. I'm sorry that Mr. Hammond 
decided not to answer my questions directly. I suspect that one of the 
reasons that he didn't is that direct honest answers to these questions 
would not be something he would want in the legislative history of this 
legislation. So he chose to simply ignore the questions. That is 
unfortunate.

  Mr. President, in the current Congress we are seeing another influx 
of campaign contributions from banks and lenders seeking to influence 
this bill.
  Incredibly, PAC contributions from National Consumer Bankruptcy 
Coalition members totaled $227,000 in March of this year alone. That's 
a full 20 months before the next election. But guess what. March 1999 
was a month during which the Judiciary Committees of both the House and 
the Senate were considering the bill. Members of the coalition gave 
nearly $1.2 million in PAC and soft money contributions in the first 6 
months of 1999. During that time period, MBNA Corp. gave $85,000 in 
soft money to the Republican Party committees, while Visa USA Inc. gave 
$30,000.
  Now I want to be clear here once again. Republicans are not alone in 
taking in hundreds of thousands of dollars from banks and lenders in 
this election cycle: During the first 6 months of 1999, the Democratic 
party committees took in more than four times the soft money from banks 
and lenders than they did during the first 6 months of the last 
presidential election cycle in 1995. Soft money contributions overall 
are up by about 80 percent, but the banks and credit card companies 
have quadrupled their contributions to my party.
  Mr. President, we need to keep in mind as we debate this bill, and 
the many amendments that will be offered, the extent to which 
bankruptcy reform has come to be seen as a gift to special interests, 
particularly the credit card companies. In light of that, we bear an 
even heavier burden to make sure that we are serving the public 
interest with this kind of far reaching legislation.
  We must open our minds to the recommendations of nonpartisan experts 
in this field. We haven't done that yet, although some progress 
certainly has been made between the time this bill left the Judiciary 
Committee and today. I am pleased, for example, that the requirement 
that debtors attorneys bear personal financial responsibility for the 
trustee's cost and fees if the debtor loses a motion to convert a 
chapter 7 filing to chapter 13 has been eliminated. That provision 
would have had the result of denying many honest American families 
adequate legal representation, making them even more subject to abusive 
and predatory practices by creditors.
  But we have a long way to go to make this a balanced bill, rather 
than a wish list for credit card companies. If we don't do that, we 
will have filed in our duty to the public and will come to regret our 
actions.
  I sincerely hope that once again we can work together to develop a 
product that will win a near unanimous vote in the Senate as last 
year's bill did. A bankruptcy reform bill should be the product of a 
considered and well-informed debate, not a political dance, where money 
calls the tune.


                           Amendment No. 2522

        (Purpose: To provide for the expenses of long-term care)

  Mr. FEINGOLD. Mr. President. In a moment I am going to offer an 
amendment to address one of the many unfairnesses of the means test in 
this bill. This amendment is focused particularly on expenses that a 
family might incur because it is paying for medical care for a non-
dependent family member.
  These kinds of expenses often are referred to in our discussions as 
expenses for long term care. Long-term care, and particularly 
fundamental long-term care reform, has been a special focus of mine 
since I was first elected to the Wisconsin State Senate in 1982.
  As I discovered when I began working on this many years ago, long-
term care is greatly misunderstood. Even today, when people hear long-
term care many think of nursing homes and the elderly.
  But that is not the whole story.
  According to the Long-Term Care Campaign, while the majority of the 
over 11 million severely disabled Americans needing long-term care 
services are elderly, nearly half are either working-age adults or 
children.
  And while many do receive their long-term care services in a nursing 
home, the vast majority of those needing long-term care receive that 
care at home.
  Long-term care touches many more than just those needing services.
  Nearly 6 of every 10 Americans have already experienced a long-term 
care problem in their own family or through a friend, and more than 
half of these have provided care to someone who needs services.
  The National Family Caregivers Association estimates that between 80 
and 90 percent of all long-term care is provided by families.
  Caregiving can be an enormous burden on families--physically, 
emotionally, and financially.
  As we found in Wisconsin two decades ago, that burden not only takes 
its toll on families, but on government budgets and taxpayers since all 
too often the reason an individual enters a nursing home is not due to 
their condition, but because the family member caregiver is simply no 
longer able to care for them.
  Though I will not speak at length today about the reforms we need to 
make to our long-term care system, I do want to note this critical 
point--we need to build on the informal long-term care that families 
already provide, not only to allow those needing long-term care 
services to remain where they prefer, at home with their family, but 
also because the alternative places a huge burden on State and Federal 
budgets.
  Families that provide personal assistance and other forms of care to

[[Page S14069]]

loved ones not only help that loved one, they help the taxpayer.
  Families provide an estimated $200 billion in long-term care services 
every year--services that help keep loved ones at home, and out of 
expensive institutional settings.
  But when families are no longer able for physical, emotional, or 
financial reasons to care for that loved one, changes are that 
individual will end up in a nursing home on the joint State-Federal 
program Medicaid.
  When taxpayers pick up the Medicaid tab for nursing home care, it 
isn't cheap.
  According to the Long-term Care Campaign, nursing homes cost an 
average of $46,000 a year, and for those with severe disabilities or 
dementia, the costs can be even greater.
  Mr. President, much as I might like to, we can't use this bankruptcy 
bill to reform our long-term care system. But at the very least, we 
should not be making the current long-term care crisis worse than it 
already is. And that, I fear, is exactly what the bill in its current 
form does.
  In particular, we should not be discouraging families from caring for 
a disabled or chronically ill loved one. If a family facing financial 
difficulties can continue to care for a loved one at home, and keep 
them out of more expensive taxpayer-funded settings, all of us will 
benefit.

  It is for that reason that I offer this amendment--to make sure that 
a family's ongoing expenses to provide care for a loved one will be 
recognized as reasonable and legitimate living expenses for purposes of 
calculating how much a family is capable of contributing toward 
repayment of debt.
  The means test in the bill provides that a debtors are ineligible for 
a Chapter 7 discharge if they can supposedly repay 25 percent of their 
debts or $15,000, which ever is less, over a period of 5 years. 
Basically, the trustee has to analyze the ability of debtors to repay 
their debts, looking at their monthly income and their monthly 
expenses. But the expenses are not actual expenses, they are the 
expenses set out in IRS standards designed for a wholly different 
purpose. And these standards do not include as necessary expenses 
amounts paid for the care of non-dependent family members.
  So people who file for bankruptcy are presumed to have abused the 
system if they don't meet the means test using the IRS standards. And 
they can rebut that presumption only by showing special circumstances 
that justify additional expenses.
  To do so, they have to provide documentation and ``a detailed 
explanation of the circumstances that makes the expenses necessary and 
reasonable.'' So under this bill, debtors with significant long term 
care expenses are deemed abusers of the system, and they may have to 
litigate to prove that they are not spending too much to care for their 
family. The bankruptcy courts are going to be called on to pass 
judgment on whether the expenses for long term care are reasonable. 
Some people may be forced to forgo bankruptcy because they cannot 
afford to both hire a lawyer to fight the presumption of abuse and 
continue to care for their family members.
  This is only one of many examples of how use of the IRS standards 
makes the means test draconian and unfair. I hope as we debate and 
amend this bill we will make major changes in how this means test 
operates. And we should start here, with long term care expenses. This 
amendment simply provides that the monthly expenses to be analyzed 
under the means test may include the continuation of actual expenses 
paid by the debtor for the care of household or immediate family 
members who are not dependent.
  Let's think about the alternative for a moment. Imagine a scenario 
where someone is in the position of filing for bankruptcy and has 
significant long term care expenses of a aging parent that are for some 
reason deemed to be not reasonable. If that individual is prevented 
from filing for bankruptcy, the need for the long term care doesn't go 
away. It stays. It may be the reason that the person has to file for 
bankruptcy in the first place, because the additional burden of the 
long term care expenses makes it impossible to make ends meet and keep 
up with payments on accumulated debt.
  What choice does this person have if the protection of the bankruptcy 
laws is unavailable? No choice at all. The care must stop, and the 
person being cared for goes into a public institution with higher costs 
to the taxpayers and, more important, untold damage to the family.
  I challenge my colleagues to tell us how the simple exception to the 
rigid IRS standards set out in this amendment will lead to abuse. Are 
people going to go out and arrange for unreasonably extravagant care 
for their family members in order to file for bankruptcy and get out of 
debt? I don't think so. In fact, I think it is insulting.
  No, the millions of Americans who selflessly care for their loved 
ones make a sacrifice that we should honor and encourage. Passing this 
amendment would be a small step toward recognizing that crucial service 
to our country that they provide. I urge my colleagues to step back 
from the misery that this bill might very well inflict and adopt this 
amendment.
  Mr. President, I ask unanimous consent that the pending amendment be 
set aside so I may offer this amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. FEINGOLD. Mr. President, I send my amendment No. 2522 to the 
desk.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Wisconsin [Mr. Feingold] proposes an 
     amendment numbered 2522.

  Mr. FEINGOLD. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       On page 7, line 15, strike ``(ii)'' and insert ``(ii)(I)''.
       On page 7, between lines 21 and 22, insert the following:
       ``(II) In addition, the debtor's monthly expenses may 
     include, if applicable, the continuation of actual expenses 
     paid by the debtor for care and support of a household member 
     or member of the debtor's immediate family (including 
     parents, grandparents, and siblings of the debtor, the 
     dependents of the debtor, and the spouse of the debtor in a 
     joint case) who is not a dependent.

  Mr. FEINGOLD. Mr. President, I ask unanimous consent to set aside the 
pending amendment and offer Senator Durbin's amendment No. 2521, which 
he discussed and filed this morning, and that the Durbin amendment No. 
2521 then be immediately set aside.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.


                           Amendment No. 2521

 (Purpose: To make an amendment with respect to allowance of claims or 
               interests and predatory lending practice)

  Mr. FEINGOLD. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The legislative assistant clerk read as follows:

       The Senator from Wisconsin [Mr. Feingold], for Mr. Durbin, 
     proposes an amendment numbered 2521.

  Mr. FEINGOLD. Mr. President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       On page 29, after line 22, add the following:

     SEC. 205. DISCOURAGING PREDATORY LENDING PRACTICES.

       Section 502(b) of title 11, United States Code is amended--
       (1) in paragraph (8), by striking ``or'' at the end:
       (2) in paragraph (9), by striking the period at the end and 
     inserting ``; or'' and
       (3) by adding at the end the following:
       ``(10) the claim is based on a secured debt, if the 
     creditor has materially failed to comply with any applicable 
     requirement under section (c), (d), (e), (f), (g), (h), or 
     (i) of section 129 of the Truth in Lending Act (15 U.S.C. 
     1639).''
       On page 201, line 3 strike ``period at the end'' and insert 
     ``semicolon''.

  Mr. FEINGOLD. Mr. President, I yield the floor.
  Mr. SESSIONS. Mr. President, I thank the Senator for his amendment 
and the remarks he made. There are some good questions. We do want to 
help those who are in nursing homes and so forth.
  I am somewhat nervous and troubled by the breadth of the language 
because economics is a fairly crystal science in a lot of ways. This 
just says you want

[[Page S14070]]

to help a dependent. In effect, what he is saying by this amendment is 
that a debtor who owes people who he has gotten benefits from and 
promised to pay them money, he won't pay them; he will be able to take 
money they should get and apply it to the family members to whom he 
wants to give it.
  I don't know whether that is a good proposal for this bill or not. As 
he said, maybe we can't fix health care in the bankruptcy bill. Maybe 
not. We will be glad to review that, and I am sure Senator Grassley 
will.
  I wish to make a number of points about some of the issues that have 
been raised because I do so strongly believe this piece of legislation 
is good. I believe it is going to make a major step forward in 
improving bankruptcy and having more fairness, eliminating these 
complaints that all of us are, in fact, hearing from people in our 
States who have been abused by the process in bankruptcy. Many times 
they blame the lawyers, and sometimes so do I. But the truth is, 
lawyers are using the laws we pass. It is our responsibility, if the 
law isn't working, to come to this floor and present legislation to fix 
it.
  Over 70 percent of the people believe we need to reform bankruptcy 
law. This isn't a special interest piece of legislation. But I will say 
this: There is no doubt that banks and others who regularly go to 
bankruptcy court see what is going on there on a daily basis. They have 
every right to call to our attention what they see are problems and 
injustices. We have a responsibility, if that is so, to fix it. That is 
fundamental. That is what American law is all about. What we are doing 
with the bankruptcy bill is trying to reform and improve bankruptcy 
law, which has had no real analysis since 1978. We have had more than 
double the filings in bankruptcy since 1978. Indeed, we have had a 
virtual doubling of bankruptcy filings since 1990, during that period 
of time.

  Larry Summers, the present Secretary of the Treasury, stated that 
bankruptcy does, in fact, increase interest rates. Businesses have to 
charge more when more people are bankrupting and not paying back their 
debts. It raises the interest rates. The present Secretary of the 
Treasury understands that, and any economist would.
  Senator Hatch, chairman of our Judiciary Committee, has pointed out 
the average cost per family of the debts wiped out in bankruptcy per 
year is $400. What that means is that somebody is not paying their debt 
and, in fact, is shifting the burden to other people to pay them for 
them. Sure, bankruptcy is a historic part of American law. It is 
something we never want to eliminate. We want to protect that right. It 
is mentioned in the Constitution but not provided for in detail. Our 
Founding Fathers recognized we ought to have a bankruptcy system. It 
has always been a part of the Federal court system, and we, as the 
Congress, have the responsibility to analyze it periodically to see 
what abuses and problems are occurring and, where there are problems, 
to fix them and see if we can't make the system work better.
  Now they say we want to talk about credit cards. That is an issue we 
may want to talk about.
  But this piece of legislation was designed to deal with the 
bankruptcy court system. We have banking committees and others that are 
dealing with these credit disclosure acts and the kind of bank loans 
and interest rates credit cards ought to utilize.
  In fact, the chairman of the Banking Committee is not happy we are 
down here amending banking law on a bankruptcy bill that has nothing to 
do with banking law. Rightly, he should be. I don't think we need to 
distract ourselves on that. Frankly, I think we ought to just confront 
this issue that is being raised.
  Bankruptcy is the fault of all of the credit card companies, and they 
are giving too much money to people who are marginal credit risks. They 
are allowing them to have credit cards--horrible things they are doing, 
allowing a poor person to have a credit card. That is bad.
  We just had a banking bill that almost went down over a debate among 
those liberals in this body who wanted to ensure that the banks lend 
more money to at-risk, high-risk borrowers. That is a good thing, not a 
bad thing. If they weren't lending money to poorer people, weren't 
allowing them to have credit cards, then they would be much condemned 
for it, and rightly so. Ninety-nine percent of people who have credit 
cards pay their debt--99 percent. The banks are not lending substantial 
sums of money to people who can't pay their debt.
  But I will tell you this. If you are living on a fixed income, you 
have a $25,000-a-year income, you have a family, you are trying to do 
things, and the tire blows out on your car, you are glad you have a 
credit card so you can pay for it to be fixed, so you don't have to sit 
it on the blocks, or you can get your momma, or somebody, to lend you 
the money to fix the tire. And it allows you to pay it back over a 
period of time.

  It is an odd thing to me that people who think and claim they care 
about the poor are going to be complaining because credit card 
companies allow them to have credit cards so they can borrow money when 
they need to. It becomes a critical thing for them.
  Then there is a complaint that somehow this legislation is unfair to 
women and children. That is a stunning event. From day 1, Senator Hatch 
and Senator Grassley made a commitment to make a historic change in the 
way bankruptcy treats child support and alimony. There is a list of 
things that have to be paid first when you pay off your debts in 
bankruptcy. They call them priorities. Child support and alimony used 
to be seventh on that list. From day 1--this bankruptcy bill has 
proceeded for over 2 years now--we have raised child support and 
alimony to No. 1, ahead of lawyer fees. That is historic. They are 
complaining, too. But we made a commitment that nothing would take 
priority in bankruptcy court over child support and alimony.
  It amazes me. I am astounded that those who want to kill this 
legislation, for reasons I cannot fathom, come down here and complain 
that the reason they are against it is that it hurts children. This is 
a historic move to provide unprecedented protections and priorities for 
children.
  I find that a stunning argument to make.
  They argue that this is going to penalize a single woman with a child 
who has financial troubles and needs to go into bankruptcy, and that 
somehow that woman with that child would be required to pay back some 
of their debt when they wouldn't have been required to pay some of 
their debt under the old law, because fundamentally what this bill says 
is, if you can pay back some of your debts, you ought to. What is wrong 
with that? If you can pay back some of your debts, you ought to pay 
some of them back. That is fairness. That is one of the biggest abuses 
we have. We have young yuppies making $100,000 a year in income, 
running up a bunch of debts, and then they just wipe them out and start 
all over again. That is not right. If they can pay back some of those 
debts, they ought to pay them.
  The question is, Won't this abuse women with children at home who 
have financial difficulties? Let me explain this simply. If there is a 
mother and a child, a family of two, the median income in America is 
$40,000. If they make less than $40,000, they will be able to file 
bankruptcy just as they always have. If two of them are making $40,000 
a year--which is a pretty solid income--or below, they will not be 
subject to these rules that require those who can pay to pay. If they 
make over $40,000, the judge will have the responsibility to evaluate 
their debt, evaluate their expenses, and see if they can pay back some. 
If they can pay back 25 percent, or 30 percent, or 50 percent, or maybe 
100 percent, if their income is $100,000 a year, what is wrong with 
that?
  Should a single woman be given preference over a single man with a 
child?
  We have to have simple rules that are fair and objective. All I am 
saying is, it would take a family with a substantial income before the 
principles of law would apply that they would have to pay back any 
money.
  There is a suggestion that somehow because a father is paying alimony 
and he might pay back some of his debt, he will not be able to pay his 
child support. But as we know, he is required to pay his child support 
first. And no plan in bankruptcy can be approved by a bankruptcy judge 
unless this gives priority to repayment of past due child

[[Page S14071]]

support and paying current child support. That is a bogus argument.

  This bill requires the judge, before he approves a bankruptcy payback 
plan, to give priority to the payback of child support and alimony. In 
fact, it will strengthen the ability of children to receive the alimony 
payment because instead of walking in and filing bankruptcy under 
chapter 7 and just wiping out all of his debt and starting fresh, the 
deadbeat dad will be under the control of the bankruptcy court, under 
chapter 13, and will have to report his income on a regular basis. If 
he is not paying that, he can be disciplined through the bankruptcy 
court.
  That is not a good argument, I would suggest.
  There is a study by a group of professors who said only 4 percent of 
the people filing bankruptcy could pay even 25 percent of their debt. 
In that instance, if that is true--and I doubt that; I think the figure 
is a good bit higher than that but not a lot higher. I am not saying it 
is a huge number. Maybe it is 15, 20, or 10 percent. But those 10 
percent who can pay it, those 4 percent who can pay their debts, why 
shouldn't they pay them? That is what we are saying. The law will not 
make them pay if they can't pay. If their income is below the median 
income, they won't have to pay back the debts at all.
  I think that is not an argument that is important to us today.
  There is another complaint about mailing credit cards. I heard a lot 
of people say, I get credit cards in the mail. They are not getting 
credit cards in the mail. If they are, they ought to call the Federal 
State law enforcement because it is illegal to send somebody a credit 
card they haven't asked for. What they are receiving in the mail from 
credit card companies are solicitations or offerings for credit cards.
  I think that is probably good because I don't like those high 
interest rates on credit cards. I shop around. I don't like paying 18 
percent interest. I hope most people can avoid running up any 
significant debt because that is a high interest rate. But one of the 
good things that has happened of late is, credit cards are getting 
competitive. They are offering us to join up: Convert to our credit 
card, have no interest for so many months, and you are going to have a 
lower interest rate than you had before. They are getting some 
competition in the credit card industry.
  We are going to come around now and pass a law in this Congress that 
says a credit card company can't write you a letter and offer you 15-
percent interest instead of your current 17-percent interest? What kind 
of idea is that? We have some poor economic thinking in this Congress.

  By the way, as the Secretary of the Treasury under President Clinton 
has indicated, defaults on payments in bankruptcy drive up interest 
rates for everyone. It was suggested we have to make these reforms in 
amendments because old people are not able to pay their debts. Old 
people are not the ones filing bankruptcy. The figures cited were older 
people over 55. Filers over 55 have gone up almost 120 percent since 
1990, but during that time all filings have gone up 100 percent. Always 
the older citizens of the country are the least likely to file 
bankruptcy. They are the most responsible and keep up with their books 
and manage their debts well. That is not the biggest problem in 
bankruptcy. Check the ages and it won't be the people 65 years old and 
up filing bankruptcy in America today. They are responsible. They have 
learned how to manage their money.
  One amendment is to crack down on subprime lenders, banks that loan 
to poor people. We have legislation attacking banks for redlining areas 
and not loaning to poor people. We had a big fight over it on the 
banking bill. The people receiving these loans were viewed as 
vulnerable and preyed upon. Sometimes they can be vulnerable and 
sometimes I guess they can be preyed upon. However, one doesn't have to 
take a loan if they don't think it is better. If a person has $10,000 
credit card debt at 18-percent interest and they can get a loan at a 
bank at 12.5 percent to pay it off and they don't have a good credit 
rating, but 12.5 percent is better than 18 percent. People make those 
choices daily. I don't know as part of bankruptcy court reform that we 
ought to try to reform banking law. That ought to be thought through 
more carefully.
  This bill is essentially the bill that passed 97-1 in this body. It 
is essentially the bill that passed the House last year by a veto-proof 
majority. It has already passed the House again this year by a veto-
proof majority. There is bipartisan support for it. It is beyond me why 
we can't have a final vote and get it passed. I have only been in this 
body a little over 2\1/2\ years, and I don't see how we have a bill 
with this kind of support. It is frustrating trying to get a final vote 
and do what the people of this country want done. We debated it. They 
said we have not had hearings. We had hearings for years on it. 
Everybody knows the issues. We have had staff meetings in excruciating 
detail.
  Senator Grassley has been more than generous in working with those 
who have concerns about the bill. He has met with the staff, met with 
the White House. My staff is meeting with a representative from the 
White House today trying to work out the language on one or two issues 
that we think we can reach an agreement on. There have been great 
efforts to make some changes. Why some want to spin this as a bill that 
is unfair is beyond my comprehension. We had this year a joint House-
Senate Committee on bankruptcy--the first time in history--to consider 
those issues.
  My vote is not for sale. I am not going to support a bankruptcy bill 
or any other bill because of any political contribution. I am offended 
by those who come on the floor and suggest that is what we are doing. I 
am prepared to debate any issue on this bill on the merits of what is 
good for public policy in this country. I am getting sick and tired of 
sanctimonious Senators suggesting they are above all the rest of us and 
everybody is corrupt--because industry gives political contributions to 
both parties. That is not right.

  Let's talk about what is wrong with this bill. Let's talk about why 
something in here is unfair, if it is. If it is unfair, we will fix it. 
I am not happy with that. I think we need to do better.
  Mr. President, 70 percent of the people are in favor of this 
legislative reform. There is overwhelming popular support for a system 
the reform of which is long overdue. We can do it. I don't blame the 
people who are in the process of dealing with it every year for being 
angry. They have a right to be. There are multiple loopholes in this 
bankruptcy system that we have seen. We have seen how they work and we 
can fix them.
  One of the driving factors behind increased filings of bankruptcy is 
advertising by attorneys. Watch their ads. They don't say: Come on down 
and we will file bankruptcy. It says: Got problems with your debts? 
Come talk to me.
  You talk to them and the next thing you know a person who has never 
been given an opportunity for a different opinion has suggested they 
can pay a certain fee and file bankruptcy and they will take care of 
him; all their debts will be wiped out. And the debtor says: You mean 
that, really? And the lawyer says: Absolutely; that is the law.
  We passed that law. We talk about needs-based reform. What we are 
saying is, if you can't pay your debts, you have an income below the 
median income in America, $50,000 for a family of four--that is what 
the median income is--if you can't pay, you can have traditional 
benefits of chapter 7 and wipe out your debts, if that is what you 
choose. However, if you make above that, the judge can order you to pay 
some of the money back. I think that is only fair. I believe that will 
eliminate some of the abuses in the bankruptcy system.
  Another amendment Senator Kohl and I have offered deals with what I 
consider another abuse in bankruptcy. I have an example from the New 
York Times article of last year about some people who used and abused 
the bankruptcy system.
       The First American Bank and Trust Company in Lake Worth, 
     Fla., closed in 1989, and its chief executive, Roy Talmo, 
     filed for personal bankruptcy in 1993. Despite owing $6.8 
     million, Mr. Talmo was able to exempt a bounty of assets.
       During much of the bankruptcy proceedings, Mr. Talmo drove 
     around Miami in a 1960 Rolls-Royce and tended the grounds of 
     his $800,000 tree farm in Boynton Beach. Never one to slum 
     it, Mr. Talmo had a 7,000-square-foot mansion with five 
     fireplaces, 16th-century European doors and a Spanish-

[[Page S14072]]

     style courtyard all on a 30-acre lot. Yet in Mr. Talmo's 
     estimation, this was chintzy. He also owned an adjacent 112 
     acres, and he tried to add those acres to his homestead. The 
     court refused.
       Mr. Talmo, though, now looks back as a more humbled man, 
     ``Bankruptcy is something I don't want to do again,'' Mr. 
     Talmo said. ``Mine is a sad story. I have my home, but 
     otherwise I was wiped out.''

  This is the way it works: The former commissioner of baseball--lots 
of prominent people do this--runs up a big bunch of bills; the business 
fails; he owes a lot of people money. So you say: What can I do? I can 
move to Florida; I can move to Texas; I can buy a big mansion, put all 
my money there on the Atlantic coast or the gulf coast or the Texas 
coast or wherever, and I will just put everything I have liquid right 
now in that house. I will claim it as my homestead and they cannot take 
it.
  Then, after I have wiped out all these people I legitimately and 
lawfully owe, I can sell my multimillion-dollar mansion and live high 
the rest of my life. That is what this law allows. It is proper and 
legal in the American bankruptcy system today, and we ought to put a 
stop to it.
  People say it is States rights. Not so. Bankruptcy is totally a 
Federal court proceeding. It is referred to in the U.S. Constitution. 
It is totally a Federal court proceeding and we have, as a Federal 
Congress, the right to set the standards as we choose them for a 
homestead exemption. In my view, this is an abuse. It allows people to 
move in interstate commerce and to defeat totally legitimate creditors 
and live like kings and not pay back people they owe.
  I am going to mention one other example in the New York Times 
article:

       Even when residents of Texas and Florida sell their homes 
     and pay off their mortgages during bankruptcy, they can still 
     walk away rich.
       Talmadge Wayne Tinsley, a Dallas developer, filed for 
     Chapter 7 bankruptcy in 1996 after he incurred $60 million in 
     debt, largely bank loans. Under Texas law, Mr. Tinsley could 
     keep only one acre of his 3.1-acre estate, a rule that did 
     not sit well with him. His $3.5 million, magnolia-lined 
     estate included a five-bedroom, six-and-a-half-bath mansion 
     with two studies, a pool and a guest house. All that fit 
     snugly onto one acre.
       Yet when the court asked Mr. Tinsley to mark of two acres 
     to be sold to pay off his debts, his facetious offer was for 
     the trustee to come by and peel off two feet around his 
     entire property. The court refused, forcing a sale, but by 
     Mr. Tinsley still did rather well for himself.
       He sold his house in October for $3.5 million using the 
     proceeds to write a $659,000 check to the Internal Revenue 
     Service and another for $1.8 million to pay off the mortgage. 
     That left $700,000 for Mr. Tinsley after closing costs and 
     other expenses were deducted from the proceeds, according to 
     court officials. About $58 million of his debts were left 
     unpaid.
  I believe there are abuses there. I believe the Kohl-Sessions 
amendment will deal with it. It is not a question of States rights. The 
Federal bankruptcy courts have allowed States to set the standard, but 
it has never been a problem, that the Federal court could set a 
national standard if they chose.
  We, by this amendment, say you could only have $100,000 in equity in 
your home--not the value but in the equity of your home--and be able to 
keep it; whereas, over two-thirds of the States limit it to $40,000. So 
we are just moving down some of those States with extreme laws to a 
reasonable level. I believe that will eliminate one of the most glaring 
abuses in the bankruptcy system.
  I am pleased to be joined now by the distinguished chairman of the 
Judiciary Committee, Senator Hatch, who has worked hard to bring this 
legislation to fruition. I am proud to serve on his committee. I yield 
the floor.
  The PRESIDING OFFICER (Mr. Allard). The Senator from Utah.
  Mr. HATCH. Mr. President, I thank my colleague for his excellent 
presentation and the work he has done on the Judiciary Committee on 
this very important bill. It is a very important bill.


                           Amendment No. 1729

 (Purpose: To provide for domestic support obligations, and for other 
                               purposes)

  Mr. HATCH. I intend to make it even more important by calling up 
amendment No. 1729 and asking for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The legislative assistant read as follows:

       The Senator from Utah [Mr. Hatch], for himself and Mr. 
     Torricelli, proposes an amendment numbered 1729.

  Mr. HATCH. Mr. President, I ask unanimous consent that reading of the 
amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The text of the amendment is printed in today's Record under 
``Amendments Submitted.'')
  Mr. HATCH. Mr. President, I am pleased to express my commitment again 
this year to reforming the bankruptcy laws in order to adequately 
protect children and ex-spouses that are owed domestic support. I am 
grateful that S. 625 includes the language I offered last year along 
with Senators Grassley and Kyl, providing extensive reforms to the 
bankruptcy laws in the area of child support. Also, I introduced 
additional enhancements to the bill's protection of domestic support 
obligations at the Judiciary Committee markup, and I accepted further 
changes by Senator Torricelli, with the agreement that we would 
continue working on the development of even further enhancements to the 
bill in this important area. I would like to express my gratitude to 
Senator Torricelli for working with me on these important provisions.
  I have continued to work with domestic support enforcement groups and 
Senator Torricelli to improve the bankruptcy laws, and I offer this 
amendment, along with Senator Torricelli, to make a series of 
additional enhancements to the bill so that we can be certain that this 
important legislation enables women and children to collect the support 
and alimony payments they are owed.
  Current bankruptcy law simply is not adequate to protect women and 
children. I have been outraged to learn of the many ways deadbeat 
parents are manipulating and abusing the current bankruptcy system in 
order to get out of paying their domestic support obligations. I have 
in front of me a how-to book called ``Discharging Marital Obligations 
In Bankruptcy.'' This is why we need to reform our bankruptcy laws.
  I am proud of the improvements we are making over current law in 
terms of ensuring that parents meet their child support and other 
domestic support obligations in bankruptcy.
  This chart indicates:

       The Support Provisions Of This Bill Certainly Justify The 
     Praise Given Them By The Most Significant National Public 
     Support Collection Organizations In This Country.

  That is a statement made by Phillip Strauss, Legal Division of the 
Family Support Bureau, the Office of the District Attorney of San 
Francisco on March 18, 1999, in testimony before the House of 
Representatives.
  The bill's improvements over current law have the support of the 
country's premiere child support collection organizations. As you can 
see, the bill's child support provisions are endorsed by the National 
Association of Attorneys General, the National Child Support 
Enforcement Association, and all of them, and many others, support what 
we are trying to do today. I would also like to point out that 
literally dozens of ex-spouses who are owed domestic support 
obligations have expressed to me their support for these improvements 
to bankruptcy law.
  We have all heard complaints by those who would attempt to politicize 
this issue that the bankruptcy bill is somehow harmful to families. I 
have worked tirelessly, provision by provision, both last year and this 
year to make this a bill that dramatically improves the position of 
children and ex-spouses who are entitled to domestic support. No one 
who actually looks at what the bill says can, in good conscience, say 
that this bill is not a tremendous improvement for families over 
current law. There may be those who do not want to see bankruptcy 
reform, but they cannot, with a straight face, argue that this bill is 
anything other than a huge positive step for our children. I believe 
that criticizing this bill without regard for what is in it, and using 
our children as pawns in the process, is shameful.
  I challenge critics of the bill to stop with the vague allegations 
and take a look at what the bill itself actually does.
  First, here is what S. 625 does apart from the additional 
improvements I have offered in the manager's amendment:

[[Page S14073]]

  The bill prevents the use of the automatic stay from being used to 
avoid family support obligations: S. 625 stops deadbeat parents from 
using bankruptcy to avoid family support obligations.
  For example, the bill prevents the automatic stay from being used to 
put a hold on the interception of tax refunds to be used to pay a 
domestic support obligation.
  The bill enables revocation of driver's licenses and other privileges 
from deadbeats: The bill prevents the automatic stay from being used to 
prevent the withholding of driver's licenses when debtors default on 
domestic support obligations. This is a particularly important 
provision, given recent news reports about the effectiveness of 
suspending driver's licenses of people who aren't paying their child 
support. A Maryland initiative has resulted in $103 million in child 
support collections just since 1996. We do not want our bankruptcy laws 
to work as an impediment to effective programs like the one in 
Maryland.
  Without these changes, a person could use current bankruptcy law to 
stave off a driver's license suspension by using the automatic stay, 
and undermine the effectiveness of these programs at getting child 
support to the kids who need it.
  The bill gives child support first priority status: Domestic support 
obligations are moved from seventh in line to first priority status in 
bankruptcy, meaning they will be paid ahead of lawyers and other 
special interests.
  The bill makes debt discharge in bankruptcy conditional upon full 
payment of past due child support and alimony.
  It requires payment of domestic support obligations for plan 
confirmation:
  And, S. 625 makes domestic support obligations automatically 
nondischargeable. This lets ex-spouses seeking to enforce domestic 
support obligations avoid the legal expenses of litigation that they 
incur under present law.
  The bill provides single parents with new tools to help them collect 
from an ex-partner in the bankruptcy system.
  The bill provides better notice and more information for easier child 
support collection.
  The bill provides help in tracking deadbeats. For example, If there 
is non-payment of child support in a post-discharge situation, other 
creditors with non-dischargeable debt are required to provide the last 
known address of the debtor on request, a significant help in locating 
people who have skipped out on their child support obligations.
  And, the bill allows for claims against a deadbeat parent's property.
  In addition to these improvements over current law that have been 
part of the bankruptcy reform bill for months, I have worked with 
Senator Torricelli, the National Women's Law Center, and the National 
Association of Attorneys General to further enhance the domestic 
support provisions of the bill. I thank each of them for their 
commitment to further improving the bill, and I am proud of what we 
have accomplished.
  Our amendment has many enhancements over current law.
  For example, the amendment allows for the payment of child support 
with interest by those with means. The debtor can pay interest under 
the plan if he has sufficient income after paying all other allowed 
claims.
  The amendment prevents bankruptcy from holding up child custody, 
visitation, and domestic violence cases. Essentially, the amendment 
exempts proceedings not involving money from being subject to 
bankruptcy's automatic stay provisions. These include civil cases 
regarding child custody or visitation, divorce--unless it involves a 
division of property--and domestic violence.
  The amendment facilitates wage withholding to collect child support 
from deadbeat parents. It accomplishes this by adding a requirement 
that the trustee provide to the person owed support and the State child 
support collection agency the debtor's employer's last known name and 
address. Also, the amendment simplifies the ability of the person owed 
support to get information on the debtor's whereabouts from other 
creditors. These measures will assist greatly in the imposition of wage 
withholding orders if they are not already in effect.

  The amendment helps avoid administrative roadblocks to get kids the 
support they need. The amendment provides an expanded definition of 
``domestic support obligation'' to cover those who have not been 
officially designated as a legal guardian, but who nonetheless are 
entitled to collect child support on a child's behalf.
  Also, the amendment gives priority to parents over government. It 
divided the new ``first priority'' status into two sub-parts, giving 
parents who are not receiving benefits the top priority--whether or not 
the benefits have been formalistically ``assigned'' to the government 
for collection purposes--and giving next priority to obligations 
assigned to and owed directly to the government in exchange for the 
payment of benefits--such as where parents are liable for the costs of 
treating a child in a mental facility.
  A key provision makes staying current on child support a condition of 
discharge. The amendment allows for conversion or dismissal of chapter 
1, 12, and 13 cases where the debtor is not current on presently 
accruing domestic support obligations. Two checkpoints are imposed in 
the case at which the debtor must be current with payments: 
confirmation and prior to obtaining a discharge. This provides a new 
way of preventing debtors from not paying their domestic support 
obligations during the gap period between filing and confirmation.
  Moreover, the amendment makes payment of child support arrears a 
condition of plan confirmation. It provides that the Chapter 13 plan 
must pay all 507(3) arrears claims (those owed to families not 
receiving benefits) in full, unless the creditor--that is, spouse or 
child--agrees otherwise.
  The amendment puts responsible debtors over government. It permits 
the cram down of arrears claims over the objection of a 507(a)(4) 
government arrears claimant--that is, the government collecting in 
exchange for paying benefits, in Chapter 12 and 13 cases so long as the 
debtor agrees to commit all disposable income for a five-year period.
  This level of detail would ordinarily not be necessary in discussing 
provisions in a bill on the Senate floor, but I have done so to put the 
issue to rest once and for all. Let me be clear: With my provisions in 
the bill, bankruptcy will no longer be used by deadbeat parents to 
avoid paying child support and alimony obligations.
  If we take the time to look at the actual provisions in the bill, it 
is clear that the bankruptcy reform bill of 1999 provides enormous 
improvements over current law. I have had a long history of advocating 
for children and families in Congress, and I support a bill that moves 
the obligation to pay child support and alimony to a first priority 
status under S. 625, as opposed to its current place at seventh in 
line, behind bankruptcy lawyers and other special interests. I support 
a bill that requires debtors who owe child support to keep paying it 
when they file for bankruptcy. I support a bill that prevents debtors 
from obtaining a discharge from the court until they bring their child 
support and alimony obligations current. And, I support a bill that 
provides that if a debtor pays child support right before filing for 
bankruptcy, the child support payment can't be taken away from the 
kids. Let's take a stand for our nation's kids and pass the Bankruptcy 
Reform Act of 1999 out of the Senate.
  Again I thank my colleagues for the work they have done, especially 
Senator Torricelli, who has done a remarkable job working with Senator 
Grassley on this bill as a whole, but in particular working with me on 
this amendment.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from New Jersey.
  Mr. TORRICELLI. Mr. President, I express my gratitude to Senator 
Hatch for the drafting of the Hatch-Torricelli amendment that is before 
the Senate. Senator Hatch has reinforced his reputation by a commitment 
to American families and American children that is almost without peer. 
This is an extremely important amendment, and it strengthens the 
provisions of the bankruptcy reform legislation as they deal with 
families.
  In drafting bankruptcy reform, Senator Grassley and I were aware that 
many people were concerned that changes in the bankruptcy laws would

[[Page S14074]]

have the unintended consequences of making spouses or children more 
vulnerable as people sought protection from their family obligations.
  Any change in the bankruptcy code obviously and importantly raises 
questions about family protection because, indeed, one-third of 
bankruptcies involve spousal and child support orders. In half those 
cases, women are creditors trying to collect court-ordered support from 
their husbands. Therefore, the sensitivity that Senator Grassley and I 
in the general legislation and Senator Hatch and I now offer in this 
amendment is extremely important for Members of the Senate to have 
confidence in this bankruptcy reform.
  It should be remembered by the Senate that these support orders for 
support of children and spouses are lifelines for thousands of families 
struggling to maintain self-sufficiency and remain off public 
assistance.
  Forty-four percent of single-parent families with children under the 
age of 18 have incomes below the poverty line. With child support 
amounting to an average of nearly $3,000 a year, it is too often the 
only thing keeping families out of poverty and desperation.
  With these facts in mind, Senator Grassley and I drafted legislation 
in the managers' amendment that has a very important provision 
insisting that child support be elevated to first, rather than seventh, 
in the list of debts to repay by a debtor in bankruptcy.
  Addressing the Senate this morning, I wanted to bring attention to 
this provision more than any other. Under current law, a child or a 
spouse is seventh in the list of debts to be repaid. Under our 
legislation, it will now be first, where it belongs.
  The amendment Senator Hatch and I are now offering goes even further. 
With the help of women's groups and Government enforcement agencies, we 
have now been able to make several important new additions to this 
legislation.
  Hatch-Torricelli, first, prevents civil cases regarding child 
custody, visitation, and divorce from being held up by an automatic 
stay. The automatic stay is designed to protect the debtor from 
coercion by creditors, not to provide the debtor a tactic for delay in 
dealing with support issues regarding their own children.
  Our amendment will ensure that child custody and visitation issues 
are not held hostage by the filing of a bankruptcy petition. Bankruptcy 
petitions are not designed to interfere with or delay child support or 
other related issues in family disputes regarding children and spouses. 
We will not permit that to happen. Hatch-Torricelli reinforces the 
strength of that provision.
  Second, the Hatch-Torricelli amendment cracks down on those who seek 
to avoid payment of child support obligations by requiring the trustee 
to give the person to whom support is owed and State collection 
organizations information on the debtor's whereabouts. By this 
provision, not only are we ensuring that bankruptcy reform not 
interfere with child support, we are making bankruptcy reform a 
strengthening provision in finding the whereabouts of those who are 
seeking to avoid family and child support.
  It is a reflection of the reality that many people avoid child 
support by changing jurisdictions, by hiding from law enforcement. We 
will use the information in bankruptcy to find those who are 
responsible in avoiding obligations to their children.
  Third, the Hatch-Torricelli amendment requires the debtor to pay all 
child support arrears before the conclusion of a bankruptcy plan unless 
the spouse agrees otherwise. Not only will bankruptcy reform not be 
used to complicate child support, people will meet that support, they 
will deal with their arrears before their bankruptcy petition is acted 
upon and completed. This will ensure the child support is paid, and 
paid in full, before the debtor is released from the bankruptcy system.
  Importantly, however, we do have a safety valve. If the offended 
spouse believes this is not in their interest, they can indeed waive 
this provision. For example, if more money may be available for payment 
of support obligations after confirmation of the bankruptcy plan 
because other debts are discharged, then there can be a waiver.
  I believe, though we already have good legislation that Senator 
Grassley and I have offered which would further protect children and 
spouses, it is now enhanced by the provisions offered by Senator Hatch. 
I am very proud to be his cosponsor on this important amendment. I 
believe we have a better bill because of it. I believe American 
children and families will be strengthened in the bankruptcy 
proceedings because of it. I am proud to offer it, Mr. President.
  I yield the floor.
  Mr. LEAHY addressed the Chair.
  The PRESIDING OFFICER. The Senator from Vermont.
  Mr. LEAHY. Mr. President, I wish to commend, as I did earlier, 
Senators Grassley, Torricelli, Kohl, Sessions, Durbin, Feingold, and 
Hatch for coming forward very promptly to offer amendments to improve 
this bill.
  In the 4 hours we have had today, I see six amendments have been 
called up. On first blush, I think I am probably going to be supportive 
of some of these amendments, if not all. I think if we can continue to 
improve the bill at this rate, we may well end up getting the same kind 
of a vote--the 97-1 vote--we had last year on this bill.
  I would note one thing. I hope Senators will look at this: We have 
been told of all the money the bill is going to save families in 
America--$400 each--and that the credit card industry will save $5 or 
$10 billion by the reforms in this bill.
  I have a simple question: If we are going to be giving the credit 
card companies this $5 or $10 billion in savings from this bill, I am 
just wondering if they are going to do anything to change some of the 
charges and interest rates they charge consumers--those in a different 
era we would consider usury, at best.
  So my simple question is this: What language in the bill will 
guarantee that savings from the bill will be passed on to consumers? Is 
there anything that says the credit card fees or consumer credit 
interest rates will be reduced by the huge savings that some say will 
come from the enactment of this bill?
  If the consumer credit industry is going to keep several billions of 
dollars in savings from enactment of the bill, are those savings going 
to go to credit card consumers? Even some of the savings? I think that 
is a fundamental question supporters of the bill should ask themselves 
as we go forward. We know that more and more, many bankruptcies come 
about following the enormous--enormous--fees and interest rates charged 
by credit card companies. They are going to get billions of dollars in 
savings here. Will they pass any of those on?
  Mr. President, I understand we have to file amendments by 5 p.m. 
today. I send an amendment to the desk and ask that it be appropriately 
filed.
  The PRESIDING OFFICER. It is duly noted. The amendment is submitted.
  The Senator from Vermont.
  Mr. LEAHY. I am going to make a unanimous consent request in a 
moment. I will wait until the distinguished chairman comes back on the 
floor to do it.
  This amendment is offered to protect victims of domestic violence in 
bankruptcy proceedings.
  I ask unanimous consent that Senators Murray and Feinstein be added 
as cosponsors.
  The PRESIDING OFFICER. Without objection, it is so ordered. They will 
be added.
  Mr. LEAHY. Mr. President, I offer this amendment to protect victims 
of domestic violence in a bankruptcy proceeding. I am pleased that 
Senators Murray and Feinstein are joining me as cosponsors.
  Unfortunately, domestic violence pervades all areas of our country. 
Last year, the Department of Justice reported more than 960,000 
incidents of violence against a current or former spouse, boyfriend, or 
girlfriend occur each year, and about 85 percent of the victims are 
women.
  As if those statistics were not disturbing enough, the report went on 
to say that only half of the incidents of intimate violence experienced 
by women are reported to the police. That leaves almost 1 million 
incidents that go unreported every year.
  The pain and terror caused by these crimes of violence are all too 
often also shared by children, as the Justice Department found that 
more than half of female victims of intimate violence live in 
households with children under the age of 12.

[[Page S14075]]

  As our government and community organizations grow more responsive to 
the needs of victims of intimate and domestic abuse, more victims are 
leaving their abusive homes seeking safety and assistance. There are a 
number of programs, including the Rural Domestic Violence and Child 
Victimization Enforcement Grants, which I authored in the 1994 crime 
law, that make victim services more accessible to women and children 
escaping domestic violence.
  For some victims, however, escaping domestic violence means starting 
a whole new life away from danger. It sometimes means permanently 
leaving one's home to find safe housing. Safe housing could be across 
town or in another state--and it often means having to purchase or rent 
a new home.
  Escape from domestic violence sometimes necessitates victims to leave 
their job, which could leave a woman and her children without an 
income. Recovery from domestic violence could--and often does--also 
involve long-term medical and counseling services. These are all 
necessary expenses which the victim must face.
  The amendment that I am proposing today would ensure that victims are 
not penalized for such expenses in a bankruptcy proceeding.
  My amendment would ensure that additional expenses and income 
adjustments associated with the protection of a victim and the victim's 
family from domestic violence are included in their monthly expenses 
under the bill's means test.
  I believe that we must ensure that we protect the victims of domestic 
violence if they are forced to file for bankruptcy. I urge my 
colleagues to support our amendment.


                           Amendment No. 2528

    (Purpose: To ensure additional expenses and income adjustments 
 associated with protection of the debtor and the debtor's family from 
    domestic violence are included in the debtor's monthly expenses)

  Mr. LEAHY. Mr. President, I am advised by the staff of the 
distinguished chairman that he would have no objection. I now ask 
unanimous consent to set aside the pending amendment so I may offer the 
Leahy-Murray-Feinstein amendment on domestic violence and bankruptcy 
that I just described.
  The PRESIDING OFFICER. Is there objection? Without objection, it is 
so ordered. The clerk will report.
  The legislative clerk read as follows:

       The Senator from Vermont [Mr. Leahy], for himself, Mrs. 
     Murray, and Mrs. Feinstein, proposes an amendment numbered 
     2528.

  Mr. LEAHY. Mr. President, I ask unanimous consent that reading of the 
amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       On page 7, line 22, insert after the period the following:
       ``In addition, the debtor's monthly expenses shall include 
     the debtor's reasonably necessary expenses incurred to 
     maintain the safety of the debtor and the family of the 
     debtor from family violence as identified under section 309 
     of the Family Violence Prevention and Services Act (42 U.S.C. 
     10408), or other applicable Federal law. The expenses 
     included in the debtor's monthly expenses described in the 
     preceding sentence shall be kept confidential by the court.''


                           Amendment No. 2529

 (Purpose: To save United States taxpayers $24,000,000 by eliminating 
       the blanket mandate relating to the filing of tax returns)

  Mr. LEAHY. Mr. President, I ask unanimous consent to set aside my own 
amendment in order to offer another amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered. The clerk 
will report.
  The bill clerk read as follows:

       The Senator from Vermont [Mr. Leahy] proposes an amendment 
     numbered 2529.

  Mr. LEAHY. Mr. President, I ask unanimous consent that reading of the 
amendment be dispensed with?
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       On page 115, line 23, strike all through page 117, line 20, 
     and insert the following:
       ``(iv) copies of all payment advices or other evidence of 
     payment, if any, received by the debtor from any employer of 
     the debtor in the period 60 days before the filing of the 
     petition;
       ``(v) a statement of the amount of projected monthly net 
     income, itemized to show how the amount is calculated; and
       ``(vi) a statement disclosing any reasonably anticipated 
     increase in income or expenditures over the 12-month period 
     following the date of filing''; and
       (2) by adding at the end the following:
       ``(d)(1) At any time, a creditor, in the case of an 
     individual under chapter 7 or 13, may file with the court 
     notice that the creditor requests the petition, schedules, 
     and a statement of affairs filed by the debtor in the case 
     and the court shall make those documents available to the 
     creditor who request those documents.
       ``(2)(A) At any time, a creditor in a case under chapter 13 
     may file with the court notice that the creditor requests the 
     plan filed by the debtor in the case.
       ``(B) The court shall make such plan available to the 
     creditor who request such plan--
       ``(i) at a reasonable cost; and
       ``(ii) not later than 5 days after such request.
       ``(e) An individual debtor in a case under chapter 7 or 13 
     shall file with the court at the request of any party in 
     interest--
       ``(1) at the time filed with the taxing authority, all tax 
     returns required under applicable law, including any 
     schedules or attachments, with respect to the period from the 
     commencement of the case until such time as the case is 
     closed;
       ``(2) at the time filed with the taxing authority, all tax 
     returns required under applicable law, including any 
     schedules or attachments, that were not filed with the taxing 
     authority when the schedules under subsection (a)(1) were 
     filed with respect to the period that is 3 years before the 
     order of relief;
       ``(3) any amendments to any of the tax returns, including 
     schedules or attachments, described in paragraph (1) or (2); 
     and''.

  Mr. LEAHY. Mr. President, I am offering this amendment to make this 
bill more workable in the real world and to save the taxpayers of this 
country $24 million over the next five years.
  This bankruptcy bill now requires filing of millions of copies of 
personal income tax returns. Section 315(b) of the bill requires 
debtors to file with the court copies of their tax returns for the 
three years preceding their bankruptcy filings as well as tax returns 
filed while the bankruptcy was pending.
  If this requirement was in effect last year, the 1.4 million 
Americans who filed for bankruptcy would have produced at least 4.2 
million copies of their tax returns. More than 4 million copies of tax 
returns would produce mountains of paperwork and clog the files of 
most, if not all, bankruptcy courts across the country.
  Where are the bankruptcy courts going to put these millions of copies 
of tax returns? And why do the courts need to keep them? Good questions 
that the sponsors of this bill have not answered.
  Most bankruptcy filers have no assets and little income so there is 
no reason to review their tax returns. These debtors have no ability to 
repay their debts and their creditors know it. This blanket requirement 
to file tax returns for the last three years for all debtors, 
regardless of the debtor's assets or income, fails to make any common 
sense. It is simply silly.
  Moreover, this blanket requirement to file tax returns ignores the 
reality that many debtors, just like other citizens, may not have 
access to their tax returns for the past three years.
  For example, a recently divorced mother of two children may not have 
copies of her past tax returns if the couple's tax returns are kept by 
her former husband. Or a debtor, just like other citizens, may not have 
copies of past records such as tax returns. In either case, the debtor 
would have to contact the Internal Revenue Service to request copies of 
past tax returns before being able to seek bankruptcy relief.
  Depending on the quick service of the IRS is not reassuring to an 
honest debtor who may honestly need bankruptcy relief. This mandate to 
keep copies of tax returns for the past three years is unnecessary and 
unrealistic.
  Indeed, this burdensome and unworkable mandate is opposed by the 
Consumer Bankruptcy Legislative Group, Department of Justice, 
Administrative Office of the U.S. Courts, Judicial Conference, and 
National Bankruptcy Conference. Bankruptcy judges, creditor and debtor 
attorneys and other practitioners know this mandate will not work in 
the real world.
  The Leahy amendment strikes this section of S. 625 and replaces it 
with the option that any party in interest may request and get a copy 
of a debtor's tax return after the bankruptcy filing.
  Under the Leahy amendment, a creditor, judge or trustee may force a 
debtor to file copies of tax returns if the facts of the case warrant 
it by simply asking for the returns. In most cases, a

[[Page S14076]]

party in interest will not want to review tax returns if a debtor has 
no assets or little income. But if a creditor, judge or trustee does 
want to copies of the tax returns then they simply request it under my 
amendment and the debtor must furnish past and current tax returns.
  This is a common sense approach to verifying debtor income and assets 
when a creditor, judge or trustee wants verification. The current 
blanket requirement for all debtors to file copies of their tax returns 
for the past three years will waste millions of taxpayer dollars.
  Indeed, the Congressional Budget Office estimates that it will cost 
$34 million over the next five years to store and provide access to 
more than 20 million tax returns. Some experts predict it will take up 
20 miles of shelf space to store all these tax returns.
  The Leahy amendment saves $24 million over the next five years by 
striking this mandatory tax return filing requirement, according to 
CBO.
  There are better ways to verify debtor income and assets that are 
workable, efficient and save taxpayer dollars. Under current law, U.S. 
Trustees and private trustees may review a debtor's tax returns if the 
facts of the case warrant it.
  In addition, the Leahy amendment permits any party in interest to 
request a debtor to file copies of his or her past and current tax 
returns. The party in interest does not have to a hearing or even give 
a reason for wanting the tax returns.
  But in the real world, a creditor or trustee will only want to see 
the tax returns of a debtor in a few cases--cases where there are 
actual questions about the debtor's assets or income. This targeted 
approach will save millions of taxpayer dollars and save the courts 
from filing millions of pages of unnecessary paperwork.
  I urge my colleagues to vote for the Leahy amendment to save U.S. 
taxpayers $24 million and make this bill far more workable in the real 
world.
  Mr. President, I understand we now have eight amendments pending. I 
note the latest one is a Leahy amendment. I see my distinguished 
colleague from Alabama on the floor. If somebody else wants to bring up 
another amendment, I have no objection to mine being set aside so they 
could do it. I am just trying to get these on the calendar, as the 
Senator knows and as Senator Torricelli and Senator Hatch and others 
have earlier today.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. SESSIONS. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SESSIONS. Mr. President, I thank the distinguished ranking member 
for his comments. I have enjoyed working with him on moving this bill.
  I thought I would mention a couple of things that are particularly 
valuable in the bill that may not be that clearly understood by most 
people.
  I had the privilege of offering a credit counseling amendment early 
on in this process a year and a half ago. I offered that after having 
spent almost an entire day at a nonprofit credit counseling agency in 
my hometown of Mobile, AL. I was extraordinarily impressed with what 
they do.
  They have individuals who come to them in financial trouble. They 
have a rule: They bring in the entire family. They sit down in a nice 
conference room, and they go over all the debts that are owed and the 
income that is coming in. They sit down and see if they can't help that 
family work their way out of the debt in which they find themselves. 
They have established over the years respect with financial 
institutions, such as credit card companies and banks. Those 
institutions will frequently reduce the amount of money they demand 
that is owed. They will reduce the interest rate that may be paid, if 
this person will make a good-faith effort to reorganize their finances 
and pay what they can pay on the debt.
  This is working all over America. In fact, there are credit 
counseling agencies in virtually every town and city in the Nation. 
They are serving a valuable purpose. They sit down with individuals and 
find out what is wrong with the family.
  It may not be known to everyone, but it is well known in professional 
circles that financial disputes are probably the most common cause of 
divorce in America. We know many people are in financial trouble 
because of alcoholism. Many people are in financial trouble because of 
gambling. Gambling is driving an increase in bankruptcy in a number of 
areas in this country. Some people simply have an inability to 
discipline themselves. One member of the family feels as though the 
other one is getting an advantage on them in spending, so they spend 
more and vice versa. They go on a downward spiral of financial 
management. We have individuals who have mental health problems who are 
simply not able to be disciplined about their money.
  Credit counseling is a tremendous thing. They care about the families 
with whom they are dealing. They help work with them to discover a way 
to work out their problems. It is a good thing.
  What this bankruptcy bill requires is that someone, before they file 
bankruptcy, at least go and talk to a credit counseling agency, to meet 
with them and see if that agency may have the ability to solve their 
problem short of filing bankruptcy.
  Most people do, in fact, want to pay their debts, and they work hard 
to try to pay their debts. If they are given this kind of option, where 
a company will reduce their interest or reduce their debt, they work 
out a payment plan. The family signs onto it, the mother and father, 
son and daughter. They can restore pride and confidence. They can learn 
something about how to manage money. They may well receive marital 
counseling, mental health treatment, Gamblers Anonymous references, or 
other help.

  What happens in bankruptcy today is that somebody is sued for a debt 
they haven't paid. They don't know what to do. They have seen on the 
TV, or in the newspaper: Call this lawyer if you have debt problems. So 
they call the lawyer and he sits down and says: The thing for you to do 
is file bankruptcy. There will be a $1,000 fee, and you will wipe out 
all your debts. They will say something like: How am I going to pay 
you? I don't have $1,000. He will say something like: You won't have to 
pay any more payments on your credit card. In fact, go buy everything 
you can with your credit card because we are going to wipe out all 
those debts when we file, unless they are short-term debts concurrent 
with the bankruptcy filing. The lawyer will say: You do that and pay 
me, and we will wipe out everything. That is what you ought to do.
  The lawyer has a financial incentive there. He spends no time with 
the family. Oftentimes, they tell me the paralegals and staff people 
fill out all the forms and the paperwork; the lawyer hardly even meets 
the client. He goes down in court and calls out their name and they 
come up to him, and he introduces them to the judge. They do the 
bankruptcy and they go home. And nothing has been done about the 
fundamental problem in that family, or the lack of discipline which is 
often the case that causes bankruptcy. Many bankruptcies--a substantial 
percentage --are due to very severe events. But a substantial portion 
are also caused by a gradual descent into debt, and a lack of 
discipline, or some sort of emotional or psychological problem.
  I believe if we can give them the choice to go through credit 
counseling and work out ways to deal with their debts as a family, we 
will do something good for this country. How many would choose this? I 
don't know. But most people who have been sued or are getting credit 
calls over debts they owe from all kinds of debtors and creditors get 
nervous and don't know what to do. They are told file bankruptcy and 
that is what they do. They think they have no choice. I believe we can 
do better than that. This bill will lead us in that direction. I 
believe it will be a historic step for this system.
  We also have people who are filing repeat bankruptcies, people who 
file bankruptcy again and again. This bill will attempt to reduce that. 
More than 10 percent of the people who file for bankruptcy have 
previously filed. In some Federal court districts in America, 40 
percent of the consumer bankruptcies are repeat filers. They learned 
the first time it worked, so they do it

[[Page S14077]]

again. They haven't learned the discipline and effort that it takes to 
maintain an honest credit rating.
  So one of the things this act requires is that before a person is 
discharged from bankruptcy, they will have to have some counseling on 
how to manage their debt, and perhaps they will not come back again. I 
think that would be a good thing.
  We are concerned about fraud in bankruptcy. The forms are basically 
self-proving. They are accepted by the court. Whatever a person says 
their income is and their ability to repay is, it is basically accepted 
and rarely verified. We find that is a problem. So they will have to 
file documents with their bankruptcy file. It will include a Federal 
tax return, monthly income and expenses, their actual wage stubs, how 
much money they are actually making, so it will allow a judge to decide 
properly what the right procedure is under the circumstances. It allows 
that a person to whom a debt is owed gets notice--a small businessman, 
garage owner, furniture store, or a doctors office gets a note from the 
court that Billy Jones is filing for bankruptcy, and you are notified 
as a creditor. This says you don't have to have a lawyer, but you can, 
in fact, go on your own and defend your interests in the bankruptcy 
court. You may need a lawyer, in which case you can hire a lawyer. But 
it will clearly make it known that creditors who have clearly proven 
debt can go down to the bankruptcy court and establish that debt and 
defend their interest, without having to spend more money on an 
attorney than perhaps the debt is worth. I think that would be good.

  We are dealing with a huge increase in personal bankruptcies--1.4 
million, a 94-percent increase, since 1990. In many States in this 
country, in many Federal bankruptcy districts, many people are filing 
under chapter 13. When you file under chapter 13, what you do is you go 
to court and you say: I owe all this money, judge. I have this much 
income and I would like to work my way out of it. These people are 
suing me. I am getting phone calls at home. I want you to have a stay, 
to stop them all from suing me. Take my money and tell me who to pay 
and I will pay my money, every bit I can, to pay off these debts.
  That is a preferable way, in my opinion, for a person to deal with 
financial difficulties, if they can't pay their bills. Some people are 
so far in debt that it will be hopeless; straight bankruptcy chapter 7 
is for them.
  Under the present state of the law, amazing though it might be, there 
is no standard on that. The debtor himself can choose whether to go 
into chapter 13 or chapter 7. He can choose whether or not to pay off 
his debts. In Alabama, I am proud to say, in the northern district of 
Alabama, over 60 percent of the individual filers choose to file 
chapter 13 and repay a large portion of their debt. That is something I 
think reflects well on the people of the northern district of Alabama. 
The numbers are high in the other districts in Alabama--over 50 
percent, choose Chapter 13. But we know in certain other districts in 
this country, the number of people filing chapter 13 is under 10 
percent. Many of these people have high incomes and could, in fact, 
easily pay off all or part of their debt.
  So that is why we have said in this legislation that if your income 
is above the median income, which for a family of two is $40,000, and 
for a family of four, over $50,000--if you are making above the median 
income, then you ought to be considered by the judge for repayment of 
as much of your debt as you can under the chapter 13 bankruptcy. So for 
the first time we will have a realistic way for a judge to objectively 
analyze these debtors, to see if they can pay back some of their debts.
  That is why Senator Hatch says the average bankruptcy costs the 
average family $400 per year. When people don't pay their debts, 
somebody else has to pay them. It drives up the cost of business, the 
interest rates at the bank, and it drives up the charges the furniture 
store is going to make, or that the doctor office has to charge, to 
come out ahead if people are not paying their debts. It is that simple.
  Paying your debt is a big deal. If we ever get to the point in this 
country where people don't feel like they have to pay debts back and 
they can wipe them out whenever they want to, we will have endangered 
the economic strength and commercial vitality of our Nation. Make no 
mistake about it. Our legal system and our economic system is based on 
honesty and integrity and responsibility. People pay their taxes based 
on their own calculations. They add up the numbers and they write that 
check to the Federal Government. That is why taxes ought to be low 
because when we ask too much of people they start cheating; they feel 
justified in cheating. We have relatively low taxes compared to other 
nations, and we have the lowest amount of cheating in the world.
  We are making some important progress with this legislation. It will 
help us economically because, as the Secretary of the Treasury, Mr. 
Summers, has said, bankruptcy costs do add to interest rates. Everybody 
will pay higher interest rates if the bankruptcy filings are up. If 
bankruptcies are down, interest rates can drop. It will be passed on to 
the consumer. It ultimately always is.

  I wish to express my appreciation to Senator Grassley, who has worked 
so hard on this legislation. He has listened to everybody concerned. He 
has spent an extraordinary number of hours with the members of the 
Democratic leadership and members of the committee on both sides of the 
aisle. He has worked with them to achieve a bill that is responsive to 
virtually every complaint that can be thought up.
  Essentially this same bill passed this body 97 to 1 last year. It 
passed the House with over 300 votes. Why we couldn't get it finally 
passed last time is beyond my comprehension. It was nothing more than a 
bunch of obstructive tactics. I can't accept the complaint and refuse 
to accept the argument that women and children are somehow being abused 
under this act when every objective analysis would indicate that we are 
making a historic move toward providing the greater protection that has 
ever been provided to alimony and child support payments. That is 
absolutely false. Why people tend to want to attack this bill to delay 
its passage and frustrate us in this effort is beyond me.
  I believe we are eliminating abuses in the system. For example, I 
point out a landlord who leases an apartment to a tenant; that tenant's 
lease is for 1 year, that year is up, and he owes the landlord money. 
The landlord seeks to move him out because he is going to rent the 
apartment to somebody else. That tenant can file for bankruptcy and 
stay, or stop, any lawsuits for eviction. Months can go by. And the 
landlord has to hire an attorney to go to bankruptcy court to try to 
get the ``stay'' lifted--that is what they call it--on filing the 
eviction notice so they can go forward with it. This bill would say if 
your lease is up, you can continue with your case. Eventually the 
landlord always wins, but often it takes months to get a final hearing, 
and it will cost him a good deal of money and attorney's fees.
  There are many abuses such as this in the system. Those kinds of 
things ought to be eliminated.
  We have had the experience of the existing system since 1978. We have 
not given it the kind of overhaul it needs. We have completed that now. 
I am proud of this legislation. I know that Senator Hatch, who chairs 
the Judiciary Committee and has worked extraordinarily hard on it, also 
shares that view.
  I am also pleased to have the support and leadership of Senator 
Torricelli and the ranking member of the subcommittee. He has worked 
hard for this bill. He understands the economics behind it. He 
understands that this is going to help those who are in need and at the 
same time is not going to allow abuses to occur in the system.
  We are at a good point. I think we are going to have a vote next 
week. I am confident that once again we will have an overwhelming vote 
for this legislation.

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