[Congressional Record Volume 145, Number 162 (Tuesday, November 16, 1999)]
[Senate]
[Pages S14605-S14609]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                     BANKRUPTCY REFORM ACT OF 1999

  The PRESIDING OFFICER. 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.

  Pending:

       Feingold amendment No. 2522, to provide for the expenses of 
     long term care.
       Hatch/Torricelli amendment No. 1729, to provide for 
     domestic support obligations.
       Leahy amendment No. 2529, to save United States taxpayers 
     $24,000,000 by eliminating the blanket mandate relating to 
     the filing of tax returns.
       Wellstone amendment No. 2537, to disallow claims of certain 
     insured depository institutions.
       Wellstone amendment No. 2538, with respect to the 
     disallowance of certain claims and to prohibit certain 
     coercive debt collection practices.
       Feinstein amendment No. 1696, to limit the amount of credit 
     extended under an open end consumer credit plan to persons 
     under the age of 21.
       Feinstein amendment No. 2755, to discourage indiscriminate 
     extensions of credit and resulting consumer insolvency.
       Schumer/Durbin amendment No. 2759, with respect to national 
     standards and homeowner home maintenance costs.
       Schumer/Durbin amendment No. 2762, to modify the means test 
     relating to safe harbor provisions.
       Schumer amendment No. 2763, to ensure that debts incurred 
     as a result of clinic violence are nondischargeable.
       Schumer amendment No. 2764, to provide for greater accuracy 
     in certain means testing.
       Schumer amendment No. 2765, to include certain dislocated 
     workers' expenses in the debtor's monthly expenses.
       Dodd amendment No. 2531, to protect certain education 
     savings.
       Dodd amendment No. 2753, to amend the Truth in Lending Act 
     to provide for enhanced information regarding credit card 
     balance payment terms and conditions, and to provide for 
     enhanced reporting of credit card solicitations to the Board 
     of Governors of the Federal Reserve System and to Congress.
       Hatch/Dodd/Gregg amendment No. 2536, to protect certain 
     education savings.
       Feingold amendment No. 2748, to provide for an exception to 
     a limitation on an automatic stay under section 362(b) of 
     title 11, United States Code, relating to evictions and 
     similar proceedings to provide for the payment of rent that 
     becomes due after the petition of a debtor is filed.
       Schumer/Santorum amendment No. 2761, to improve disclosure 
     of the annual percentage rate for purchases applicable to 
     credit card accounts.
       Durbin amendment No. 2659, to modify certain provisions 
     relating to pre-bankruptcy financial counseling.
       Durbin amendment No. 2661, to establish parameters for 
     presuming that the filing of a case under chapter 7 of title 
     11, United States Code, does not constitute an abuse of that 
     chapter.
       Torricelli amendment No. 2655, to provide for enhanced 
     consumer credit protection.
       Wellstone amendment No. 2752, to impose a moratorium on 
     large agribusiness mergers and to establish a commission to 
     review large agriculture mergers, concentration, and market 
     power.


                           Amendment No. 2663

              (Purpose: To make improvements to the bill)

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

       The Senator from New York [Mr. Moynihan] proposes an 
     amendment numbered 2663.

  Mr. MOYNIHAN. 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 107, line 7, strike ``(C)(i) for purposes of 
     subparagraph (A)--'' and insert the following:
       ``(C) for purposes of subparagraph (A)--
       ``(i) if the debtor, and the spouse of the debtor in a 
     joint case, as of the date of the order for relief, have a 
     total current monthly income greater than the national or 
     applicable State median family monthly income calculated on a 
     monthly basis for a family of equal size, or in the case of a 
     household of one person, the national median household income 
     for one earner (except that for a household of more than 4 
     individuals, the median income shall be that of a household 
     of 4 individuals, plus $583 for each additional member of 
     that household)--''.
       On page 107, lines 8 and 14, move the margins 2 ems to the 
     right.
       On page 107, line 19, strike ``and'' and all that follows 
     through line 20 and insert the following:
       ``(ii) if the debtor and the debtor's spouse combined, as 
     of the date of the order for relief, have a total current 
     monthly income that does not satisfy the conditions of clause 
     (i)--
       ``(I) consumer debts owed to a single creditor and 
     aggregating more than $1,075 for luxury goods or services 
     incurred by an individual debtor on or within 60 days before 
     the order for relief under this title are presumed to be 
     nondischargeable; and
       ``(II) cash advances aggregating more than $1,075 that are 
     extensions of consumer credit under an open end credit plan 
     obtained by an individual debtor on or within 60 days before 
     the order for relief under this title are presumed to be 
     nondischargeable; and

[[Page S14606]]

       ``(iii) for purposes of this subparagraph--''.
       On page 111, line 20, strike ``(14A)(A) incurred to pay a 
     debt that is'' and insert the following:
       ``(14A) if the debtor, and the spouse of the debtor in a 
     joint case, as of the date of the order for relief, have a 
     total current monthly income greater than the national or 
     applicable State median family monthly income, calculated on 
     a monthly basis for a family of equal size, or in the case of 
     a household of one person, the national median household 
     income for one earner (except that for a household of more 
     than 4 individuals, the median income shall be that of a 
     household of 4 individuals, plus $583 for each additional 
     member of that household)--
       ``(A) incurred to pay a debt that is''.
       On page 112, line 2, insert ``, with respect to debtors 
     with income above the amount stated,'' after ``that''.

  Mr. MOYNIHAN. Mr. President, the amendment is a small matter in the 
larger context of the legislation we are dealing with, but a very large 
matter to the people we are talking about who are low-income debtors. 
This addresses two aspects of the bill that have disproportionate 
negative impacts on low-income debtors.
  The first aspect concerns consumer debt and cash advances. The second 
relates to debt incurred to pay nondischargeable debt. By 
nondischargeable debt, we mean the debt a consumer has to repay even if 
they declare bankruptcy. There are very common-sense provisions in our 
bankruptcy laws that say if you acquire a large debt in a short period 
before declaring bankruptcy, there is some presumption that you knew 
where you were heading and you were taking advantage of the bankruptcy 
laws.
  Under current law, consumer debts owed to a single creditor--
excluding ``goods or services reasonably necessary''--of more than 
$1,075 obtained within 60 days of bankruptcy and cash advances of more 
than $1,075 obtained within 60 days of bankruptcy are presumed to be 
fraudulent and thus nondischargeable.
  S. 625 seeks to expand the circumstances under which such 
transactions would be considered fraudulent in two ways: First, by 
lowering the threshold amount that would trigger the fraudulent 
presumption to $250 for consumer debts and $750 for cash advances; and, 
second, by increasing the number of days prior to bankruptcy during 
which debt incurred and cash advances obtained would be presumed 
fraudulent--to 90 days for consumer debts and to 70 days for cash 
advances.
  Under this amendment, the new threshold amounts of money and numbers 
of days proposed in S. 625 would apply to debtors whose total monthly 
income is greater than the median monthly income, but they would not 
apply to low-income debtors. Low-income debtors do not have much money 
and, at times, need to charge certain items or to take a cash advance 
to buy necessary goods, such as clothing. It is wrong--or so I 
believe--to assume these people acted fraudulently. They acted of 
necessity--or I believe that is a fair assumption. They did what they 
needed to do to get by. The thresholds as they exist under current law 
would continue to apply to median and below-median income families.
  I will make the point that we are, by this amendment, not changing 
current law. We are not introducing a novel concept into bankruptcy 
proceedings. We are providing for low-income persons to continue to 
have the same presumptions in their favor, or against them, that we 
have lived with for many years, with fair success, as I understand it.
  S. 625 adds a new exception to discharge for debt incurred to pay 
nondischargeable debt and creates a presumption of nondischargeability 
for debts incurred to pay such debt within 70 days of filing the 
bankruptcy petition. This amendment would retain the current state of 
the law as to debt incurred to pay nondischargeable debt for median and 
below-median income families.
  I do believe this is a worthy amendment. I commend it to my 
colleagues. I have had the opportunity to have worked through this, and 
I express my own gratitude that in many years distant past I did not 
decide to become a bankruptcy lawyer. That would have been a complexity 
beyond my capacity.
  Mr. President, I thank the Chair for his courtesy and the Senate for 
its equal attention. I commend this matter. I think it is something we 
would be wise to do. The essence of the proposal is: For low-income 
debtors, don't change the rules. They are not the problem. Don't create 
problems for them.
  A well-documented and prevalent form of abuse by some creditors is 
the filing of unfounded complaints alleging that debtors committed 
fraud, or the use of the threat of such a complaint, to coerce debtors 
into giving up valuable bankruptcy rights, typically by agreeing that 
all or part of the debt is not discharged.
  Such threats are especially potent against low-income debtors. That 
is why the safe harbor in my amendment is necessary. These debtors 
often do not have lawyers, and they certainly do not have the funds to 
pay hundreds or even thousands of dollars to defend against creditor 
litigation. When a creditor threatens to or actually files a complaint 
alleging fraud, the debtor has to choose either to pay to defend 
against the complaint (requiring a lump sum payment to an attorney of 
at least several hundred dollars and usually more) or to make a deal 
with the creditor (who will offer to take a reaffirmation or settlement 
with ``low monthly payments'' of perhaps $50). Most cash-strapped 
debtors will take the ``low monthly payment'' option, often the only 
thing they can afford, regardless of whether the creditor has a good 
case.
  This scenario is played out already, in the area of dischargeability 
litigation. Several courts have found practices of creditors filing 
``fraud'' dischargeability cases, for which there is no factual basis, 
simply to coerce reaffirmations, and actually dropping those cases when 
they are defended. Most of these cases are in fact settled through 
reaffirmations, because the debtors have no choice but to take the 
``low monthly payment'' option.
  The new presumptions of fraud proposed in S. 625, against debtors who 
have charged as little as $250 on a credit card, and under the 
amorphous standard that a debt was incurred to pay another debt, will 
embolden creditors to file many more of these complaints. My amendment 
to S. 625 addresses these presumptions. I will explain how.
  First, under current law, consumer debts owed to a single creditor 
(excluding ``goods or services reasonably necessary'') of more than 
$1,075 obtained within 60 days of bankruptcy and cash advances of more 
than $1,075 obtained within 60 days of bankruptcy are presumed to be 
fraudulent, and thus nondischargeable. S. 625 seeks to expand the 
circumstances under which such transactions would be considered 
fraudulent in two ways: first, by lowering the threshold amount that 
would trigger the fraud presumption to $250 for consumer debts and to 
$750 for cash advances; and, second, by increasing the number of days 
prior to bankruptcy during which debt incurred and cash advances 
obtained would be presumed fraudulent (to 90 days for consumer debts 
and to 70 days for cash advances).
  Under my proposed amendment, the threshold amounts of money and 
numbers of days triggering a presumption of fraud in S. 625 would only 
apply to debtors whose total monthly income is greater than the median 
monthly income, while the current thresholds would continue to apply to 
median and below-median income families.
  Second, S. 625 adds a new exception to discharge for debt--a loan or 
credit card debt--incurred to pay nondischargeable debt with the intent 
to discharge such debt in bankruptcy; it also creates a presumption of 
nondischargeability for debts incurred to pay nondischargeable debt 
within 70 days prior to filing the bankruptcy petition. My proposed 
amendment would retain the current state of the law as to debt incurred 
to pay nondischargeable debt for median and below-median income 
families.
  Nothing in the amendment would prevent a creditor with evidence of 
fraud from pursuing a case against a low-income debtor. However, the 
creditor would not be entitled to the benefit of a presumption to make 
its case. And low-income debtors would not be forced to spend money 
they don't have to defend against an expanded presumption of their 
dishonesty.
  The filing of abusive dischargeability complaints is not a new 
phenomenon in bankruptcy law. It was the subject of legislation when 
the Bankruptcy Code

[[Page S14607]]

was first passed in 1978. At that time, a strong attorney's fee 
provision was added to the Code to deter such creditor tactics. The 
House Judiciary Committee report (95-595, p.131) found the problem 
prevalent at that time:

       The threat of litigation over this exception to discharge 
     and its attendant costs are often enough to induce the debtor 
     to settle for a reduced sum, in order to avoid the costs of 
     litigation. Thus, creditors with marginal cases are usually 
     able to have at least part of their claim excepted from 
     discharge (or reaffirmed), even though the merits of the case 
     are weak.

  Unfortunately, in 1984 Congress weakened the attorney's fees 
provision and added, for the first time, a presumption of fraud based 
on purchases in the period immediately before bankruptcy. Then the 
concerns of the House Judiciary Committee proved prescient. Creditors 
began filing fraud complaints in large numbers, and courts have found 
that most debtors settle those complaints, regardless of how weak they 
are, rather than incur the expense of litigation.
  The amendment before us is a very modest one. It does not return to 
the law the strong attorney's fee provision enacted in 1978. It does 
not eliminate the presumptions of fraud that were added in 1984 and 
made more expansive in 1994. It does not even completely eliminate the 
additional presumptions of fraud added by this bill, or the new 
exceptions to discharge. The only thing my amendment does is to make 
these new presumptions of fraud inapplicable to families below median 
income--those who would have the most difficulty affording a defense 
against unfounded fraud complaints.
  The amendment will not shelter anyone who commits fraud. The current 
fraud provisions of the Bankruptcy Code will continue to apply to them. 
Those provisions already clearly deem fraudulent any debt that is 
incurred with no intent to pay it or with an intent to discharge it in 
bankruptcy. My amendment merely requires that a creditor produce 
meaningful evidence to establish fraud, rather than rely on S. 625's 
new presumption of fraud, at least in cases filed by low-income 
families who are most vulnerable to, and least able to afford the 
expenses associated with, creditor-initiated litigation.


                         Privilege of the Floor

  Mr. MOYNIHAN. Mr. President, I ask unanimous consent that during the 
pendency of this amendment, Kathleen McGowan of my staff be allowed 
privileges of the floor.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. MOYNIHAN. Mr. President, seeing no other Senators seeking 
recognition, 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. GRASSLEY. 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. GRASSLEY. Mr. President, I ask unanimous consent that tomorrow, 
immediately following the Wellstone amendment, there be a vote on the 
Moynihan amendment, except for 4 minutes in between to be evenly 
divided for the proponents and the opponents of the amendment.
  The PRESIDING OFFICER. Is there objection?
  Mr. REID. Mr. President, reserving the right to object, it is my 
understanding that no amendments would be in order to the Moynihan 
amendment prior to the vote.
  Mr. GRASSLEY. That is right.
  Mr. REID. No objection.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRASSLEY. Mr. President, I know the Senator from New York is very 
sincere about the amendment he has proposed. I know he is cognizant of 
a discussion on a similar subject that we had on the amendment by the 
Senator from Connecticut last week. I think in a good-faith effort he 
comes in with something that does not go quite as far as Senator Dodd's 
amendment goes. But I still think, for the very same reasons I 
expressed opposition to the Dodd amendment last week, I must express 
opposition to the Moynihan amendment.
  In addition, I think perhaps by setting up one category for people 
who are in bankruptcy court who are below the national average and 
allowing a certain behavior on their part that you don't for people 
above the national average of income sets up a double standard that is 
not justified.
  I oppose this amendment for pretty much the same reasons I opposed 
the Dodd amendment--that Congress needs to be very careful to fight 
against fraud and abuse and to say no to fraud and no to this financial 
abuse whenever we can. It seems to me it is a standard of ethic that is 
justified--being against fraud and abuse and treating it the same 
wherever it might happen.
  One type of fraud and abuse involves loading up on debt right before 
bankruptcy and then discharging that debt. It doesn't seem to me we 
need to allow that above the limits of our legislation. The bill before 
us now contains provisions limiting the amount of debt incurred to 
purchase luxury goods within 90 days of declaring bankruptcy.
  Senator Moynihan's amendment would let people below the median income 
load up on more debt than higher income people. This lets people at low 
income levels get away with fraud and more fraud. I think this is not a 
very good idea. I respectfully oppose this amendment with obvious good 
intentions. I have never known Senator Moynihan to have anything but 
good intentions, but this is one amendment that could bring about very 
unfair results as we allow people at a lower income get away with more 
fraud and abuse than we would people with higher income.
  I oppose the amendment and yield the floor.
  Mr. REID. Mr. President, to engage my friend on the bill generally, 
we have been working with the ranking member of the Judiciary 
Committee, Senator Daschle's floor staff, and Senator Grassley and his 
staff during all or parts of the day. We are in a position now where 
this bill can be completed in a relatively short period of time. We 
have worked with Members on this side of the aisle, and with the 
cooperation of the manager of this bill there is a tentative agreement 
to accept about 10 amendments that the Democrats have offered. They may 
want to change the amendments in some fashion. We have been able to 
work on a finite number of hours that would be left in those 
amendments, with the exception of one Senator.
  In short, for notice to the other Members of the Senate, with a 
little bit of luck we can finish this bill relatively shortly. I hope 
the majority allows Members to continue to work on this bill to 
complete it.
  Mr. GRASSLEY. Mr. President, responding to the Senator from Nevada 
and going back to his efforts of last Wednesday before we adjourned for 
the national Veterans Day holiday, I can say that on that day as well 
as other periods of time over the weekend, and even as late as 
yesterday, between his efforts working with me and the efforts of our 
respective staffs, I have found the Senator from Nevada very 
cooperative. As a result of his cooperation, what we thought was an 
impossible amount of amendments to work our way through to bring this 
bill to finality has been dramatically reduced. The Senator needs to be 
credited with that extra effort.
  I encourage Members on my side of the aisle to reach agreement. There 
may be one or two items that are above my pay grade, maybe even above 
the pay grade of the Senator from Nevada, that will have to be decided 
by leadership, but except for those items, we are making tremendous 
progress. I want to work in that direction, and I assure the Senator 
from Nevada of my efforts in that direction.
  Mr. REID. Mr. President, I say to my friend from Iowa, we have made 
great progress. Originally, the bill had about 320 amendments. We are 
now down to no more than 15 amendments. Of those amendments, some can 
be negotiated. There are some that will require votes.
  As I indicated, there is only one Senator, who has two amendments, 
who hasn't agreed on time for those amendments. Of course, if everyone 
is serious about completing the bankruptcy bill, going from 320 
amendments to approximately 15 amendments says it all. We should 
complete this bill. Significant progress has been made.
  I acknowledge there are a couple of issues that will be more 
difficult. However, people on our side--even on those two amendments--
have agreed to times. One Senator has agreed to a 30-

[[Page S14608]]

minute time agreement; the other Senator has agreed to a 70-minute time 
agreement. As contentious as these two amendments might be, we 
recognize we are in the minority. We are willing, in spite of our being 
in the minority, to agree to a time limit to let the will of this body 
work. We would agree to a way of disposing of those. Two Senators feel 
very strongly that they deserve a vote on these two amendments.
  Other than those two amendments, I think we should be able to go 
through this bill at a relatively rapid rate. From all I have been able 
to determine, we are not going to be leaving here tomorrow anyway. We 
should try to complete this bill if at all possible. It would be a 
shame if cloture were attempted to be invoked on this bill, after 
having gone from 320 amendments to a mere handful. I think that would 
leave a pretty good argument on the side of the minority not to go 
along with cloture. We have done everything we can to be reasonable. A 
few Senators desire to offer amendments. They should have the right to 
offer those amendments.

  I have appreciated the cooperation of the Senator from Iowa, the 
manager of this bill, and his staff. They have been very easy to work 
with and very understanding of what we have been trying to accomplish.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Smith of Oregon). The clerk will call the 
roll.
  The legislative clerk proceeded to call the roll.
  Mr. GRASSLEY. 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. GRASSLEY. Mr. President, I add to what the Senator from Nevada 
has said about bringing this bill, hopefully, to finality within just 
the last few days of this session, and I remind everybody that should 
be possible because of the bipartisan cooperation we had in drawing up 
the bill that brought the Senate to this point, as well as the fact 
that similar legislation passed last year on a vote of 97-1, I believe.
  I ask unanimous consent to lay the pending Moynihan amendment aside.
  The PRESIDING OFFICER. Without objection, it is so ordered.


               Amendments Nos. 2529 And 2478, As Modified

  Mr. GRASSLEY. I ask unanimous consent to modify amendments 2529 and 
2478, and I send the modifications to the desk.
  The PRESIDING OFFICER. The clerk will report.

       The Senator from Iowa [Mr. Grassley], for Mr. Thurmond, 
     proposes an amendment No. 2478, as modified.
  Mr. GRASSLEY. These amendments have been cleared by both sides. I ask 
unanimous consent they be agreed to en bloc and the motion to 
reconsider be laid upon the table.

  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendments (Nos. 2529 and 2478), as modified, were agreed to, as 
follows:


                           amendment no. 2529

       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, 11 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''
       At the appropriate place, insert the following:
       ``In the case of an individual under chapter 7, the court 
     shall not grant a discharge unless requested tax documents 
     have been provided to the court. In the case of an individual 
     under chapter 11 or 13, the court shall not confirm a plan of 
     reorganization unless requested tax documents have been filed 
     with the court.''
                                  ____



                           AMENDMENT NO. 2478

 (Purpose: To provide for exclusive jurisdiction in Federal court for 
           matters involving bankruptcy professional persons)

       On page 124, insert between lines 14 and 15 the following:

     SEC. 322. EXCLUSIVE JURISDICTION IN MATTERS INVOLVING 
                   BANKRUPTCY PROFESSIONALS.

       Section 1334 of title 28, United States Code, is amended--
       (1) in subsection (b) by striking ``Notwithstanding'' and 
     inserting ``Except as provided in subsection (e)(2), and 
     notwithstanding''; and
       (2) amending subsection (e) to read as follows:
       ``(e) The district court in which a case under title 11 is 
     commenced or is pending shall have exclusive jurisdiction--
       ``(1) of all the property, wherever located, of the debtor 
     as of the commencement of such case, and of property of the 
     estate; and
       ``(2) over all claims or causes of action that involve 
     construction of section 327 of title 11, United States Code, 
     or rules relating to disclosure requirements under section 
     327.

  Mr. SPECTER. Mr. President, I seek recognition to discuss two 
important provisions that were added to the bankruptcy reform bill by 
unanimous consent. The first provides that bankruptcy attorneys who 
represent debtors will be liable for paying certain attorneys' fees 
only if their own actions are ``frivolous''--the bill had originally 
required these attorneys to pay fees for merely losing the argument on 
a motion to remove a case from Chapter 7 to Chapter 13. The second of 
these provisions empowers judges to waive the bankruptcy filing fee for 
individuals who cannot afford to pay it, even in installments. I have 
fought for these two provisions, together with Senator Feingold, since 
this bill first came before the Senate Judiciary Committee last 
Congress, and I believe their inclusion in the bill is a significant 
improvement that will ensure sufficient access to justice for all who 
seek relief in our bankruptcy courts.
  As originally drafted, the bankruptcy bill provided that if a debtor 
files in Chapter 7, and a bankruptcy trustee prevails on a motion to 
remove the debtor to Chapter 13 because the debtor is found to have the 
ability to pay at least 25% of his debts, then the debtor's attorney 
must pay the reasonable costs and attorneys' fees incurred by the 
trustee in filing and arguing the removal motion.
  This was an inappropriate provision. We would have had attorneys 
being penalized not because they were bad actors, but because they 
engaged in zealous advocacy on behalf of clients and happened to lose 
the argument. This would have had an enormous chilling effect on 
debtors' attorneys. In all cases where the outcome was less than 
certain, lawyers would have been inclined to file their clients in 
Chapter 13, even if they truly believe that the clients belong in 
Chapter 7, in order to avoid the penalty.
  When the bill came before the Senate Judiciary Committee last 
Congress, I offered an amendment together with Senator Feingold to 
provide that the debtors' attorneys should pay these fees only if their 
actions in filing in Chapter 7 were ``frivolous.'' Our amendment was 
defeated by a roll call vote of 9-9. We then offered our amendment on 
the Senate floor, where it was tabled by a vote of 57-42.
  As the result of our efforts last Congress, the attorneys' fees 
standard was improved when the bill was re-introduced this Congress. 
The current version of the bill provides that lawyers must pay these 
fees only if their actions in filing in Chapter 7 were not 
``substantially justified.'' Still, I believe that this standard is too 
broad and will still chill attorneys from zealous advocacy. As in every 
other area of the law, lawyers must be punished only if their actions 
are ``frivolous'' or in

[[Page S14609]]

bad faith. I am glad that this is the standard that is now in the bill.
  A second problem with the bankruptcy bill as originally drafted was 
that it did not permit bankruptcy judges to waive the bankruptcy filing 
fee for indigent individuals. Individuals who petition for Chapter 7 
bankruptcy must pay a filing fee of approximately $175. There are many 
individuals who are so indigent by time they decide to seek the relief 
of bankruptcy, however, that they cannot even afford this relatively 
small fee. As a result, some individuals are actually too poor to go 
bankrupt. This is an absurd result. In such limited cases, we must 
empower a judge to decide that the filing fee can waived.
  Many individuals opposed to waiving the filing fee have argued that 
doing so would open the door to an enormous increase in the number of 
individuals taking advantage of the bankruptcy system. The idea is that 
``free'' bankruptcies will lead to a bankruptcy bonanza.
  Unfortunately, these individuals have failed to look at the record. 
In the appropriations bill for FY `94, Congress authorized a pilot in 
forma pauperis program in six federal judicial districts, including 
Eastern District of Pennsylvania, for three years. These pilots 
demonstrated that the program worked as intended, and did not 
significantly change the number or nature of bankruptcy filings.
  In the six pilot districts, waivers were requested in only 3.4% of 
all non-business Chapter 7 cases, and waivers were granted in only 2.9% 
of all non-business Chapter 7 cases. This number was small enough that 
it did not lead to a significant increase in the number of overall 
Chapter 7 filings or a significant loss in revenue to the courts.
  When the bankruptcy bill was before the Senate Judiciary Committee 
last Congress, I offered an amendment to permit the waiver of filing 
fees together with Senator Feingold. Our amendment was defeated in 
Committee by a vote of 9-9. When we introduced our amendment on the 
floor of the Senate, however, the motion to table the amendment was 
rejected by a vote of 47-52, and the amendment was accepted into the 
bill. I am glad that this Congress our waiver provision has been 
included without the necessity of a vote.
  Taken together, these two provisions ensure that all who are in need 
will have access to our bankruptcy courts and will enjoy the benefits 
of zealous advocacy on their behalf that is the cornerstone of our 
legal system. They are valuable improvements, and I commend Senators 
Grassley, Leahy, Torricelli and Feingold for their inclusion in the 
bill.
  Mr. GRASSLEY. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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