[Congressional Record Volume 146, Number 3 (Wednesday, January 26, 2000)]
[Senate]
[Pages S49-S52]
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 assistant legislative clerk read as follows:

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

  Pending:

       Hatch/Torricelli amendment No. 1729, to provide for 
     domestic support obligations.
       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. 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.

[[Page S50]]

       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.
       Feingold amendment No. 2779 (to Amendment No. 2748), to 
     modify certain provisions providing 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.

  Mr. HATCH. Mr. President, I notice the distinguished minority whip is 
here. If he has any comments, I certainly defer to him.
  Mr. REID. Mr. President, the minority is ready to proceed on this 
legislation. We have Senators who are ready to speak on this as soon as 
the acting leader completes his remarks, and we hope to complete this 
legislation when all the amendments are debated. We have structured 
time to complete this bill, and we look forward to full debate on all 
the issues.

  Mr. HATCH. I thank the Senator. I thank my colleagues.
  Mr. President, I am pleased that we have finally reached an agreement 
to complete floor consideration of the bankruptcy reform legislation. 
It was my intention that we finish consideration and pass this bill 
tonight, but we cannot get it done so we will do it next Tuesday. To 
that end, I hope any Member who intends to offer an amendment under the 
agreement comes down and begins debating it as soon as possible.
  First, I commend everyone who has worked hard to make this agreement 
a reality. It took a lot of effort and cooperation to come together and 
get to where we are today. My staff, the majority and minority 
leadership and floor staffs, Senator Leahy's and Senator Reid's staffs, 
Senator Grassley's staff, and Senator Gramm's staff all worked 
literally the whole day yesterday to craft the agreement we are 
operating under. We have a lot of work still ahead of us. We not only 
have the 13 amendments we must consider today, but we have a number of 
major issues to resolve in conference. This bill is far from becoming 
law at this point, but I am optimistic that we can work together as we 
have done in the past to have a fair and balanced reform bill that the 
President can sign.
  Mr. President, I have stood here on the Senate floor many times and 
professed the need for reforming our bankruptcy system. I stand before 
you again today and say that the Senate has enjoyed a lengthy 
deliberative process. Along with my Senate colleagues, I have debated 
the legislation and many of its amendments at great length over the 
past several years. The Senate Judiciary Committee's Subcommittee on 
Administrative Oversight and the Courts, chaired by my good friend 
Senator Grassley, has held numerous hearings on the issue of bankruptcy 
reform, gaining insights from literally dozens of witnesses.
  I am optimistic that we will restore fairness and integrity to our 
bankruptcy system. I am encouraged by what has transpired in the House 
of Representatives with respect to bankruptcy reform: the House bill is 
more stringent in terms of reform than the bill we are considering here 
in the Senate, and it nonetheless passed by an overwhelming, veto-proof 
margin of 313 to 108.
  Not long ago in our Nation's past, there was an expectation that 
people should repay what they have borrowed. Hand in hand with this 
expectation was a stigma that attached to those who filed bankruptcy. 
The bankruptcy system, as it was originally envisioned, was truly a 
last resort. It was intended to give those who needed it--those in 
serious financial difficulty, with no way out of their hard times--a 
fresh start. As our bankruptcy system has evolved over the years, this 
original mission has become lost.
  Our current system, I am sorry to say, allows some people who are 
able to repay their debts to avoid doing so. It does this by treating 
income as irrelevant, and by allowing people to exploit various 
loopholes. When I talk with the hardworking folks both from my state of 
Utah, and more recently all across this great Nation, I simply cannot 
defend the current system. I cannot find an adequate explanation for 
why our current laws let people who have the capacity to repay their 
debts use bankruptcy as a financial planning tool. I cannot justify the 
more than $400 hidden tax our current bankruptcy system imposes on 
every American family every year.
  It is no mystery that when someone borrows money or buys something on 
credit, and then files a bankruptcy of convenience, someone does not 
get paid back. This is true whether the creditor is a large lending 
company in which a retiree's pension funds may be invested, or a small 
family business. Under the current system, when bankruptcies of 
convenience are filed, everyone loses except for the unscrupulous 
person who games the system. Studies have been conducted that show that 
between 6 and 15 percent of filers are using bankruptcy as a financial 
planning tool, running up debts and erasing them without any noticeable 
impact on their lifestyle. When we look at the daunting number of 
bankruptcy filings we have seen in recent years, these abuses are a 
major problem. In 1998 alone, 1.4 million Americans filed for 
bankruptcy. As I have pointed out before, more Americans filed 
bankruptcy than graduated from college, were on active military duty, 
or worked in the post office. During these days of great economic 
prosperity, these record filings are outrageous.
  We must put an end to the system that allows people to live high on 
the hog.
  The bill also puts the brakes on an abuse known as ``loading up,'' 
when debtors take out large cash advances on their credit cards and buy 
luxury goods on the eve of their filing for bankruptcy.
  The bill is also designed to enhance consumer protections by imposing 
penalties on creditors who overreach. Penalties are imposed on 
creditors who refuse to negotiate in good faith with debtors prior to 
declaring bankruptcy, who willfully fail to properly credit payments 
made by the debtor in a chapter 13 plan, and who threaten to file 
motions in order to coerce a reaffirmation without justification. The 
bill also contains provisions designed to eliminate abusive 
reaffirmation practices.
  The bill protects debtors by imposing requirements on lawyers who 
represent debtors in bankruptcy. These provisions are intended to 
target the practices of so-called bankruptcy mills, which aggressively 
promote bankruptcy to people with financial problems when bankruptcy 
may not be in their best interests.
  I am particularly proud of the advancements this bill makes in 
helping people to avoid bankruptcy and avoid repeating financial 
problems. The bill provides for education for debtors with respect to 
their alternatives to bankruptcy, along with financial management 
education and credit counseling.
  This bill also protects our children. Anyone who knows my record in 
the Senate knows I have been a strong advocate for children for many 
years. It is not surprising that this is a particularly important 
aspect of the bill. From the time this bill was being drafted and 
through the process of committee markup and floor consideration, I made 
it a top priority to ensure that the bill included provisions to 
prevent deadbeat parents from using bankruptcy to get out of paying 
child support and alimony. Under my provisions, the obligation to pay 
child support and alimony is moved to a first-priority status, as 
opposed to its current place at seventh in line, behind attorney's fees 
and other special interests. If you really want to know the truth, my 
measures make improvements over current law in this area that are too 
numerous to mention here at this time, but they work to facilitate the 
collection of child support and alimony and effectively prevent 
deadbeats from getting their obligations discharged.
  I am also proud that one of my provisions on S. 625, which is 
supported by

[[Page S51]]

AARP and many other important organizations, ensures that retirement 
savings will be treated equally in bankruptcy so that schoolteachers 
and church workers will no longer be at a disadvantage relative to 
people with retirement savings that happen to fall into other 
categories.
  I also made sure that education was protected in this bill. Under my 
education savings amendment, already accepted as part of S. 625, which 
I developed with the help of Senators Gregg, Dodd, and others, 
contributions made for educational expenses to education IRAs and 
qualified State tuition savings programs will be protected in 
bankruptcy. I believe protecting these savings accounts is important 
because college savings accounts encourage families to save for college 
and increase access to higher education. My amendment ensures that the 
ability to use dedicated funds to pay the educational costs of children 
and grandchildren will not be jeopardized by the bankruptcy of a parent 
or a grandparent. At the same time, I have included conditions on the 
protection of these accounts to prevent fraud and abuse.

  In effect, this bill tightens up the bankruptcy laws to ferret out 
abuses on all sides, from the unscrupulous debtor to the overreaching 
creditor to the dishonest lawyer. At the same time, it works to stop 
the cycle of indebtedness through education. It makes sure that 
children, our retirement savings, and access to education are all 
protected.
  It is wrong for this country to have a system that makes honest, 
hard-working, bill-paying citizens foot the bill for those who have the 
ability to pay but who choose not to. A recent study shows that 76 
percent of all Americans believe individuals should not be allowed to 
erase all of their debts in bankruptcy if they are able to repay a 
portion of what they owe. I am pleased to say that that is precisely 
what S. 625 would accomplish. This study is heartening to me because it 
indicates that this country hasn't lost sight of the principle that 
individuals should take responsibility for their own actions.
  We are enjoying a wonderful period of economic prosperity. To the 
people who, despite their high levels of income, choose a bankruptcy of 
convenience, I say the game is over. No longer will the hard-working 
people of my State of Utah and in the rest of the country foot the bill 
for the people who are abusers of the system. The American people 
deserve better. With passage of the bankruptcy reform bill, the 
bankruptcy system will again return to the last resort for those who 
truly need it.
  In closing, I urge my colleagues to urge colleagues to come down here 
sooner rather than later to debate amendments, or let us know if they 
don't intend to offer them. It is my and the leader's intention, and I 
believe the intention of Senators Leahy and Daschle, that we debate 
these amendments in a timely manner today and vote on final passage 
next Tuesday. I hope we can get through all these amendments today, and 
next Tuesday we will have a full day of voting.
  With that, I yield the floor.
  The PRESIDING OFFICER. The Senator from Idaho is recognized.


                    Amendment No. 2651, As Modified

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

       The Senator from Idaho [Mr. Craig] proposes an amendment 
     numbered 2651, as modified.

  Mr. CRAIG. 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 the bill, insert the following 
     new section:

     SEC.  . PROPERTY NO LONGER SUBJECT TO REDEMPTION.

       [(a)] Section 541(b) of title 11 of the United States Code 
     is amended by adding at the end the following--
       ``(6) any interest of the debtor in property where the 
     debtor pledged or sold tangible personal property [or other 
     valuable things] (other than securities or written or printed 
     evidences of indebtedness or title) as collateral for a loan 
     or advance of money, where--
       ``(a) the tangible personal property is in the possession 
     of the pledgee or transferee;
       ``(b) [(i)] the debtor has no obligation to repay the 
     money, redeem the collateral, or buy back the property at a 
     stipulated price, and
       ``(c) [(ii)] neither the debtor nor the trustee have 
     exercised any right to redeem provided under the contract or 
     state law in a timely manner as provided under state[,] law 
     and Section 108(b) of this title.''

  Mr. HATCH. Mr. President, following Senator Craig's amendment No. 
2651, as modified, I ask unanimous consent that Senator Murray be 
recognized for 10 minutes to speak, and I ask that Senator Sessions be 
given 10 minutes.
  Mr. REID. Reserving the right to object, the ranking member of the 
Judiciary Committee wants to come and speak on this at some time.
  Mr. HATCH. Whenever the ranking member wants to speak, we will, at a 
convenient time, interrupt and allow him to do so.
  Finally, we will go to Senator Wellstone's amendment after Senator 
Sessions speaks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Idaho is recognized.
  Mr. CRAIG. Mr. President, I understand that my amendment, as 
modified, has been accepted on that side.
  I guess I am at risk, as we are anytime a Senator comes to the floor 
and says, ``This is a simple amendment'' But in fact that is exactly 
what this amendment is. It corrects a very small but very real problem. 
We are talking about property that is pawned by a debtor.
  This amendment deals with the question of when that pawned property 
is legally out of the reach of a debtor's bankruptcy estate.
  This amendment would allow pawned tangible personal property to be 
excluded from the bankruptcy estate, so long as the debtor has no legal 
obligation to repay the money or redeem or buy back the property and 
the contract or statutory redemption period has expired on the pawned 
property. And, of course, it is that expiration date that is clear and 
important as it relates to the period of redemption, and that is where 
the courts have found themselves in the last several years.
  This amendment incorporates the general position of the courts that 
pawnbrokers should be allowed to have complete and clear title to the 
pawned personal property of a person in bankruptcy once the redemption 
period has expired and the debtor or trustee has not exercised the 
right of redemption.
  This amendment allows the pawnbroker to sell the pawned property 
without burdening the courts with unnecessary actions seeking relief 
from the automatic stay provision of the bankruptcy code.
  Courts have found that unredeemed, pawned, tangible personal property 
cannot be treated as property of the bankruptcy estate because once the 
statutory redemption period has run, and the pawned goods have not been 
redeemed, the debtor forfeits all rights and title to the pawned 
property. The cutoff date for inclusion of the bankruptcy estate is the 
end of the redemption period. I am referencing Dunlap, a 1993 case in 
Maryland and Tennessee, 158 BR 724.
  In the circumstances outlined by this amendment, the property doesn't 
belong to the debtor anymore. Once that redemption period has run out 
and they have not exercised it, it is out of his possession and out of 
his right to control. It is only common sense that when it is no longer 
his property, it cannot be pulled into the bankruptcy estate. That is 
what the courts have said, and that is what this amendment says.
  All too often, however, pawnbrokers are pulled in and ultimately they 
have to go through the expense of hiring attorneys and doing all of 
those kinds of things even though it is very clear that the property 
redemption period has expired and the courts ultimately ruled in favor 
of the pawnbroker.
  So we are clarifying that with this amendment, and I hope my 
colleagues will accept it and be consistent in this law with what the 
courts have been saying now over the last period of years.
  Mr. President, I relinquish the floor.
  Mr. HATCH. Mr. President, I rise in support of the amendment offered 
by my good friend, the Senator from Idaho. This amendment is needed to 
clarify that if an individual has pledged

[[Page S52]]

his property for money and is not obligated to redeem it, and indeed 
does not redeem the property within the time he or she agreed to redeem 
it, then the bankruptcy laws are not abused to attempt to get that 
property back.
  What this amendment does is basically recognize and respect the right 
of individuals and businesses to be able to pledge property for money 
for an agreed period of time. Essentially, those businesses engaged in 
this type of transaction, namely pawnbrokers, provide cash loans to 
people in exchange for a pledge of personal property. The pawnbroker 
charges interest on the loan, but the customer is under no obligation 
to redeem the pledged property. When the individual does not redeem the 
pawned item within the contractual period, the property becomes part of 
the pawnbroker's inventory for sale. It does not continue to be the 
property of the individual.
  Some debtors have attempted to subject their pawn transactions to the 
operation of the bankruptcy code's automatic stay, after the time under 
the contract for redeeming the property has expired. Most courts that 
have considered the matter have held that if the debtor or the trustee 
does not redeem the property within a typical period of 60 days from 
the date of filing for bankruptcy, then full title to the property 
vests with the pawnbroker. This is the sensible result, because the 
debtor has no obligation to redeem the property.
  This is a sensible clarification amendment, without which, certain 
individuals could abuse the system to the detriment of other consumers 
who use and need the pawnbroker's services. Let's close this loophole 
and support this amendment.
  The PRESIDING OFFICER. The Senator from Washington.
  Mrs. MURRAY. Thank you, Mr. President.
  (The remarks of Mrs. Murray pertaining to the introduction of the 
legislation are located in today's Record under ``Statements on 
Introduced Bills and Joint Resolutions.'')

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