[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.
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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
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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
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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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