[Congressional Record Volume 146, Number 59 (Monday, May 15, 2000)]
[Senate]
[Pages S3934-S3937]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           BANKRUPTCY REFORM

  Mr. WELLSTONE. Mr. President, I have with me an investigative article 
from the May 15, 2000 issue of Time magazine, the title of which is 
``Soaked by Congress, Lavished with campaign cash, lawmakers are 
`reforming' bankruptcy--punishing the downtrodden to catch a few 
cheats,'' by Donald L. Barlett and James B. Steele, who are well known 
for their investigative journalism--some of the best investigative 
journalism in the country.
  Mr. President, I thank these two journalists for the work they have 
done over the years. I used to assign their books to classes, and I 
think it is very good investigative journalism.
  Let me read from one part of this lengthy article. I sent a copy of 
this out to colleagues. I commend this piece to all of them.
       Under the legislation before Congress, new means tests 
     would force more borrowers into Chapter 13--leading to still 
     more failures--and would eliminate bankruptcy as an option 
     for others. For this second group, life will be especially 
     bleak. Listen to their future as described by Brady 
     Williamson, who teaches constitutional law at the University 
     of Wisconsin in Madison and was chairman of the former 
     National Bankruptcy Review Commission, appointed by Congress 
     in 1995: ``A family without access to the bankruptcy system 
     is subject to garnishment proceedings, to multiple collection 
     actions, to repossession of personal property and to mortgage 
     foreclosure. There is virtually no way to save their home 
     and, for a family that does not own a home, no way to ever 
     qualify to buy one.'' The wage earner will be ``faced with 
     what is essentially a life term in debtor's prison.''
  Brady Williamson, who teaches constitutional law at the University of 
Wisconsin, is joined by law professors all across the country in their 
strong critique in, I would really say, condemnation of this bankruptcy 
bill. Again, he was the chairman of the former National Bankruptcy 
Review Commission, which was appointed in 1995.
  The reason I mention this is that I want to take a few minutes to 
talk about this bill.
  When there was an effort to separate this bankruptcy bill out from 
minimum wage legislation, I opposed it. I opposed the unanimous consent 
agreement. Senator Feingold was out here on the floor with me. We did 
this because we believe this piece of legislation deserves more 
scrutiny, albeit it passed by a big margin in the Senate. But I am 
telling you that many colleagues, I think, had no idea of some of the 
provisions that were in this legislation--some really egregious 
provisions. We have learned something about what many of us call the 
pension raid, which basically for the first time would enable these 
creditors, as a condition for making the loan, to call upon borrowers 
to say, look, you can also put a lien on my pension. That has never 
been done before.
  But there are other egregious provisions as well. I again point out 
that last week Time magazine published this investigative article 
entitled ``Soaked by Congress,'' written by Donald Barlett and James 
Steele.
  I think this is a true picture of who files for bankruptcy in 
America. You will find a far different profile of who the people are 
than from the skewed version that was used to justify this ``bankruptcy 
reform bill'' passed by the House and the Senate.
  I would like to give my colleagues an example of the kind of families 
we are talking about--working families, hard-pressed families, crushed 
by debt, people who need a fresh start.
  Tomorrow, Senator Kennedy will be coming with other Senators --I will 
join them--in speaking about this bill as well. Since I came to this 
floor and I objected to any unanimous consent agreement to separate 
this bankruptcy bill, passing it and moving it forward, and since I 
have done everything I know how as a Senator to stop this bill, I want 
to discuss why.
  First, I will talk about this legislation from the perspective of 
ordinary people, people who don't have a lot of money--not the big 
banks and not the big credit card companies that have been running the 
show on this legislation.
  I will read the beginning of this article by Bartlett and Steele:

       Congress is about to make life a lot tougher--and and more 
     expensive--for people like the Trapp family of Plantation, 
     Fla. As if their life isn't hard enough already. Eight-year-
     old Annelise, the oldest of the three Trapp children, is a 
     bright, spunky, dark-haired wisp who suffers from a 
     degenerative muscular condition. She lives in a wheel-chair 
     or bed, is tied to a respirator at least eight hours a day, 
     eats mostly through a tube and requires round-the-clock 
     nursing care. Doctors have implanted steel rods in her back 
     to stem the curvature of her spine.
       Her parents, Charles and Lisa, are staring at a medical 
     bill for $106,373 from Miami Children's Hospital. then there 
     are the credit-card debts. The $10,310 they owe Bank One. The 
     $5,537 they owe Chase Manhattan Bank. The $8,222 they owe 
     MBNA America. The $4,925 they owe on their Citibank Preferred 
     Visa card.
       The $6,838 they owe on their Discover card. The $6,458 they 
     owe on their MasterCard. ``People don't understand, unless 
     they have a medically needy child, these kinds of 
     circumstances,'' says Charles Trapp, 42, a mail carrier.

  Most of the people who file for bankruptcy under chapter 7 for a new 
start, about 40 percent-plus, are people who have been put under 
because of a medical bill. The studies don't talk about a lot of abuse. 
They mention 3, 4 or 5 percent of the people at most abusing this 
system. Most of the people in the country who do have to start over 
find themselves in these awful situations because there has been a 
divorce and now there is a single parent or because people have lost 
their jobs or because people face catastrophic medical bills. We are 
going to punish these families?
  The figures on the amount of money pouring in, let me be clear, are 
not on one to one. I am not going to stand here and say every single 
Senator who disagrees with me on this disagrees with me because they 
received a lot of money from big credit card companies. Then someone 
can turn around, and I know the presiding Chair will agree, and say 
every position you take is based on money you have received. That is 
simply an analysis that should be unacceptable. I will not do that. It 
is not fair to people I serve with and I don't believe it.
  However, from an institutional view of who has power and who doesn't 
have power in America, we see an industry that has a tremendous amount 
of clout, that certainly contributes a lot of money--Republicans and 
Democrats alike--that has the lobbyists, is certainly well connected 
and, of course, the people whom we are talking about, such as the Trapp 
family, don't have the same kind of connections.
  We are, I think, about to do something very egregious to these 
families. Yesterday was Mother's Day--Sheila and I marched in the 
Million Mom March and were proud to do so--so I'd like to read from a 
letter signed by 70 scholars at our Nation's law schools who are 
opposed to this legislation about how this bill will affect mothers. 
They write directly to this issue of how low-income, women-headed 
households will be devastated by this bankruptcy bill.
       As the heads of the economically most vulnerable families, 
     they have a special stake in the pending legislation. Women 
     heads of households are now the largest demographic group in 
     bankruptcy, and according to the credit industry's own data, 
     they are the poorest. The provisions in this bill, 
     particularly the provisions that apply without regard to 
     income, will fall hardest on them. A single mother with 
     dependent children who is hopelessly insolvent and whose 
     income is far below the national median income still would 
     have her bankruptcy case dismissed if she does not present 
     copies of income tax returns for the past three years--even 
     if those returns are in the possession of her ex-husband. A 
     single mother who hoped to work through a chapter 13 payment 
     plan would be forced to pay every penny of the entire debt 
     owed on almost worthless items of collateral, such as used 
     furniture or children's clothes, even if it meant that 
     successful completion of a repayment plan was impossible.
  I don't think the choices in this debate could be stated any more 
starkly. The core question is, Are we on the side of these big credit 
companies and these banks or are we on the side of too many women in 
this country struggling to support their families?
  I will mention a few other provisions in this legislation that are 
punitive. I already mentioned the pension grab. People didn't even seem 
to know about that provision. That is being reworked. Good. I want to 
see the bill improved, although a wise proverb comes to mind: Never put 
good stitching in a rock cloth.
  I think this bill is fundamentally flawed--not the Senators who 
support

[[Page S3935]]

the bill, the bill. Section 102 of this bill removes the ability of a 
debtor to seek sanctions against a creditor who brought coercive, 
frivolous claims against the debtor, as long as the claim in question 
is less than $1,000. If someone has a loan for less than $1,000, a 
creditor can intimidate and threaten legal action, even if he doesn't 
intend to take legal action with impunity.
  Section 105 imposes mandatory credit counseling on debtors before 
they can seek bankruptcy relief at the debtors' expense--as if the 
debtors have the money for this. This is regardless of whether the 
bankruptcy would be the result of simple overspending or the result of 
unavoidable expenses such as catastrophic medical expense. There is no 
waiver of this requirement. People can end up being evicted.
  Section 311 ends the practice of stopping eviction proceedings 
against tenants who are behind on rent who file for bankruptcy. This is 
critical for tenants under current law.
  I could go on and on.
  I speak from the Senate floor to the people in the country. This is a 
reform issue. I talked about who has the clout in America and who 
doesn't. At one time, there was a bill that came to the floor of the 
Senate, a much better bill, that I voted against. It was a 99-1 vote. I 
thought that bill was too harsh and too punitive, but most of my 
colleagues disagreed. People had done good work on it.

  Now this bill that passed the United States, it is as Barlett and 
Steele pointed out in their very important piece, it is completely one 
sided. There is no call for accountability or responsibility on the 
part of the creditor, credit card companies. There are harsh 
provisions, many of which--most of which--all of which, frankly, 
disproportionately affect low-income people, moderate-income people, 
women, working families, you name it, based upon the assumption that 
most people who file for bankruptcy abuse the system--which is not 
true. Most people are put under because of a medical bill or they have 
been out of work or because there is a divorce. This bill is just a 
carbon copy of what this credit card industry wants.
  I objected to the unanimous consent agreement to try to move this 
bill, first to decouple it from the minimum wage and then to try 
basically to move it through. I do not want to. I want to try to stop 
this piece of legislation. Because different Senators are entitled to 
their own viewpoint, I will be pleased, as we get a chance to really 
look at the provisions of this legislation carefully, as in the case of 
this Barlett and Steele piece, and if this bill comes back before the 
Senate and we have the debate, I will be willing to agree to time 
limits on amendments--you name it. But we need to have a thorough 
debate on this bill. I am not going to let it go through by unanimous 
consent or continue in any way, shape, or form.
  The effort that is underway is to take this legislation and put it 
into an unrelated bill; the e-signatures bill is the latest, the effort 
to take this bankruptcy--quote, reform--bill and put it into the 
conference committee on e-signature legislation. It has nothing to do 
with e-signature legislation. Then the effort is to bring the 
conference report back to the Senate where it cannot be amended and can 
be only voted up or down.
  It is clever enough, but the truth of the matter is, again, my goal 
in life is to have people interested in politics, public affairs. Even 
if they vote Republican, I am all for them if they are interested in 
public affairs. That is my view. I just don't want people opting out 
and being disillusioned and becoming cynical because then I think our 
country suffers, I think representative democracy suffers. That is what 
I believe in more than anything else.
  This is a reform issue. People hate this. They hate the way this 
process works, where you can take a bill and now put it into a 
completely unrelated piece of legislation, outside the scope of the 
conference committee, tuck it in, do it at midnight, do it late at 
night, do it when people cannot see it, do it in whatever way you can, 
in the most private way possible, and then just try to push it through. 
It is a neat parliamentary technique, it is a neat trick through this 
process, this legislative process. But it is an outrage.
  I do not think Senators should support this. I certainly am going to 
challenge this question on the scope of conference. I think we had a 
ruling on this which was an unfortunate ruling. We will have to go back 
through that. There are other Senators, Senator Harkin, Senator 
Feingold, Senator Kennedy--a number of others--just to mention a few 
who I think feel very strongly about this. The more Senators really 
know what is in this piece of legislation, the more Senators who read 
this investigative report in Time magazine, the more Senators are going 
to be worried about this. They are going to be worried about this 
legislation going through in this form.
  There are good Senators who have worked on this legislation, some I 
consider to be some of the best. But this legislation is fundamentally 
flawed. I speak about it today. I am going to continue to do everything 
I can to stop it. I want people in the country to know what the effort 
is right now, which is to put this piece of legislation into an 
unrelated conference report.

  I want to make it clear on the floor of the Senate that everything I 
know how to do as a Senator, to insist that this bill goes back in the 
regular order and comes back through this legislative process--which 
will give us an opportunity to look at other provisions we did not know 
were in this bill, such as the pension grab amendment--is what I insist 
on. I think other Senators feel the same way.
  I do not believe Senators, Democrats or Republicans alike, whether 
they agree or disagree on this particular piece of legislation--I do 
not think they should accept the proposition we can just put it into an 
unrelated conference report. We are heading nowhere good if we start 
doing that with different pieces of legislation. We are heading nowhere 
good as a legislative body. It is the wrong way to legislate. It is the 
wrong way to conduct our business.
  Then the question is, Paul, do you have a right to just come out here 
and object to a unanimous consent agreement?
  Yes, I do. We had a minimum wage and we had a bankruptcy bill tied 
together, and there were tax cuts included with minimum wage 
provisions. But tax measures need to originate in the House of 
Representatives under the Constitution and the Senate leadership knows 
that. If that mistake was made--to unconstitutionally add the tax 
cuts--and I oppose this bill and, by our own rules, it requires 
unanimous consent to correct the mistake, of course I have a right to 
object, especially if I think this is an egregious piece of legislation 
which hits hard at the most vulnerable, low-income citizens in the 
United States of America. Of course I have the right to do that.
  I say to the majority leader, if he wants to bring this bill back on 
the floor, let's have at it. We will even have some time agreements on 
some amendments. But we will have a thorough debate on this, and I will 
have a chance to point out many egregious provisions in this 
legislation in a way we were not able to last time. Then we will see 
where we go.
  But if this gets put into a conference committee--and I hope there is 
enough pressure from other Senators and I hope there is enough pressure 
from the public that this does not happen. That is the best outcome. I 
hope the journalists will write about this piece of legislation and 
will write about what could very well happen here because I think it is 
indicative of what does not work well here in the legislative process.
  If this gets folded into a conference report, I have no doubt a 
number of Senators--we will do everything we can to hold it up in every 
way possible. But my hope is we do this the right way and not the wrong 
way. The right way is, let's have a little bit more of a focus and a 
little more spotlight on this piece of legislation.
  To reiterate, I wanted to take just a few minutes today to talk about 
the so-called bankruptcy ``reform'' bill which some Members of this 
body are trying to force down the throat of working families. As I hope 
my colleagues are aware, as I speak here today this punitive 
legislation is being negotiated by a small group of staff working for a 
handful of members in a secret ``shadow'' conference. Their plan is to 
attach this legislation to an unrelated conference report and pass the 
bill with minimal public scrutiny.
  When you really look at what's in this bill, and what's driving this 
bill,

[[Page S3936]]

it's really not surprising that some of my colleagues have been trying 
to do this behind closed doors. But recently, there has been an 
increasing drum beat of outrage and attention from outside Congress 
both on the bill itself and the desperate tactics being used to pass 
it. As I said, last week Time magazine published an investigative 
article about the bill, entitled ``Soaked by Congress,'' The article, 
written by reporters Dan Bartlett and Jim Steele, is a detailed look at 
the true picture of who files for bankruptcy in America. You will find 
it far different from the skewed version that was used to justify the 
bankruptcy ``reform'' bill passed by the House and Senate.
  Last week I sent a dear colleague around with a copy of the article. 
I hope all my colleagues saw it. Tomorrow I believe a group of Senators 
will speak in the morning about this article, but I'd like to talk 
about it this afternoon for just a few minutes in the hope that some of 
you will take another look at this bill, take another look at what it 
will do to working families, folks crushed by debt, folks who need a 
fresh start. I want my colleagues to look at this bill from the 
perspective of ordinary folks--not the big banks and credit card 
companies.
  I'd like to read the beginning of the article, it begins:

       Congress is about to make life a lot tougher--and more 
     expensive--for people like the Trapp family of Plantation, 
     Fla. As if their life isn't hard enough already. Eight-year-
     old Annelise, the oldest of the three Trapp children, is a 
     bright, spunky, dark-haired wisp who suffers from a 
     degenerative muscular condition. She lives in a wheelchair or 
     bed, is tied to a respirator at least eight hours a day, eats 
     mostly through a tube and requires round-the-clock nursing 
     care. Doctors have implanted steel rods in her back to stem 
     the curvature of her spine.
       Her parents, Charles and Lisa, are staring at a medical 
     bill for $106,373 from Miami Children's Hospital. Then there 
     are the credit-card debts. The $10,310 they owe Bank One. The 
     $5,537 they owe Chase Manhattan Bank. The $8,222 they owe 
     MBNA America. The $4,925 they owe on their Citibank Preferred 
     Visa card. The $6,838 they owe on their Discover card. The 
     $6,458 they owe on their MasterCard. ``People don't 
     understand, unless they have a medically needy child, these 
     kinds of circumstances,'' says Charles Trapp, 42, a mail 
     carrier.

  Now I ask my colleagues, is there one thing in this bill that would 
have helped this family head off bankruptcy? Absolutely not, this bill 
would simply make it harder for them to get the relief they needed to 
take care of themselves and their daughter. Why aren't we talking about 
what could have kept this family out of bankruptcy? What does this bill 
do to help a woman or man who wants to educate themselves so they can 
earn a better living for their family? What does this bill do to keep 
ordinary folks from being overwhelmed by medical expenses? What does 
this bill do to promote economic stability for working families? 
Shouldn't the goal be keeping families out of circumstances where they 
can't pay their debts instead of punishing them once it's too late? I 
believe if my colleagues really wanted to reduce the number of 
bankruptcies they would focus more on providing a helping hand up 
rather than removing the safety net. If they really wanted to tackle 
bankruptcy, they would take on the credit card companies and their 
abusive tactics.
  Yesterday was Mother's Day Mr. President, I would like to read from a 
letter, signed by approximately 70 scholars at our nation's law 
schools, who are opposed to this legislation. They write directly to 
this issue of how low income women headed households will be devastated 
by this legislation:

       As the heads of the economically most vulnerable families, 
     they have a special stake in the pending legislation. Women 
     heads of households are now the largest demographic group in 
     bankruptcy, and according to the credit industry's own data, 
     they are the poorest. The provisions in this bill, 
     particularly the provisions that apply without regard to 
     income, will fall hardest on them. A single mother with 
     dependent children who is hopelessly insolvent and whose 
     income is far below the national median income still would 
     have her bankruptcy case dismissed if she does not present 
     copies of income tax returns for the past three years--even 
     if those returns are in the possession of her ex-husband. A 
     single mother who hoped to work through a chapter 13 payment 
     plan would be forced to pay every penny of the entire debt 
     owed on almost worthless items of collateral, such as used 
     furniture or children's clothes, even if it meant that 
     successful completion of a repayment plan was impossible.

  I don't think the choices in this debate can be made any more stated 
any more starkly. The core question is this: Will colleagues be on the 
side of these women, struggling to raise their families? Or do they see 
these women as the banks and credit card companies do: just an economic 
opportunity ripe for exploitation?
  A constituent from Crystal, Minnesota wrote to my office last July to 
tell me about her experience with bankruptcy. Her life was very much 
like any of ours until an injury forced her to leave the financial 
security of her factory job. She worked multiple minimum wage jobs for 
several years as her marriage fell apart and her daughter began a 
descent into deep clinical depression. In the meantime, she enrolled in 
computer school so that she could pursue a career that would give her 
and her daughter a stable income. She purchased a computer on credit so 
she could spend more time working at home. In time, the payments on the 
computer, her mortgage and her daughter's medical bills became too 
much, and she fell behind on debt payments. When creditors approached 
her, she tried to work out a repayment schedule that she could meet. 
Some were willing to do so. However, she says in her letter:

       What I want you to know specifically is that this one 
     credit card company would not offer any reductions in the 
     interest rate, demanded over one quarter of my entire monthly 
     income, did not care if I could not meet my payments for the 
     most basic requirements of human existence, suggested that I 
     use a food shelf, and they refused to acknowledge that my 
     child was suicidal and that their harassing phone calls to my 
     house nearly caused her to overdose on the only non-
     prescription pain relievers that I could have for myself.

  So she filed for bankruptcy. She has begun to rebuild her life and 
she ended her letter by saying:

       Please to not vote for Senate Bill 625 or any other bill 
     that makes bankruptcy harder for people who find themselves 
     caught in the unforeseen predicaments of life for which they 
     have no control. It is not fair to pass a bill that helps the 
     credit card companies by hurting people like me without 
     forcing them to look at what they are doing, and how they 
     respond. They have many options that could be used without 
     creating the emotional trauma that forces hard working people 
     to choose the relief of bankruptcy.

  What the Bartlett and Steele article makes very clear is that these 
stories are typical in our bankruptcy courts today. And what does this 
bill do to these folks? It makes it more difficult to file, harder to 
get a fresh start, allows them to discharge less debt. Forces them to 
pay more in attorney's fees or maybe make an attorney cost 
prohibitive--but not for the big banks. It forces families into Chapter 
13 which \2/3\ which of all debtors currently fail to complete because 
of economic circumstances. This legislation allows them to be 
victimized by coercive debt collectors and abolishes critical tenant 
protections.
  This is reform?
  Let me be clear: The bankruptcy bills passed by House and Senate are 
ill-conceived, unjust, and imbalanced. They impose harsh penalties on 
families who file for bankruptcy in good faith as a last resort, and 
address a ``crisis'' that is self-correcting. They reward the predatory 
and reckless lending by banks and credit card companies which fed the 
crisis in the first place, and it does nothing to actually prevent 
bankruptcy by promoting economic security in working families.
  Here are just a few of the punitive provisions in the Senate passed 
bankruptcy bill:
  No. 1. Section 102 of the bill would remove the ability to a debtor 
to seek sanctions against a creditor who brought coercive, frivolous 
claims against a debtor--as long as the claim in question is less than 
$1000. So in other words, as long as the loan was for less than $1000, 
a creditor may intimidate the borrower or threaten legal action it 
doesn't intend to take (all illegal under current law).
  No. 2. Section 105 imposes mandatory credit counseling on debtors 
before the can seek bankruptcy relief--at the debtors expense. This is 
regardless of whether the bankruptcy would be the result of simple 
overspending or something unavoidable like sudden medical expenses. 
There is no waiver of this requirement if the debtor needs to make an 
emergency bankruptcy filing to stave off eviction or utility shutoff.

[[Page S3937]]

  No. 3. Section 311 will end the practice under current law of 
stopping eviction proceedings against tenants who are behind on rent 
who file for bankruptcy. This is a critical right of tenants under 
current law.
  No. 4. Section 312 will make a person ineligible to file for Chapter 
13 bankruptcy if he or she has successfully emerged from bankruptcy 
within the past 5 years--even if it was a successful chapter 13 
reorganization where the debtor paid off all their creditors.
  No. 5. The bill's new reporting, filing and paperwork requirements 
will make bankruptcy process more onerous than ever before--expensive 
legal expertise will be more necessary, a burden which low and moderate 
income families with high debt loads can ill afford. But several 
sections of the bill create a variety of disincentives for attorneys to 
represent consumers in bankruptcy. The results of these provisions will 
be that some attorneys will leave the practice of consumer bankruptcy, 
and others will have to raise their fees to account for the increased 
expenses and risks involved. This in turn will lead to more consumers 
being unable to afford an attorney and either obtaining no relief or 
falling prey to nonattorney petition preparers who provide services 
which are usually incompetent and often fraudulent.
  No. 6. The means test to determine which debtors can file Chapter 7 
bankruptcy--as opposed to Chapter 13--is inflexible and arbitrary. It 
is based on IRS standards not drafted for bankruptcy purposes that do 
not take into account individual family needs for expenses like 
transportation, food and rent. It disadvantages renters and individuals 
who rely on public transportation and benefits higher income 
individuals with more property and debt.

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