[Congressional Record Volume 146, Number 141 (Tuesday, October 31, 2000)]
[Senate]
[Pages S11415-S11416]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                               BANKRUPTCY

  Mr. TORRICELLI. Mr. President, for the last 4 years, my colleague, 
Senator Grassley, has shown extraordinary patience and considerable 
leadership in bringing this institution towards fundamental and fair 
reform of the bankruptcy laws. It has not always been a popular fight, 
but it is unquestionably the right thing to do for consumers, for 
business, and perhaps most importantly, for small businesses, family-
owned businesses, that are often victimized by abusers.

  Everyone, I think, generally agrees, within reason, that there is a 
need for bankruptcy reform. The question, of course, has been how to do 
that. In the last Congress, we came extremely close to bipartisan 
reform. Having come so close in the 105th Congress, I inherited the 
role as the ranking member of the subcommittee with jurisdiction, and I 
felt some optimism that we could succeed.
  Since that time, working with Senator Grassley, I think we have dealt 
with most of the critical issues. He has been extremely cooperative. 
Indeed, Members on both sides of the aisle have had suggestions, 
changes, most of which have been incorporated. Overwhelmingly, Senators 
who had problems with the bill and individual changes have been 
accommodated in both parties.
  So today we bring to the floor the culmination of 2 years of work, of 
refining something that had been worked on for the 2 years before 
that--4 years--with many Members of the institution, and overwhelmingly 
Members who have voted for it.
  Is it perfect? No. Were I writing bankruptcy reform by myself, there 
would be differences. But none of us writes any bill by ourselves.
  The critical question is: Is it fair and is it a balanced bill? 
Unequivocally, the answer to that question is yes.
  Will it improve the functioning of the bankruptcy system without 
doing injury to vulnerable Americans who have need, legitimate need, of 
bankruptcy protections? Absolutely, yes.
  For those reasons, this bill deserves and, indeed, clearly has 
overwhelming bipartisan support in the Senate.
  What has fueled this broad and deep support among Democrats and 
Republicans in the House and the Senate have been the facts, an 
overwhelming misuse and expansion of bankruptcy. In 1998 alone, 1.4 
million Americans sought bankruptcy protection, a 20-percent increase 
since 1996, during the greatest economic expansion in American history, 
with record employment, job growth, income growth, a 20-percent 
increase in bankruptcies, more staggering, since 1980, a 350-percent 
increase in the use of bankruptcy laws.
  It is estimated that 70 percent of those filings were done in chapter 
7, which provides relief from most unsecured debt. Conversely, just 30 
percent of those petitions were filed under chapter 13, which requires 
a repayment plan.
  The result of these abuses of the system has meant that just 30 
percent of petitions under chapter 13 require a repayment plan. 
Overwhelmingly, people have discovered, contrary to the history of the 
act and good business practices, they can escape paying back these 
debts, although they have the means to do so, and escape so by simply 
filing under a different chapter.
  This is the essence of the bill. Simply making this adjustment, 
moving many or some of these 182,000 people back into repayment plans, 
could save $4 billion to creditors. This isn't somebody else's problem. 
That $4 billion gets paid. If the bankruptcy affects a carpenter, a 
family owned masonry business, a home building company, it can put them 
out of business, or the cost gets passed on to someone else who buys 
the next house. If it is the mom and pop store on main street, it can 
put them out of business or they absorb the cost. But even if it is a 
major financial institution, with many credit card companies losing 4 
or 5 percent of revenues to bankruptcy, it gets passed on to the next 
consumer.
  This $4 billion is not the problem for some massive company faraway 
that can afford to absorb it. It is us. We are all paying the bill. The 
American consumer is absorbing this money from the abuse of the 
bankruptcy system--often those least able to absorb it, small 
businesses, family owned businesses, and consumers.
  This is why, with these compelling facts and the logic of this 
reasoning, that the Senate passed a very similar bill by a vote of 83-
14 from both parties, across philosophical lines, in an overwhelming 
vote. That is the bill we bring back today.
  It is charged by critics of the bill that this will deny poor people 
the protection of the Bankruptcy Act. One, this is not true. Two, if in 
any way it denied poor people the protection of bankruptcy, not only 
would I not speak for it, not only would I not vote for it, I would be 
here fighting against it. The simple truth is, no American is denied 
access to bankruptcy under this bill.
  What the legislation does do is assure that those with the ability to 
repay a portion of their debts do so by establishing a clear and 
reasonable criteria to determine repayment obligations. However, it 
also provides judicial discretion to ensure that no one genuinely in 
need of debt cancellation will be prevented from receiving a fresh 
start. That bears repeating. No one is denied bankruptcy protection 
because, ultimately, of judicial discretion. Prove you need the 
protection, and you can and will get it.
  To do this, the bill contains a means test, virtually identical to 
the one passed by the Senate with 84 votes on a previous occasion. 
Under current law, virtually anyone who files for complete debt relief 
under chapter 7 receives it. Regardless of your resources, whether you 
can repay it or not, your obligation simply gets passed along to the 
small store owner, the mom and pop store, the family business. You pass 
on your obligation, regardless of your ability. We changed that by 
creating a needs-based system which establishes a presumption that 
chapter 7 filings should either be dismissed or converted to chapter 13 
when the debtor has sufficient income to repay at least $10,000 or 25 
percent of their debt--a presumption that if you have money in the bank 
or you have income to repay a portion of this, you should do so. You 
can answer the presumption. You can overcome it. You can defeat it. But 
surely it is not unreasonable for someone with those means to have that 
burden, to prove they cannot pay the debt.

  In addition to this flexible means test, the bill before us also 
includes two key protections for low-income debtors that were a vital 
part of the Senate bill previously passed. The first is an amendment 
offered by Senator Schumer to protect low-income debtors from coercive 
motions. This will ensure that creditors cannot strong arm poor debtors 
into making promises of payments they cannot afford to make. Senator 
Schumer asked for it to be in the bill. It is in the bill. It offers 
protection from unscrupulous, unfair, and burdensome collections.
  The second is an amendment offered by Senator Durbin. Senator Durbin, 
who previously held my position and drafted the bill 2 years ago in its 
initial form, provided a miniscreen to reduce the burden of the means 
test on debtors between 100 and 150 percent median income. This is a 
preliminarily less intrusive look at the debts and expenses of middle-
income debtors to weed out those with no ability to repay those debts 
and to move them more quickly to a fresh start.
  It was a good addition, but the combination of Mr. Schumer's 
amendment

[[Page S11416]]

for a safe harbor in addition to the Durbin miniscreen and other 
provisions, not a part of the original Senate bill, will provide real 
protections to low-income debtors. These include, first, a safe harbor 
to ensure that all debtors earning less than the State median income 
will have access to chapter 7 without qualifications; two, a floor to 
the means test to guarantee that debtors unable to repay less than 
$6,000 of their debts will not be moved into chapter 13; three, 
additional flexibility in the means test to take into account the 
debtor's administrative expenses and allow additional moneys for food 
and clothing expenses--three protections--absolute, providing real 
protection for low-income families on vital necessities, on modest 
savings, and on means of collection.

  All of this should assuage any fear that this bill will make it more 
difficult for those in dire straits to obtain a fresh start and 
reorganize their lives. Absolutely no one, because of these 
protections, will be denied access to complete protection in 
bankruptcy. But it is balanced because there is also protection for 
businesses and family companies.
  Critics have also argued that the bill places an unfair burden on 
women and single-parent families. This is the most important part of 
this bill to understand. There is not a woman in this country, there is 
not a single parent, there is not someone receiving alimony, child 
support, or any child in America whose position is weakened because of 
this bill. Indeed, their position is strengthened because of this bill. 
Single-parent families, by elevating child support to the first 
position rather than its current seventh position, are in a better 
place because of this bill than they are if we fail to act.
  Under current law, when it comes to prioritizing which debts must be 
paid off first, child support is seventh--after rent or storage 
charges, accountant fees, and tax claims. Remember this, because if you 
oppose this bill and if we fail to act in the bankruptcy line, 
accountants will be there, tax claims will be there, storage claims 
will be there, and women and children will be behind. Under this bill 
and this reform, children, women, single-parent families are where they 
belong--in front of everyone, including the Government.
  Finally, the bill requires that a chapter 13 plan provide for full 
payment of all child support payments that become due after the 
petition is filed. This is simply a better bill--for business and for 
families.
  Finally, in drafting a balanced bill, Senator Grassley and I were 
confronted with the very real need to provide some additional consumer 
protection. The fact is, many people don't just fall into bankruptcy. 
In my judgment, they are driven into bankruptcy by unscrupulous, 
unnecessary, and burdensome solicitations of debt by the credit 
industry. This had to be in the bill, and it is in the bill.
  The credit card industry sends out 3.5 billion solicitations a year. 
That is more than 41 mailings for every American household--14 for 
every man, woman, and child in the Nation. It is not just the sheer 
volume of the solicitations; it is a question of who is targeted. 
Solicitations of high school and college students are at a record 
level. Americans with incomes below the poverty line have doubled their 
use of credit.
  The result is not surprising, as 27 percent of families earning less 
than $10,000 have consumer debt of more than 40 percent of their 
income. This bill deals with that reality.
  With the help of Senators Schumer, Reed, and Durbin, we have ensured 
that there is good consumer protection in this bill. It is not 
everything I would have written, certainly not everything they would 
have liked, but it is good and it is better than current law.
  The bill now requires lenders to prominently disclose the effects of 
making only a minimum payment on your account; that interest on loans 
secured by dwellings is tax deductible only up to the value of 
property, warnings when late fees will be imposed, and the date on 
which an introductory or teaser rate will expire and what the permanent 
rate will be after that time. All of these things will be required on 
consumer statements in the future. Few are required now.

  What this means is that Senator Grassley and I have done our best. We 
have worked with all Members of the Senate in both parties. This is a 
good bill and a balanced bill. The Senate has approved it before. It 
should do so again. It provides new consumer protection, protection for 
women and children, securing their place in bankruptcy lines, ensuring 
that debts get repaid when they can be, ensuring bankruptcy protection, 
and ensuring that abuses end so that small businesses are not 
victimized and consumers who can pay their bills do not pay the 
additional costs of those who choose not to.
  I congratulate Senator Grassley once again on an extraordinary 
effort. I am very proud to coauthor this bill with him. I look forward 
to the Senate's passage.
  I yield the floor.
  Mr. GRASSLEY. Mr. President, I hope we had a lot of people who were 
able to listen all afternoon on this debate. I doubt if very many 
people listened for 4 hours, but they heard a lot of charges against 
the bill that were partisan early on this afternoon. Then I said how 
this bill passed 83-14 originally. That would never have happened--that 
wide of a margin and bipartisan cooperation--except for the early 
support and continuing support, and you have seen that demonstrated in 
the recent speech by Senator Torricelli. I thank him for that.
  I also thank Senator Biden of Delaware for also helping us get this 
bill out of committee and to the floor, and also Senator Reid of 
Nevada, who helped us get through the hundreds of amendments we had 
filed with this legislation. So this is evidence of just three people 
on the other side of the aisle who have worked very hard to make this a 
bipartisan approach, and this legislation, as controversial as it is, 
would not have gotten as far as it had without that cooperation. I 
thank Senator Torricelli.

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