[Congressional Record Volume 146, Number 149 (Wednesday, December 6, 2000)]
[Senate]
[Pages S11656-S11658]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




      BANKRUPTCY REFORM ACT OF 2000--CONFERENCE REPORT--Continued

  Mr. KENNEDY. Mr. President, as I understand it, under the time 
agreement I was allocated 28 minutes.
  The PRESIDING OFFICER. Just under 28 minutes.
  Mr. KENNEDY. Will the Chair be kind enough to let me know when I have 
3 minutes remaining?
  The PRESIDING OFFICER. The Chair will do so.
  Mr. KENNEDY. Mr. President, I rise to urge the Senate to reject the 
flawed bankruptcy bill. For 3 years, the proponents and opponents of 
the so-called bankruptcy reform bill have disagreed about the merits of 
the bill. The credit card industry argues that the bill will eliminate 
fraud and abuse without denying bankruptcy relief to Americans who 
truly need it. But scores of bankruptcy scholars, advocates for women 
and children, labor unions, consumer advocates, and civil rights 
organizations agree that the current bill is so flawed that it will do 
far more harm than good. Every Member of the Senate should analyze 
these arguments closely. We can separate the myths from the facts and 
determine the winners and the losers.
  A fair analysis will conclude that this bankruptcy bill is the credit 
card industry's wish list, a blatant effort to increase their profits 
at the expense of working families. We know the specific circumstances 
and market forces that so often push middle-class Americans into 
bankruptcy. Layoffs are a major part of the problem. In recent years, 
the rising economic tide has not lifted all boats. Despite low 
unemployment, a soaring stock market, and large budget surpluses, Wall 
Street cheers when companies, eager to improve profits by downsizing, 
lay off workers in large numbers.
  During the period of January to October in the year 2000, the Bureau 
of Labor Statistics reported that there were a total of 11,364 layoffs 
resulting in more than 1.29 million Americans who were unemployed. In 
October 2000 alone, there were 874 mass layoffs--a layoff of at least 
50 people--and 103,000 workers were affected.
  Often when workers lose a good job, they are unable to recover. In a 
study of displaced workers in the early 1990s, the Bureau of Labor 
Statistics recorded that only about a quarter of previously laid-off 
workers were working at full-time jobs paying as much as or more than 
they had earned at the job they lost. Too often, laid-off workers are 
forced to accept part-time jobs, temporary jobs, or jobs with fewer 
benefits or no benefits at all.
  I am always reminded that if you were to compare the economic growth 
in the immediate postwar period, from 1948 up to 1972, and broke the 
income distribution into fifths in the United States, virtually every 
group moved up together. All of them moved up at about the same rate. 
If you looked at the 1970s, and particularly in the 1980s and 1990s, 
and if you broke the income distribution down into five economic 
groups, you would see that the group that has enhanced its economic 
condition immeasurably is the top 20 percent. The lower 20 percent are 
individuals who have actually fallen further and further behind in 
terms of their economic income. The next group has fallen still further 
behind.
  It is really only when you get to about the top 40 percent of the 
incomes for American families that you see any kind of increase. It is 
the group in the lower 60 percent who, by and large, have been affected 
by these significant layoffs. They have found it difficult to make very 
important and significant adjustments in their economic condition. They 
are hard-working men and women who are trying to provide for a family, 
ready and willing to work, want to work, but they see dramatic changes 
in terms of their income and they are forced into bankruptcy.
  We see that many bankrupt debtors are reporting job problems. There 
are various types of adverse conditions. Many have been fired and some 
are victims of downsizing. We also find that more women are in the 
workforce and contributing significantly to the economic stability of 
the family. If they are victims of a job interruption, it has a 
significant, important, and dramatic impact on the income of the 
family.

  If you look at the principal reasons for bankruptcies, more than 67 
percent of debtors talk about employment problems. So these are hard-
working Americans who are trying to make ends meet and we find that the 
economic conditions are of such a nature that they are forced into 
bankruptcy. Nobody is saying they should not pay or meet their 
responsibilities. But we also ought to recognize that in many of these 
circumstances it is not necessarily the individual's personal spending 
habits that force them into bankruptcy.
  Another factor in bankruptcy is divorce. Divorce rates have soared 
over the past 40 years. For better or worse, more couples than ever are 
separating, and the financial consequences are particularly devastating 
for women. Divorced women are four times more likely to file for 
bankruptcy than married women or single men. In 1999, 540,000 women who 
headed their own households filed for bankruptcy to try to stabilize 
their economic lives, and 200,000 of them were also creditors trying to 
collect child support or alimony. The rest were debtors struggling to 
make ends meet. This bankruptcy bill is anti-woman, and this Republican 
Congress should be ashamed of its attempt to put it into law.
  This chart shows the changes between the men and women in bankruptcy. 
You see that in 1981 a relatively small percentage of the bankruptcies 
were by single women. The red reflects the men and women going into 
bankruptcy. The yellow represents men alone. That was in 1981. In 1991, 
you see joint bankruptcy is continuing at a relatively slow pace. What 
you see is the men gradually going up. What happens with women is that 
it goes up exponentially. Over the period of the last 8 years, it is 
the women, by and large, who have been going into bankruptcy.
  Is that to say that these women in 1999 aren't willing to work like 
the ones in 1991 or 1981, that they are unwilling to pull their fair 
share? No, Mr. President. There is another explanation.
  The other explanation is, when we have the tragic circumstances of 
divorces, more likely than not the women are unable to get the alimony 
and unable to get the child support, through no fault of their own, and 
they end up going into bankruptcy. That is a primary reason for the 
increase in bankruptcies--although the total numbers of bankruptcies 
now have basically flattened out or have been reduced.
  We are pointing out that economic conditions are responsible for 
about half of the bankruptcies. The fact is that downsizing has taken 
place. In spite of the fact that others who have invested in these 
companies have made enormous amounts of money, many of those employees 
have been laid off and have been pushed to the side.
  These are hard-working men and women. The interesting fact to me is 
that people filing for bankruptcy are often middle-class people who 
want to work. These are not Americans trying to get by without playing 
by the rules. They are working, and they want to work, but there are 
circumstances that undermine their financial stability. As a result of 
these circumstances, there is an increase in the number of 
bankruptcies. It may be because of the inability to get child support 
or alimony, through no fault of their own.

[[Page S11657]]

  So we have a responsibility to make sure, if we are going to pass 
legislation, that we are going to be fair to these individuals, rather 
than to be unduly harsh and penalize them. That is what I believe this 
current legislation does. It holds them to an unduly harsh standard. 
That is not only my assessment, it is the assessment of virtually all 
of the groups --advocates either for children or women or workers or 
those who fight for basic civil rights. These are organizations and 
groups that have spent a great deal of time advocating for children or 
women. They have reached the same conclusion as the 116 bankruptcy 
professors in law schools all over the country--not located in any 
particular area--who have examined this bill.

  In the few moments before we voted yesterday, I asked the other side 
if they could name one single organization advocating for women and 
children and working families that supports this legislation and thinks 
it is fair to them. There isn't a single one. That ought to say 
something. It is not only those of us who are opposed to it who say it 
is grossly unfair, it is everyone. When you have a piece of legislation 
on the floor and there is a division, generally certain organizations 
support it and certain organizations don't. Not on this one. All the 
advocacy groups oppose it. Virtually all of them oppose it because they 
know it is unduly harsh and unfair to children, women, and workers, and 
unfair to consumers.
  Mr. President, another major factor in the bankruptcy is the high 
cost of health care. 43 million Americans have no health insurance, and 
many millions more are underinsured. Each year, millions of families 
spend more than 20 percent of their income on medical care, and older 
Americans are hit particularly hard. A 1998 CRS report states that even 
though Medicare provides near-universal health coverage for older 
Americans, half of this age group spend 14 percent or more of their 
after-tax income on health costs, including insurance premiums, 
copayments, and prescription drugs.
  Does that have a familiar ring to it? We just had a national debate, 
and the Presidential candidates were asked about prescription drugs. 
Why? Because of the escalation of the cost of prescription drugs. How 
does that actually impact and affect families? Well, it is a principal 
cause of bankruptcy for many families. They just cannot afford to pay 
for prescription drugs and meet the other kinds of needs they have in 
terms of paying rent or putting food on the table. They go in a 
declining spiral and they end up in bankruptcy.
  These are individuals in families from whom the credit card industry 
believes it can squeeze another dime. The industry claims they are 
cheating and abusing the bankruptcy system and are irresponsibly using 
their charge cards to live in a luxury they can't afford.
  I think these charts are enormously interesting, and I find them so 
compelling when you see what is happening and what is driving so many 
of these families into bankruptcy.
  The high cost of prescription drugs: the Presidential candidates 
spoke about it and are talking about the importance of it. Every 
candidate across this country in this last campaign was saying what 
they were going to try to do to relieve the cost of prescription drugs.
  There are millions and millions of senior citizens who can't afford 
to wait for an answer by Congress. What has happened to them? They go 
into bankruptcy. Similarly, we see the very tragic growth of the 
breakups of families and the fact that too many of those involved in 
those relationships are unwilling to meet their responsibilities to 
their children or to pay alimony.
  What has been the result to women? They go into bankruptcy. Or, as we 
have seen as a result of the developing of our economy and these 
extraordinary mergers--fortunes are being made, on the one hand, by 
certain investors, but others who have given their lives to these 
companies and have received good compensation suddenly are cast aside. 
They are unable to quickly adjust to their changed economic conditions. 
What happens to them? They go into bankruptcy.
  Certainly we need to have bankruptcy legislation. But we also ought 
to have bankruptcy legislation that is going to be fair and that is 
going to be just and not punitive. We say that this legislation is 
punitive. It isn't only myself and many of our colleagues, but it is 
also those who have spent their lives studying bankruptcy, teaching 
bankruptcy. Judges on the bankruptcy courts are dealing with it every 
single day and have virtually uniformly come to the conclusion that 
this legislation is unfair, unjust, unwise, and doesn't deserve to pass 
the Senate.
  This legislation unfairly targets middle-class and poor families. It 
leaves flagrant abuses in place.
  Time and time again, President Clinton has told the Republican 
leadership that the final bill must include two important provisions--a 
homestead provision without loopholes for the wealthy, and a provision 
that requires accountability and responsibility for those who 
unlawfully and often violently bar access to legal health services. The 
current bill includes neither of those provisions.
  The conference report includes a half-hearted, loophole filled 
homestead provision. It will do little to eliminate fraud.
  That is another failing of this legislation. It creates a loophole 
for wealthy individuals to effectively hide their income. That kind of 
loophole will not be available for hard-working Americans who run into 
the kinds of problems I have outlined. But the homestead provision that 
is left in this bill still can be abused by hiding millions in assets 
from creditors.
  For example, Allen Smith of Delaware, a State with no homestead 
exemption, and James Villa of Florida, a State with an unlimited 
homestead exemption, were treated very differently by the bankruptcy 
system. One man eventually lost his home. The other was able to hide 
$l.4 million from his creditors by purchasing a luxury mansion in 
Florida.
  The Senate passed a worthwhile amendment to eliminate this inequity. 
But that provision was stripped from the conference report.
  Do we understand? The Senate adopted a provision to deal with the 
kind of inequity which I have just outlined--listen to this--Allen 
Smith of Delaware, a State with no homestead exemption, and James Villa 
of Florida, a State with an unlimited homestead exemption, were treated 
differently. One man eventually lost his home. The other was able to 
hide $l.4 million from his creditors by purchasing a luxury mansion in 
Florida.
  The Senate passed a worthwhile amendment to eliminate this inequity. 
But that provision was stripped from the conference report.
  Why? Why was it stripped? Who had the influence? Who authored that 
amendment? It would be interesting to find out. We don't know because 
the final conference didn't include members of our party or individuals 
who are against it. The provision just happened to show up in the 
conference report. Obviously, it is going to benefit some individuals 
to the tune of millions of dollars.
  Surely, a bill designed to end fraud and abuse should include a 
loophole-free homestead provision. The President thinks so. In an 
October 12, 2000 letter, White House Chief of Staff, John Podesta says, 
``The inclusion of a provision limiting to some degree a wealthy 
debtor's capacity to shift assets before bankruptcy into a home and in 
a State with an unlimited homestead exemption does not ameliorate the 
glaring omission of a real homestead cap.''
  The homestead loophole should be closed permanently. It should not be 
left open just for the wealthy. Yet this misguided bill's supporters 
refuse to fight for such a responsible provision with the same 
intensity they are fighting for the credit card industry's wish list, 
and fighting against women, against the sick, against laid-off workers, 
and against other average individuals and families who will have no 
safety net if this unjust bill passes.
  This legislation flunks the test of fairness. It is a bill designed 
to meet the needs of one of the most profitable industries in America--
the credit card industry. Credit card companies are vigorously engaged 
in massive and unseemly nation-wide campaigns to hook unsuspecting 
citizens on credit card debt. They sent out 2.87 billion--2.87 
billion--credit card solicitations in 1999. And, in recent years, the 
industry has begun to offer new lines of credit

[[Page S11658]]

targeted at people with low incomes--even though the industry knows 
full well that these persons cannot afford to pile up credit card debt.
  Supporters of the bill argue that the bankruptcy bill isn't a credit 
card industry bill. They argue that we had votes on credit card 
legislation, and, that some amendments passed and others did not. But, 
to deal effectively and comprehensively with the problem of bankruptcy, 
we have to deal with the problem of debt. We must ensure that the 
credit card industry doesn't abandon fair lending policies to fatten 
its bottom line, or ask Congress to become its federal collector for 
unpaid credit card bills.
  I have this letter from the American Bankruptcy Service in St. Paul, 
MN. It references the ``fresh start Visa Card.''
  They offer a unique opportunity that could be of great benefit to 
firms and their clients. By becoming a debtor, they will have the 
ability to market an unsecured Visa credit card--the fresh start card--
to their clients who have filed for chapter 7 bankruptcy, if they have 
completed the ``341 meeting'' of creditors with no outstanding issues 
with the trustees, have not yet received a discharge in bankruptcy, or 
have attached a copy of the bankruptcy notice to their Visa 
application.
  They say several law firms, especially those representing consumer 
debtors in bankruptcy, have requested the ability to distribute the 
``fresh start Visa'' application to their clients. For each credit card 
issued, their firm will receive $10.
  The credit card industry is marketing to people who are already in 
bankruptcy.
  Do we understand that? We heard all of the very pious speeches and 
statements--what we want is accountability; get those hard-working 
people and teach them the value of the dollar; teach them a lesson. 
Well, boy, this is apparently teaching someone a lesson here because 
they are already going to be eligible, according to the American 
Bankruptcy Service, to get another Visa card even though they have been 
in bankruptcy.
  They are out there trying to tempt them, bring them in one more time, 
and squeeze out a few extra dollars. Where is the responsibility of the 
credit card industry in this area? Where is their accountability? Why 
is this all one way?
  This bill is tough on women. It is tough on children. It is tough on 
workers who have had severe medical problems and had to get 
prescription drugs. It is tough on older workers who haven't gotten 
their Medicare and do not have health insurance. It is tough on all of 
them. But it is not very tough at all on the credit card industry that 
has contributed to the fact that this particular family or individual 
will be in bankruptcy.
  Where is the fairness in this? It is not there.
  Two years ago, the Senate passed good credit card disclosure 
provisions that added fair balance to the bankruptcy bill. It's 
disturbing that the provisions in the bill passed by the Senate this 
year were watered down to pacify the credit card industry. Even worse, 
some of the provisions passed by the Senate were stripped from the 
conference report.
  The hypocrisy of this bill is transparent. We hear a lot of pious 
Republican talk about the need for responsibility when average families 
are in financial trouble, but we hear no such talk of responsibility 
when the wealthy credit card companies and their lobbyists are the 
focus of attention.
  The credit card industry and congressional supporters of the bill 
attempt to argue that the bankruptcy bill will help--not harm--women 
and children. That argument is laughable.
  Proponents of the bill say that it ensures that alimony and child 
support will be the number one priority in bankruptcy. That rhetoric 
masks the complexity of the bankruptcy system--but it doesn't hide the 
fact that women and children will be the losers if this bill becomes 
law.
  Under the current law, an ex-wife trying to collect support enjoys 
special protection. But under this pending bill, credit card companies 
are given a new right to compete with women and children for the 
husband's limited income after bankruptcy.
  It is true that this bill moves support payments to the first 
priority position in the bankruptcy code, but that only matters in the 
limited number of cases in which the debtor has assets to distribute to 
a creditor. In most cases, over 95 percent, there are no assets and the 
list of priorities has no effect.
  This issue has been debated and debated and debated. It is amazing to 
me, as we work in the remaining few hours of this session, that we are 
not considering increasing the minimum wage for workers who have waited 
a long time to get a $1 increase from $5.15 an hour. No, we are not 
willing to pass that legislation. We are not willing to come back and 
pass and give consideration to reauthorizing an elementary and 
secondary education bill. We are not being asked when we come back to 
even deal with the Patients' Bill of Rights. No, we are being asked to 
look out for the credit card industry in a very significant and massive 
giveaway. It is wrong. This bill does not deserve to pass. I hope it 
will not.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Sessions). Under the previous order, the 
Senator from North Dakota is to be recognized.
  Mr. DORGAN. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. DORGAN. 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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