[Congressional Record Volume 151, Number 21 (Tuesday, March 1, 2005)]
[Senate]
[Pages S1820-S1831]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2005

  The PRESIDING OFFICER. Under the previous order, the Senate will 
resume consideration of S. 256, which the clerk will report.
  The assistant legislative clerk read as follows:

       A bill (S. 256) to amend title 11 of the United States 
     Code, and for other purposes.

  The PRESIDING OFFICER. The Senator from Alabama is recognized.
  Mr. SESSIONS. Mr. President, I ask unanimous consent that the pending 
committee amendments be agreed to and be considered as original text 
for the purposes of further amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SESSIONS. Mr. President, I am pleased we are able now to move 
forward with this bankruptcy bill. We have been at it 8 years. It has 
passed this Senate 3 different times, one time with over 90 votes, and 
the last time was 83 to 15. It represents many years of steadfast 
debate and discussion.
  I see my colleague from Illinois, Senator Durbin, has been very 
active in all of this debate. As a matter of fact, at one time he was 
sponsoring the bill. He has continued to offer amendments that he 
believes improve it. Some have been accepted and made a part of the 
bill, some have not.
  I think his evaluation of the legislation is far too negative in 
terms of the impact it would have on poor people. I believe it is going 
to benefit poor people. It is going to benefit families. It is going to 
benefit mothers with children. Clearly, it will do that and it will 
crack down on abuses.
  Are there additional abuses we would like to deal with, one in 
particular he just mentioned, the homestead exemption? I would like to 
have gone further. It is in the constitution of quite a number of 
States that homesteading is so much and Senators have dug in their 
heels and said this overrides the Florida constitution, the Kansas 
constitution, the Texas constitution, or I cannot agree to do that on 
the floor, I will fight this bill and object to it if anyone tries to 
do that.
  So we made some improvements in the abuses on homestead. I think that 
was the right direction. I wish we could have gone further. Senator 
Herb Kohl and I would have offered the amendment that could have 
changed it even more significantly, but perfect is not always 
achievable. I wish we could do more, but I think we made some real 
progress. We delineate those steps that tighten it up and make it much 
more difficult to abuse the homestead exemption. One has to actually 
live in a house for 2 years in that State or they cannot take advantage 
of it. That is a step forward and will stop these people from buying a 
house on the eve of filing bankruptcy. So there are some good things.
  With regard to health care, let us talk frankly about health care. 
Yes, it is a factor in quite a number of bankruptcies. It is not the 
No. 1 factor. In my view, over half the bankruptcies are clearly not 
driven by health care, but a large number of them are impacted by 
health care bills.
  The question is this: Will it change the situation for poor people 
who have health care bills? Will they not be able to take advantage of 
bankruptcy and wipe those debts out today, just like they would? Well, 
if they make below the median income--and we think about 80 percent of 
the filers in bankruptcy make below median income--the law is not going 
to change. They will still be able to wipe out any debts they have for 
medical or other reasons.

  Then what about if one has a continuing health care debt, and they 
make above median income but they have a serious medical cost which is 
recurring regularly, what can they do about that? They will have a 
harder time going into chapter 13 and paying back some portion of the 
debts that they owe, people argue, and they are correct, but under this 
bill the bankruptcy judge can calculate that extra recurring health 
care debt as part of the expenses and those people would still be able 
to file under chapter 7, wiping out all of their debts, if that is what 
they chose to do. If they make above the median income and are able to 
pay off some of their debts to their doctor and their hospital, why 
shouldn't they? You mean they have no obligation to pay a hospital that 
may have spent a lot of money helping them get well or a physician who 
took care of them and provided medical care to them? If they are making 
$80,000 a year and in bankruptcy under chapter 13 the judge finds that 
a person could pay back 25 percent, why should they not pay 25 percent? 
The judge will not order it unless he believes based on the person's 
income level they have the ability to repay.
  When a person in America undertakes an obligation to pay someone, 
they ought to pay them, and in any country that is so. We are drifting 
a bit to suggest there is no real obligation to pay the debts we incur. 
If we get to that point, then we have eroded some very important 
fundamental moral principles about commerce in America.
  I know Senator Durbin has an amendment he would like to offer, and I 
will not delay him from doing that. I have some other things to say in 
general about the bill, and I can say those later. I believe this is a 
rational bill. That is why it has such broad support. I believe this 
bill says plainly and clearly, if one can pay back some of their debts, 
they ought to do so. There is no reason why somebody making $100,000 
who can pay back 20 percent of the debts he owes to the person who 
fixed his car or the doctor who helped him get well should not pay that 
back. Why should they wipe out all of those debts?
  For the vast majority of people who file, they will be able to file 
under chapter 7 and wipe out all of their debts if that is what they 
choose.
  I will say one thing further about chapter 13. That is the category 
of bankruptcy a person would be put into if they were required to pay 
some of their debts back. Chapter 13 has been a part of bankruptcy law 
for quite a long time. In my home State of Alabama, over half the 
bankruptcies are filed under chapter 13. People want to pay their 
debts. They are behind in their debts. People are bugging them, the 
phones are ringing, lawsuits are being filed, and they are overwhelmed. 
They cannot pay all of their debts at once and they file under the 
bankruptcy law. They say, I want to pay back a percentage of my debts, 
Judge, and if you will set out a schedule, if you will get these 
creditors off my back and have them quit calling me, quit suing me, 
quit sending me demand letters, you set up the schedule, I will pay 
this one so much a month and this one so much a month. That is a 
healthy, good thing. We ought to do more of that.

  In some States, under 5 percent of the debtors go into chapter 13. 
That number ought to come up because a lot of those people in some of 
these States that are so few in choosing chapter 13 should be in 
chapter 13 for their own self-interest.
  One may ask, well, what about these people in Alabama? Are they 
making them go into chapter 13? No, they have chosen to go into chapter 
13 because they want to pay back a portion of their debts. They want to 
stop the lawsuits from going on. There are other advantages to it, such 
as being able to keep an automobile and the apartment or the house that 
one owns in ways that one would otherwise not do.
  There are some real advantages of going into chapter 13 rather than 
chapter 7. Many people choose it and in

[[Page S1821]]

some areas of the country it is very much underutilized. This will 
capture only about the top 20 percent. One expert at our committee 
hearing said about 7 of those will have extra continuing debts that 
will take them out of it, so it will probably not be much over 10 
percent of the filers who will be impacted. But some of those are the 
biggest offenders. Some of those are the people with the highest 
income. As a matter of fact, all of them will be people with incomes 
above the median income. They ought to pay some of their debts back. 
This bill will say that they must do that.
  I think it will help us in many ways to have more integrity in the 
bankruptcy system. That is why we have such strong support for it. I am 
sure we will have a full and open debate as we go forward the rest of 
this week. I hope we will have a vote, and I suspect we will have 
another strong vote for final passage.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. Mr. President, for clarity I would like to yield back all 
time in morning business and go to the bill at this point.
  The PRESIDING OFFICER. The Senate is on the bill now.


                            Amendment No. 16

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

       The Senator from Illinois [Mr. Durbin], for himself, Ms. 
     Stabenow, Mr. Bayh, Ms. Landrieu, Mr. Leahy, Mr. Levin, Mr. 
     Schumer, and Ms. Cantwell, proposes an amendment numbered 16.

  Mr. DURBIN. I ask unanimous consent the reading of the amendment be 
dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

(Purpose: To protect servicemembers and veterans from means testing in 
  bankruptcy, to disallow certain claims by lenders charging usurious 
   interest rates to servicemembers, and to allow service members to 
  exempt property based on the law of the State of their premilitary 
                               residence)

        On page 13, between lines 13 and 14, insert the following:
       ``(D) Subparagraphs (A) through (C) shall not apply, and 
     the court may not dismiss or convert a case based on any form 
     of means testing, if--
       ``(i) the debtor or the debtor's spouse is a servicemember 
     (as defined in section 101 of the Servicemembers Civil Relief 
     Act (50 App. U.S.C. 511(1)));
       ``(ii) the debtor or the debtor's spouse is a veteran (as 
     defined in section 101(2) of title 38, United States Code); 
     or
       ``(iii) the debtor's spouse dies while in military service 
     (as defined in section 101(2) of the Servicemembers Civil 
     Relief Act (50 App. U.S.C. 511(2))).
       On page 67, between lines 18 and 19, insert the following:

     SEC. 206. DISALLOWANCE OF CLAIMS FILED ON HIGH-COST PAYDAY 
                   LOANS MADE TO SERVICEMEMBERS.

       (a) In General.--Section 502(b) of title 11, United States 
     Code, is amended--
       (1) in paragraph (8), by striking ``or'' at the end;
       (2) in paragraph (9), by striking the period at the end; 
     and
       (3) by adding at the end the following:
       ``(10) such claim results from an assignment (including a 
     loan or an agreement to deposit military pay into a joint 
     account from which another person may make withdrawals, 
     except when the assignment is for the benefit of a spouse or 
     dependent of the debtor) of the debtor's right to receive--
       ``(A) military pay made in violation of section 701(c) of 
     title 37; or
       ``(B) military pension or disability benefits made in 
     violation of section 5301(a) of title 38; or
       ``(11) such claim is based on a debt of a servicemember or 
     a dependent of a servicemember that--
       ``(A) is secured by, or conditioned upon--
       ``(i) a personal check held for future deposit; or
       ``(ii) electronic access to a bank account; or
       ``(B) requires the payment of interest, fees, or other 
     charges that would cause the annual percentage rate (as 
     defined by section 107 of the Truth in Lending Act (15 U.S.C. 
     1606)) on the obligation to exceed 36 percent.''.
       (b) Conforming Amendment.--Section 523 of title 11, United 
     States Code, is amended by adding at the end the following:
       ``(f) Notwithstanding paragraphs (2), (4), and (6) of 
     subsection (a), a debt is dischargeable in a case under this 
     title if it is based on an assignment of the debtor's right 
     to receive--
       ``(1) military pay made in violation of section 701(c) of 
     title 37; or
       ``(2) military pension or disability benefits made in 
     violation of section 5301(a) of title 38.''.
       On page 132, between lines 5 and 6, insert the following:

     SEC. 234. PROTECTION OF SERVICEMEMBERS' PROPERTY IN 
                   BANKRUPTCY.

       (a) In General.--Section 522(b) of title 11, United States 
     Code, as amended by section 224, is further amended--
       (1) in paragraph (1), as redesignated, by striking ``either 
     paragraph (2) or, in the alternative, paragraph (3) of this 
     subsection'' and inserting ``paragraph (2), (3), or (4)'';
       (2) by redesignating paragraph (4), as added by this Act, 
     as paragraph (5); and
       (3) by inserting after paragraph (3), as redesignated, the 
     following:
       ``(4) If the debtor is a servicemember or the dependent of 
     a servicemember, and the date of the filing of the petition 
     is during, or not later than 1 year after, a period of 
     military service by the servicemember, property listed in 
     this paragraph is--
       ``(A) property that is specified under subsection (d), 
     notwithstanding any State law that prohibits such exemptions; 
     or
       ``(B) property that the debtor could have exempted if the 
     debtor had been domiciled in the State of the debtor's 
     premilitary residence for a sufficient period to claim the 
     exemptions allowed by that State.''.
       (b) Definitions.--Section 101 of title 11, United States 
     Code, is amended--
       (1) by inserting after paragraph (13A), as added by this 
     Act, the following:
       ``(13B) `dependent', with respect to a servicemember, 
     means--
       ``(A) the servicemember's spouse;
       ``(B) the servicemember's child (as defined in section 
     101(4) of title 38); or
       ``(C) an individual for whom the servicemember provided 
     more than 50 percent of the individual's support during the 
     180-day period immediately before the petition;'';
       (2) by inserting after paragraph (39A), as added by this 
     Act, the following:
       ``(39B) `military service' means--
       ``(A) in the case of a servicemember who is a member of the 
     Army, Navy, Air Force, Marine Corps, or Coast Guard--
       ``(i) active duty (as defined in section 101(d)(1) of title 
     10); and
       ``(ii) in the case of a member of the National Guard of the 
     United States, service under a call to active service 
     authorized by the President or the Secretary of Defense for a 
     period of more than 30 consecutive days under section 502(f) 
     of title 32, for purposes of responding to a national 
     emergency declared by the President and supported by Federal 
     funds;
       ``(B) in the case of a servicemember who is a commissioned 
     officer of the Public Health Service or the National Oceanic 
     and Atmospheric Administration, active service; and
       ``(C) any period during which a servicemember is absent 
     from duty on account of sickness, wounds, leave, or other 
     lawful cause;'';
       (3) by inserting after paragraph (40B), as added by this 
     Act, the following:
       ``(40C) `period of military service' means the period 
     beginning on the date on which a servicemember enters 
     military service and ending on the date on which the 
     servicemember--
       ``(A) is released from military service; or
       ``(B) dies while in military service;''; and
       (4) by inserting after paragraph (51D), as added by this 
     Act, the following:
       ``(51E) `servicemember' means a member of the uniformed 
     services (as defined in section 101(a)(5) of title 10;''.
       On page 191, between lines 11 and 12, insert the following:

     SEC. 322A. EXEMPTION FOR SERVICEMEMBERS.

       Section 522 of title 11, United States Code, as amended by 
     sections 224, 308, and 322, is further amended by adding at 
     the end the following:
       ``(r) If the debtor or the spouse of the debtor is a 
     servicemember (as defined in section 101 of the 
     Servicemembers Civil Relief Act (50 U.S.C. App. 511(1))) or a 
     veteran (as defined in section 101(2) of title 38, United 
     States Code) or the spouse of the debtor dies while in 
     military service (as defined in section 101(2) of the 
     Servicemembers Civil Relief Act (50 U.S.C. App. 511(2))), and 
     the debtor or the spouse of the debtor elects to exempt 
     property--
       ``(1) under subsection (b)(2), the debtor may, in lieu of 
     the exemption provided under subsection (d)(1), exempt the 
     debtor's aggregate interest, not to exceed $75,000 in value, 
     in--
       ``(A) real property or personal property that the debtor or 
     a dependent of the debtor uses as a residence;
       ``(B) a cooperative that owns property that the debtor or a 
     dependent of the debtor uses as a residence; or
       ``(C) a burial plot for the debtor or a dependent of the 
     debtor; or
       ``(2) under subsection (b)(3), and the exemption provided 
     under applicable law that may be applied to such property is 
     for less than $75,000 in value, the debtor may, in lieu of 
     such exemption, exempt the debtor's aggregate interest, not 
     to exceed $75,000 in value, in any property described in 
     subparagraph (A), (B), or (C) of paragraph (1).''.

  Mr. DURBIN. Mr. President, I will go to this amendment in a moment, 
and it is one I hope all Members will listen to carefully because it is 
an effort to protect our military from the provisions of this bill, 
particularly in light of the

[[Page S1822]]

activation of Guard and Reserve units across America and the financial 
hardship it has created. I will speak to that amendment after I address 
this bill a few moments more.
  I thank my colleague from Alabama. We see this issue differently, but 
there are some things on which we agree. I think my colleague from 
Alabama is doing the right thing on the homestead exemption because if 
you could walk into bankruptcy court having just bought a multimillion-
dollar mansion in Florida and then say, I don't want to be held 
responsible for my debts, and then the court says, Of course, your home 
you can keep, your home is your castle, and that home is worth millions 
of dollars, you have just defrauded the system, as far as I am 
concerned. Here you are with a multimillion-dollar home and these debts 
and you do not pay your debts, and the States of Florida, Texas, 
Kansas, and a few others say whatever your home is worth, it is exempt.
  It is a loophole in the law. If we are talking about just and right 
conduct in this situation, then clearly we would change the homestead 
law. I salute my colleague from Alabama because he has been a leader on 
this issue. It is unfortunate that we have been unable to reach a 
better agreement as we go forward on this bill.
  Mr. SESSIONS. Will the Senator yield for a brief question?
  Mr. DURBIN. I yield for a question without yielding the floor.
  Mr. SESSIONS. I don't think the Senator would deny that this new 
bankruptcy reform bill makes it more difficult than current law to 
abuse the homestead exemption.
  Mr. DURBIN. Yes. I would not.
  Mr. SESSIONS. We didn't go as far as we would like to go, but we did 
make some progress.
  Mr. DURBIN. I think the Senator from Alabama is correct. The bill 
makes an improvement, but it doesn't reflect the combined wisdom of the 
Senator from Wisconsin and the Senator from Alabama, an amendment I was 
more than happy to support.
  So here is this bankruptcy bill, and we are talking about ordinary 
Americans going into bankruptcy court. We did a survey. We took a look 
at 1,900 bankruptcies across the United States and said: What brought 
you to court? Why did you finally have to file for bankruptcy?
  More than half of them said medical bills. Three-fourths of the 
people who filed for bankruptcy because the medical bills had swamped 
them, three-fourths of those people had health insurance when they were 
diagnosed but they didn't have enough. It did not cover enough. Or they 
lost their job and then they couldn't keep up with it.
  Is there one of us--I guess there are some, but is there one of us 
who believes that we are invulnerable when it comes to medical debt? 
You know better. You go to the doctor's office thinking everything is 
just fine and you are diagnosed with a serious illness which results in 
surgeries, chemotherapy, and long hospital stays. Who among us can say, 
I'll just write a check; I will cover the difference in my health 
insurance? Not many. Maybe a handful of people but not many.
  So what happens? You go to the hospital. You get treated. When all is 
said and done you try to get well and go back to work, and there is 
this huge shadow over your life. They call and they say: We want you to 
pay.
  You pay some, but you can't pay enough and the next thing you know 
you are consumed with paying this debt, but you just can't do it; it is 
way beyond your means. What do you do? You do what you can legally do 
in America today. You go to a court and say: I have to file bankruptcy. 
I don't have enough assets. I will never be able to pay off this debt.
  The court may decide you will never be able to pay off this debt. If 
they think you can, they may put you on a schedule to make certain 
payments for a period of time. But say you are a waitress at a diner. 
You went through breast cancer, surgery, and treatment. You have 
$50,000 in debt, and what are your assets, $20,000? This will never 
work. You will never get out from under this debt so you can file for 
bankruptcy. You can clean the slate. You can start over.
  That is the law. It is embarrassing. People don't like to go through 
it, but they are forced into it.
  What this bill says, for those people who get in those circumstances, 
is we are going to make it tougher for you. Let me give you one little 
illustration of how they make it tougher.
  Imagine you have this huge medical debt hanging over your head. The 
creditors are not only calling you at home, they are calling your kids 
at home. The kids are crying, saying: How many more phone calls do we 
have to take, Mom?
  You get to go to bankruptcy court, but you just discovered something. 
You don't have enough money on hand. You have barely enough to get from 
paycheck to paycheck, and the attorney says: I will represent you, but 
there is a $209 filing fee to go into bankruptcy court, and I am going 
to need at least $500 to start this proceeding as your attorney.
  What am I going to do? I have a credit card. I am going to go ahead 
and take cash out of my credit card to pay the filing fee and to get 
$500 for the lawyer so I can go to court. If I do that within 70 days 
of filing bankruptcy, they declare this as a fraudulent transaction 
that cannot be discharged in bankruptcy. That credit card debt for 
$740-plus within 70 days of filing is with me forever. The credit card 
company has me forever until I pay it off.
  Some people will say: We have to hold these people to a high moral 
standard: Pay back your debts, be responsible.
  I agree with that. But the law has said for decades that there are 
some people who can't do that. They reach a point where they cannot 
physically do it. They are not making enough money and they never will. 
So you know what I did in the Judiciary Committee? I said to my 
colleagues in the Judiciary Committee, if this is about your moral 
responsibilities, let's talk about some of the corporate CEOs that we 
have heard so much about recently and their moral responsibilities. I 
used as an illustration Kenneth Lay, CEO of Enron. Mr. Lay took $81 
million in loan advances from Enron before the company declared 
bankruptcy. Do you remember what happened when it declared bankruptcy? 
Not only did the shareholders lose, the employees lost, the retirees at 
Enron lost, and retirees across America who had investments in Enron 
lost, too.
  So I said to my friends on the Judiciary Committee: If we are going 
to hold this woman with her medical bills, who just took a cash advance 
of $740, to high moral standards, shouldn't we hold Mr. Lay to high 
moral standards? Shouldn't we look back and see what his corporate 
activity was?
  They said: No. We are just interested in the woman with breast 
cancer. We don't want to talk about Kenneth Lay.
  How about Dennis Koslowski, Tyco chief executive? Do you remember his 
situation? He had Tyco pay for a $30,000 shower curtain; $30,000 paid 
by the corporation, and he took a total of $135 million out of the 
corporation in loans and company payments for his personal use and then 
went right into bankruptcy. I said to my friends on the Judiciary 
Committee: How about that? Here is a situation, this corporate 
executive fleeced his company, pushed them into bankruptcy, hurting 
millions of people, shouldn't we look back and hold him accountable?
  No, we are not interested in Dennis Koslowski, nor WorldCom CEO 
Bernie Ebbers, who took $408 million. We are interested in the woman, 
single mother with two kids, who is a waitress, who can't pay her bills 
for breast cancer. That is who we are interested in.
  That tells you what this bill is all about. This bill is all about 
the bankruptcies of ordinary Americans, ordinary Americans who are 
seeing their jobs outsourced, ordinary Americans who are seeing their 
health insurance downsized if they are lucky enough to have it, 
downsized every year, ordinary Americans who have seen their real wages 
decline, ordinary Americans who are not even being paid a minimum wage 
that reflects the cost of getting by in America, ordinary workers who 
are losing overtime pay because this administration is restricting the 
rules for eligibility on overtime. These are the people we are after. 
We are not after those corporate CEOs. We will save them for another 
day. Right. Don't hold your breath.
  Isn't it interesting at a time when health care in America is so hard 
to come by and so expensive, when the Government is talking about 
cutting

[[Page S1823]]

back on Medicaid, when we have no proposals to help people with their 
health care insurance, when we know it is driving people deeper and 
deeper into debt and more vulnerability, that we come up with a bill 
that is going to make it tougher for those who cannot pay their medical 
bills? It tells you about this Congress and its priorities.
  This is our second bill. This is our second highest priority in this 
session: Do something about that woman with breast cancer. She is going 
to that bankruptcy court, and it is not morally right.
  The credit card industry is pushing this bill big time. I told you 
earlier in the year 2003 the credit card industry had $30 billion in 
profit. They don't acknowledge the obvious. If there are abuses in the 
bankruptcy system there are sections to cover it; 707(b) allows the 
bankruptcy court to deal with substantial abuses of the rules. That is 
already in the law. If a bankruptcy judge suspects a person is going to 
walk on the debts he can pay, the judge orders a trustee to 
investigate, and if the trustee says the person is hiding assets, the 
judge can tell the person: I will not discharge your debts.
  That is already in the law, and that is the way it should be.
  Last year, they investigated over 3,000 cases where they suspected 
somebody was cheating the bankruptcy system, and it ordered the 
petitioners to pay their debts in over 95 percent of them.
  The system is working. The credit card companies don't need new laws 
to catch deadbeats. The credit card companies want this law so they can 
squeeze every last dollar out of decent, hard-working, play-by-the-
rules people who have already been devastated economically by traumatic 
events such as job loss, divorce, and, increasingly, medical problems.
  We had a hearing on this bill: 2 hours and 15 minutes. Senator Hatch 
said, at one point, if this hearing went any longer, it would have cost 
him his sanity. I won't comment on that. But I think we could have 
taken a few more minutes on this bill, even invited or subpoenaed the 
credit card companies to come up and explain why they need this so 
desperately.
  I think we understand what is going on here. The Harvard law and 
medical schools did a study, the first indepth study of the medical 
causes of bankruptcy. It is an indepth examination of the records in 
1,900 bankruptcy cases filed in five different bankruptcy courts across 
America, including one in Illinois. It showed that half of the 
bankruptcies in this country are because of high medical bills.
  Listen to these statistics. Two million Americans each year are 
driven into bankruptcy by medical debt. Three-quarters of them had 
health insurance when they first got sick. Most of them lost their 
insurance when they got fired because they were too sick to work 
anymore, or they were bankrupted by out-of-pocket expenses that 
policies didn't cover. Are these morally flawed people? Are these 
irresponsible people who got sick? They are good people who had the 
misfortune of illness.
  Harvard law professor Elizabeth Warren, one of the authors of the 
study, said:

       These are hard-working, ``play by the rules'' people who 
     have health insurance and have discovered that they were just 
     one bad diagnosis away from financial disaster. I think 
     that's the real heart of the story. This is about people who 
     thought they were all safe. Accountants, lawyers, teachers, 
     police officers, airline mechanics, members of the National 
     Guard who get sent to Iraq for a year, the family next-door--
     that is who is going bankrupt in America, families who spend 
     nearly every dollar they earn, not on luxuries but on 
     necessities and basics: childcare, health care, a decent 
     home, and a safe neighborhood. They have very little savings. 
     They are not doing that well. They dip into their savings 
     when they have to. They may even try to take their money out 
     of their 401(k). Maybe they take out a second mortgage. When 
     that money is gone, they turn to credit cards for basics such 
     as food, gas, and doctors' bills. They have done their level 
     best to raise their kids right and honor their obligations. 
     According to Professor Warren, the average American filing 
     for bankruptcy spends more than a year struggling with debts 
     before filing. This is not an impulsive thing. Four out of 
     ten people she interviewed said they had their phones shut 
     off in the 2 years before they filed. More than half skipped 
     doctor or dental appointments because of the cost. More than 
     40 percent had failed to fill a prescription, and more than 
     one in five had gone without food--without food--because of 
     the cost. By the time they finally gave up and went to 
     bankruptcy court, the average family owed more than a year's 
     salary in debt, other than their mortgage. Getting the last 
     pound of flesh from these families, that is what the bill is 
     all about.

  What is the incidence of abuse? We can almost agree on it.
  The American Bankruptcy Institute is a nonpartisan research and 
education organization that says 3 percent of the people who file for 
bankruptcy could afford to repay--3 percent. This is about 1.1 million 
who file each year. The rest don't have two nickels to rub together. 
The credit card industry says it is 10 percent. Even if you accept 
their own figure, that means 90 percent of the people who file for 
bankruptcy are flat broke. They should be left alone.
  Under current law, these 90 or 97 percent of bankruptcy petitioners 
show a bankrupt judge how much they owe and how much they earn. It is a 
simple process. You could fit the paperwork on a single sheet of paper 
and have room left over.
  If the judge agrees the person cannot afford to pay all of his or her 
debts, the petitioner can file for chapter 7 bankruptcy, and the credit 
card debt, medical bills, and other unsecured debts can be discharged, 
wiped away. Bankruptcy is still financially and emotionally draining, 
but at least the person can stop at zero.
  The bill we are considering assumes that the majority of people are 
out to cheat the system. Despite the fact that even the credit card 
industry says 90 percent of the people are not, this bill assumes they 
are.
  We create a means test--a means test that adds complication to the 
process, greater legal bills, and greater legal costs for the person in 
bankruptcy who is trying to get out from under the problem with the 
means test.
  The way the law works now, bankruptcy judges have the authority and 
discretion to look at how much debt a person has and how they acquired 
the debt. Then the judge decides: Is this someone who is trying to game 
the system? Is this someone who has been dealt some hard blows in life? 
Is this debt brought on by buying a plasma screen television, or taking 
that cruise, or is it a desperate effort to pay doctors' bills and buy 
groceries and not see the house foreclosed on?
  The means test in this bill wipes out the judge's discretion. The 
judge can't look at a real person. The judge looks at numbers on paper. 
The means test isn't really meant to screen out cheaters. There is 
already a provision in the law for that. It is designed to trip people 
up, add legal expenses, and force more families into chapter 13.
  This isn't a balanced bill. Unfortunately, the scandals I have talked 
about at Enron, Tyco, and WorldCom are the subject of a good bankruptcy 
bill. We are not going to consider that. We don't deal with corporate 
bankruptcies here, that is over the line. We deal with the bankruptcies 
of ordinary individuals.
  Let me tell you about the amendment I am offering because the people 
I am offering it on behalf of are far from ordinary. They are mothers, 
fathers, Americans in our country today. These are the men and women in 
uniform. I have seen them and you have, too. You have seen them on the 
news--risking their lives in Iraq, Afghanistan, Korea, and around the 
world. I have seen them in Illinois, as we send our troops to go serve 
overseas--in Litchfield, IL, about a month ago. There was not a dry eye 
in the house. About 100 of them were infantry, activated, standing at 
attention in the Litchfield High School gymnasium. There we sat with 
the stands filled with families praying for their safe return. We 
watched them file by and we shook hands with every one of them, saying: 
Godspeed. We are on your side. We won't forget you. You are in our 
thoughts and prayers.
  Here comes this bankruptcy bill. Do you know what happens? You end up 
with men and women in uniform--activated Guard and Reserve, and other 
active military--sent to battle, sent to combat, where every day their 
life is at stake, and meanwhile many of them are facing extraordinary 
hardships at home. They and their families have lost their life's 
savings which they cannot deal with because they are defending 
our country.

  Military service always involves sacrifice. In times of war, those 
sacrifices

[[Page S1824]]

multiply. Extended deployment means long difficult separations. 
Military service means extraordinary financial hardships.
  I asked the GAO to look into issues affecting the economic security 
of our troops; in other words, what is happening to families' finances 
when they serve our country and go overseas. There isn't a lot of data. 
They went back to the 1999 Defense Department survey. In that survey, 
they found 16,000 Active-Duty members of the military had filed for 
bankruptcy in the preceding 12 months. That was 1999, 6 years ago.
  We know the economic stress on military families has increased 
dramatically since then. We are at war with 150,000-plus in Iraq and 
thousands in Afghanistan.
  Since September 11, 2001, more than 469,000 National Guard members 
and Reserves from the Army, Marines, Navy, and Air Force have been 
called up for combat in Iraq and Afghanistan--the largest deployment of 
U.S. Guard and Reserve forces in 50 years. Reservists' tours of duty 
can last up to 24 months today. The Pentagon is considering extending 
that time limit.
  I have a pie chart I would like to show you which demonstrates some 
of the problems facing the military.
  In 2002, the Department of Defense conducted a survey of military 
spouses. Here is what they found.
  Thirty percent--almost one-third--of all military families reported a 
loss of family income when the spouse was deployed; almost one out of 
three.
  Part-time military--National Guard and Reserve members--were 
especially hard hit; 41 percent of Guard and Reserve families lost 
income when a spouse was deployed--41 percent.
  Let me just say parenthetically my salute to all of the companies, 
all of the units of government that have stood behind the men and women 
in uniform and have said: We will protect your pay while you are gone. 
We will make sure you don't get penalized. How embarrassing it is to 
stand here today and tell you that our Federal Government does not 
stand behind the men and women in the Federal workforce who are 
activated. We don't make up the difference.
  So 41 percent of those Guard and Reserve activated who have lost 
income include a lot of Federal employees. The average income varied by 
branch, ranging from an average of $600 lost for Air National Guard 
members, to $3,800 for Marine Corps reservists.
  Senior officers lost an average of $5,000 in lost income and $700 per 
enlisted member.
  Reservists who own their own businesses are especially hard hit. 
Fifty-five percent of self-employed reservists lost money when they 
were activated. The average income loss for these families is $6,500.
  For reservists with specialized degrees and training, the income loss 
was even greater. Doctors and registered nurses who are mobilized 
report an average loss of $9,000. Doctors in private practice lose an 
average of $25,000. The list goes on.
  Many of these families manage to scrape by using their savings and 
relying on relatives and friends. Some families do all of these things, 
but their financial problems still become so severe that they have no 
choice but to file for bankruptcy.
  They are the people we are talking about in this bankruptcy bill. We 
are not talking about someone in a distant State in a circumstance we 
can't understand. We are talking about an activated member of the Guard 
and Reserve deployed for a year or 2 years who loses his business and 
has to file for bankruptcy. The law we are going to pass is going to 
make it more difficult for that person to file for bankruptcy.
  Senator Evan Bayh is one Member who supports this amendment. He calls 
it the ``patriot penalty.'' We are penalizing those serving our country 
by making it tough for them when they become bankrupt because they have 
lost all of their income serving America.
  Let me give you an example.
  Ray Korizon is from Schaumburg, IL. Before the Persian Gulf war in 
1991, he owned a construction company that employed 26 employees. He 
lost his business when his Reserve unit was deployed for 6 months. 
Today, he works for the Federal Government.
  Some of the self-employed reservists who have been called to duty in 
this war are facing similar financial hardships. Army Reserve SGT 
Patrick Kuberry is one of them. He and a business partner--an Army 
Reserve colonel--used to own two small restaurants in Denver. Like most 
owners of small restaurants in Denver, CO, they both worked long hours. 
They didn't make a lot of money, but they made enough to support their 
families. Then came 9/11 and the economic downturn. They had to close 
one of the restaurants. In April 2003, his partner was called up and 
sent to Afghanistan. In June 2003, Sergeant Kuberry's unit was called 
up. He spent 11 months in Africa. That was the last blow. Without 
either man home to work, the remaining restaurant went under. Sergeant 
Kuberry and his partner were forced to file for personal bankruptcy.
  Another story: Rick Parsons and Dave Young are both Army Reserve 
majors from Rochester, NY. In civilian life, Rick Parsons is a 
veterinarian in private practice and Dave Young is an accountant. They 
were shipped out with their unit to Afghanistan for a year. They were 
nearly wiped out financially. Rick Parsons couldn't find another vet on 
short notice to run his practice. He earned $70,000 during his year in 
Afghanistan, but he had to take out a loan for the same amount to save 
his practice. He figures he was within a month of having to go file for 
bankruptcy when he got home. Dave Young's wife and father were able to 
keep the small accounting firm going during the year he was in 
Afghanistan.
  The other units were not so lucky. Another ended up with a mountain 
of medical bills after developing malaria.
  Let me tell you about another person filing for bankruptcy. Kathy 
Cruz is a bankruptcy attorney in Hot Springs, AR. The State is home to 
the 39th Infantry Division of the Arkansas National Guard. In October 
2003, the division shipped out for 18 months, including 12 months in 
Iraq. Six months later, the division deployed, the first Guard families 
began showing up at Kathy Cruz's office desperate for a way to hold on 
to their homes and avoid bankruptcy. One of her clients, a family with 
four teenagers, owned a combination gas station and convenience store. 
The father was a reservist medic. With him in Iraq, there was literally 
no one to mind the store. So they closed the store. When they got into 
serious financial trouble, they gave their home back to the mortgage 
company so it wouldn't be repossessed. Then things got worse.
  Is this irresponsible conduct of these people activated to serve 
America, to risk their lives in combat? While they are risking their 
lives, everything they own is at risk.
  Things got so much worse, the soldier's parents had cosigned the loan 
for the business, trying to save it. While this soldier was overseas 
serving America, they had to declare bankruptcy or they would lose 
their home and the whole family would be on the street. The grandfather 
is disabled. The grandmother has gone back to work to try to keep the 
family afloat financially. The whole family recently came to Ms. Cruz 
in her office in Hot Springs. This is how she described the visit of 
this family.

       You've got three generations sitting in front of you, 
     scared out of their wits.

  Ms. Cruz says she expects to see more such families in the future. In 
her words, ``This is the tip of the iceberg.''
  Most families try to desperately avoid bankruptcy because of the 
stigma, the connotation of personal failure and their own moral code 
that says you pay back what you owe. Many military members and families 
try doubly hard to avoid it because of the mistaken belief that 
bankruptcy alone can be grounds for a dishonorable discharge. They are 
encouraged to believe that, in many cases, by payday lenders that 
cluster around military bases and communities who are going to let 
people know inside the base if the soldiers don't pay off.

  Let me tell you about loan sharks. Payday lenders are legal loan 
sharks that offer small, short-term loans at interest rates of 100, 
500, even 1,000 percent. When the borrower can't pay back the loan, the 
payday lender offers them another loan, and then another loan. In fact, 
a recent study in Iowa found that customers typically roll over 
interest.

[[Page S1825]]

  Payday lenders specifically target military members because they know 
they have a steady source of income, many are young and inexperienced, 
they have family obligations, they are strapped for cash, and they are 
easy to find. And, most offensive, payday lenders target military 
members because they know these are people who are hard working and 
honest and who believe in personal responsibility and integrity.
  Operations like these and others employ former military personnel to 
solicit soldiers. They use gimmicky, misleading names such as Force One 
Lending, Armed Forces Loans, Military Financial, and American Military 
Debt Management Services.
  Let me show you this chart of payday lenders in the State of Georgia.
  Military loan: Here is an example of one of them. This is what you 
see on highways and roads leading into many military bases and 
communities: Store-front pawn dealers, payday loan shops, and ``debt 
consolidation'' operations, all trying to lure military members and 
their families with the promise of fast, easy money which they can 
never pay off.
  This is a store-front payday loan store in King's Bay, GA, just 
across the State line from a military base in Florida. Note the name of 
this operation, ``Pioneer Military Loans.''
  Here is another operation on the same highway, ``T&C Pawn.'' Isn't it 
appropriate that right next door is a unit known as Fleet Cleaners. You 
get to go to the cleaners in both places.
  Retired Navy veteran Peter Kahre made the mistake of taking out a 
loan with a business like this more than a decade ago when he was 
stationed at Jacksonville Naval Air Station. He is still haunted by it. 
When Kahre was deployed in 1996, the ``basic sustenance'' portion of 
his military pay was cut by $197 a month because his food was now being 
prepared onboard. That pay cut, plus the arrival of a new baby, put his 
family in a bind. So Kahre borrowed $100 from a payday lender.
  When he could not repay that loan, he took out another, and another, 
until he had loans with 10 different payday lenders. He estimates he 
paid back $20,000 on loans for which he received a total of not more 
than $3,000, before he was finally forced to file for bankruptcy.
  Let me show you some of the ads from the payday lenders in the Army 
Times to give you an idea what these folks are after. This one is for 
our men and women in uniform: ``INSTANT CASH.'' ``Advanced Pay Loans.'' 
``How we beat the competition:'' ``Bankruptcies OK.'' They cannot wait 
to lure the men and women in uniform into these outrageous loans. 
``Bankruptcy no problem!'' In other words: We will lend you money even 
though we know you probably cannot afford to pay it back.
  There is another kind of predatory lender that clusters around 
military communities. They lend money in exchange--listen to this--for 
military members and veterans signing over their pension benefits. 
Imagine, if you will--I have read the case that was reported in the 
news--a sergeant had married a young woman in the Philippines. He could 
not afford to bring her to the United States. He went in and pledged 
his military retirement as collateral for one of these loans.
  ``Cash now!'' Look at this one: ``Lump sum paid for pensions, VA 
disability, VSIs. Credit problems OK!'' These are the people we talk 
about who end up getting snared into these outrageous, usurious loans 
they will never be able to pay back.
  The National Consumer Law Center released an excellent report in May 
2003. Every Member of the Senate ought to read it. In it you will find 
story after story of military members and veterans who have suffered 
serious financial problems because of predatory lenders.
  Now let me tell you about the amendment I am offering. Whether the 
person is career military or Guard or Reserve, the men and women of our 
Armed Forces make extraordinary sacrifices to defend our Nation. They 
put their lives on the line, their comfort, their freedom, their time 
with their families. They sacrifice their health, even their lives. 
Many of them make major financial sacrifices.
  Today, I am offering an amendment that will give military members who 
have been forced into bankruptcy because of income loss connected to 
their service the hope of a second chance.
  My amendment does not grant military members any favors. It is not a 
``get out of debt free'' card. The members of the military I have met 
would not want that kind of special treatment. They are men and women 
of integrity who want to pay their debts and honor their obligations. 
This amendment simply protects the people who protect us from the 
possibility of spending the rest of their lives in a figurative 
debtor's prison.
  Let me show you a chart in reference to the amendment. It has four 
basic elements. My amendment protects three groups of people: service 
members, military veterans, and spouses of service members who die in 
military service.
  We protect them in bankruptcy with four provisions.
  First, we prevent unscrupulous payday lenders from using bankruptcy 
courts to fleece military members, veterans, and spouses of service 
members who die in military service. Any claims based on debt they owe 
that require payment of interest, fees, or other charges in excess of 
36 percent would not be collectible in bankruptcy proceedings.
  Second, my amendment exempts members of the armed services, veterans, 
and spouses of service members who die while in military service from 
the onerous means test provisions of this bill. Again, this is not a 
``get out of debt free'' card. It simply allows the bankruptcy judge--
not an arbitrary and inflexible formula--to determine whether a 
military member, a veteran, or a surviving spouse of a service member 
who dies while serving America deserves the protection of chapter 7. It 
is left to the judge's discretion in these cases when it comes to the 
military.

  Men and women who volunteer to go to war should not have to wage war 
against the mountain of paperwork this bill creates.
  Third, service members face a problem that most other bankruptcy 
petitioners do not. They do not choose where they live. They are sent 
on assignment by the military. That can have major economic 
consequences.
  I have a chart that shows some of the homestead exemptions. In other 
words, when you go to bankruptcy, you can usually protect your home, 
but every State is different. So if you are assigned, for example, to a 
base in Florida, there is unlimited protection for your home, if you 
file bankruptcy while you are in the military. In Ohio, it is $5,000. 
That is all that is protecting your home. In Nevada, it is $200,000. In 
Illinois, it is $7,500. If you are stationed in New Jersey, there is no 
protection at all, no homestead exemption.
  So what we have done is to establish a basic homestead exemption. It 
would say that the members of the military are going to be allowed a 
$75,000 homestead exemption, or they can choose the exemption in the 
State in which they file.
  There is another portion of this amendment which relates to the 
personal property that someone could exempt from bankruptcy. That 
exemption is different from State to State. For my State of Illinois, I 
remember from when I dealt with bankruptcy law, you can exempt your 
tools from being taken from you in bankruptcy--a reasonable idea. But 
for those sorts of things, every State is different.
  So what happens to the member of the military who files and happens 
to be stationed in the State where they file for bankruptcy? We 
establish a Federal personal property exemption. I think it is 
reasonable so that the individual serving in the military has that 
protection.
  Let me conclude. I know several Members are here to speak. We say all 
the time that we owe the men and women who defend our Nation a debt of 
gratitude we can never repay. That is true. But we can show that we 
honor their service by protecting them from spending the rest of their 
lives in a debtor's prison if their service obligations or serious 
illness or a string of bad breaks forces them to have to file for 
bankruptcy.
  The credit card industry may argue my amendment is not needed because 
few military members and their families seek bankruptcy protection. No 
one knows that for sure. But if it is a

[[Page S1826]]

small number, the protections of my amendment will not hurt this 
multibillion dollar industry.
  Some may say that military members and their families do not deserve 
the protections of my amendment because they are somehow morally 
deficient--I cannot wait to hear that argument on the floor--the same 
charge supporters of the underlying bill make about all people seeking 
bankruptcy. Well, if opponents of my amendment think members of the 
U.S. military are lacking in moral fiber, they need to spend a couple 
afternoons with troops, maybe visit some of our injured soldiers, or go 
to the veterans hospitals across America. Talk to some of these 
soldiers struggling to learn to walk on new legs, begging to go back 
into battle with their units. Tell me they need a lesson in personal 
responsibility.
  This amendment is about the men and women who protect us getting 
protection from the possibility of a lifetime of debt. It is about 
giving to those who risk their lives so our children can grow up in 
freedom the possibility of a second chance for their own lives. We 
cannot repay the debt we owe these men and women, but we can protect 
them from having to spend the rest of their lives in debt. That is what 
my amendment would do. I urge my colleagues--and I hope on a bipartisan 
basis--to support this amendment.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Alabama.
  Mr. SESSIONS. Mr. President, I share Senator Durbin's respect for our 
men and women in uniform. I served over 10 years in the Army Reserve. I 
have made three trips to Iraq as a member of the Armed Services 
Committee. We work on those issues on a daily basis.
  The last time I was in Iraq we were meeting with soldiers, and I had 
one tell me his business had been hurt by him being there. He lost 
income, and he was worried about it. We discussed that with the 
soldiers there.
  Then later he came up to me and said: I want you to know, Senator, 
one hour from now I am signing up for another 7 years.
  It made me proud to know that we have that kind of service personnel 
who are serving their country well. How we ought to compensate them, 
how we ought to benefit them is something all of us need to consider. 
We are having increased compensation plans, increased bonuses for 
reenlistment, and other increasing benefits for our personnel because 
we love them. We respect them. We want to affirm them. We want to carry 
our part of the burden that they are carrying as they serve us in 
dangerous areas of the globe today.
  I want to point out, though, and bring ourselves back to where we 
are, this is not a bill that deals with American health insurance. It 
is not a bill that deals with compensation for the military. It is not 
legislation that should set bank lending rates. That is a Banking 
Committee issue, and it has been raised against this bill on a number 
of occasions. We have some credit card changes here, consumer-oriented 
credit card amendments that I know Senator Durbin and others have asked 
for and have been cleared by the Banking Committee. But this is not the 
place to set banking regulations in a bankruptcy bill.
  This legislation is designed to analyze what is occurring in Federal 
bankruptcy courts every day, to see what is happening there. What we 
have learned is that over the last 30 years, people have learned to 
manipulate this system in ways that are not good for the economy. 
Lawyers, particularly, have advised their clients on ways they can 
absolutely maximize their benefits under the bankruptcy law. And 
sometimes we have found that has not been healthy. As a result, these 
advertisements--and they are on television, in the newspapers, in the 
free things at the checkout counter where it tells you where you can 
buy things on sale--tell you how to file for bankruptcy. That is all 
right. It is a free country. But those of us who set policy and set the 
rules for the bankruptcy system need to analyze how it is actually 
working in bankruptcy court. We need to ask ourselves what we should do 
to make it better. And we need to do some things that help debtors such 
as single moms, who have bankruptcies filed against their child support 
and things of that nature, to put them higher up on the list of people 
who get compensated. We do that.
  The testimony is unequivocal that with regard to family breakup, 
alimony and child support, this bill is a huge step forward for 
children and their parents who receive those benefits.
  There is a lot in here that benefits people on a routine basis who 
have to go into bankruptcy court. Remember, if you make below median 
income in America and you file for bankruptcy, you can wipe out, as an 
absolute right, every debt you owe, no matter how you incurred it, for 
any reason.
  I know Elizabeth Warren. She has been an activist against bankruptcy 
reform for years. And one thing she puts in her definition of debts 
arising from health care is gambling debts, for example. I believe 
those numbers that have been promoted at a recent hearing by her are at 
best a bit too high. They are really less. Are health care debts a part 
of this? Yes. Are there people with insurance who still don't have 
enough money to pay their health care debts? Yes. Do people who don't 
have insurance have health care debts that help cause them to be unable 
to pay their debts and go into bankruptcy? Yes. But what if you make 
$100,000 and you have $75,000 in debt? Under current law, you can go 
into bankruptcy court and wipe out every one of them. It can be your 
doctor, your local hospital, your local automobile dealership, your 
friendly mechanic, anyone you owe in the community--just wipe out those 
debts. You don't have to pay them.
  Lawyers will tell them that. They are advertising how to do that. 
Beat your landlord. Don't have to pay your rent. Come on down. We will 
keep you in your house another 6 months by filing bankruptcy, which 
will stay eviction. And then, when you finally lose that, which you 
inevitably will lose that contest of eviction, then you wipe out all 
your debts and rents, and you don't owe anybody anything.
  Let me say, there are problems in bankruptcy that this bill has 
carefully set about to deal with and tried to fix. I am rather proud of 
it. We have made a lot of progress on dealing with a number of the 
abuses that exist. But we are not in the business of dealing with 
health insurance, health care reform. We can't deal with the issue on 
how we ought to compensate reservists and guardsmen who have been 
activated.
  I will say this with regard to the military issues. My staff has been 
reviewing the fundamental protections provided to the service men and 
women under the Soldiers and Sailors Relief Act, originally passed in 
1940. It is a tremendous piece of legislation to protect service 
personnel who are called to active duty from being harassed, abused, or 
taken advantage of in court.
  It remains the law of the land today. It has been strengthened over 
the past years. When I was in the Army Reserve, I was a U.S. attorney, 
and sometimes there is a basic officer in the unit, and sometimes in my 
duties as a jack officer it fell in my lot to brief the personnel on 
the benefits of it and to represent people who would be abused under 
the Soldiers and Sailors Relief Act. It has some very good and powerful 
things in it.
  Let me show you how many of the concerns that the Senator has are 
covered by that act. In 2003, we passed the Service Members Civil 
Relief Act, which added even more protections. The goal was to 
financially protect Active-Duty military members, reservists in active 
Federal service, and National Guard members. The act allows military 
members to suspend or postpone civil financial obligations during their 
period of military service. Oftentimes, this can enable them to avoid 
having to file a bankruptcy.
  The information brochure on the Soldiers and Sailors Civil Relief 
Act, by the Department of Defense, states that it provides an umbrella 
of protection, and it does. The umbrella of protection created by the 
act includes these provisions: an interest rate cap of 6 percent on all 
debts incurred before or during commencement of Active-Duty service. So 
if you are called to active duty and you entered into a debt that 
carries a 25-percent interest rate, you can reduce that. It applies to 
mortgage payments, credit card payments, and car loans. The act 
provides protection from eviction. It would delay all civil court 
proceedings, including bankruptcy, until

[[Page S1827]]

you get back--an automatic delay. If the lawyer says the serviceman is 
in Iraq--``He has been activated, Your Honor''--this case is stayed. 
That is what is done immediately. There is no dispute. Foreclosure 
proceedings are delayed. Divorce proceedings against a service member 
are stayed.
  There is a prohibition on entering of default judgments against 
Active-Duty military members and the ability to reopen default 
judgments. In other words, sometimes when the service member is gone, 
he does not know he has been sued and failed to respond effectively 
because he is on active duty. The judge is prohibited from taking a 
default. But if the judge, by mistake or otherwise, enters a default 
judgment, then that Active-Duty member can have it set aside when he 
comes back. It is not binding.
  The ability to terminate property, residential and automobile leases 
at will is provided for in this act. In other words, if you enter into 
a solemn lease agreement for a residence or an automobile and you are 
called up, all you have to do is write them and say: I have been 
activated, so I am no longer bound by this lease agreement. It includes 
the continuation of life insurance of at least $250,000, without 
requiring premiums to be paid.
  The tolling of statutes of limitation--in other words, if you have a 
lawsuit and you are thinking about filing it and the time for you to 
file it is about to run and you get called to active duty, that time is 
extended until you return, and you have time after you return to file 
any lawsuit because the statute of limitations is tolled. There is 
temporary relief from mortgage payments, and credit rating protections. 
In other words, if you are somehow found to be poorly responsive to 
your debts because you have been activated, you can clear up your 
credit rating.
  There are penalties for landlords and creditors who violate the act 
and fines of up to $100,000 or imprisonment if they harass a service 
member contrary to this act while they are serving their country in 
some distant land. The Supreme Court has even added to the act the 
ability to help military members in times of financial need by ruling 
that the act must be read with an eye friendly to those who drop their 
affairs to answer their country's call. This has been a strong act that 
provides great protection for our men and women. We all ought to be 
proud that America has understood this.
  Now, let's talk about some of the specific ideas that are in Senator 
Durbin's bill. He said it somewhat differently than what he offered in 
committee. I have not seen amendments until this morning, and I briefly 
heard his comments and have not had a chance to study it in detail. But 
he would exempt service members, military Active-Duty members, 
veterans, and spouses from means tests contained in the bankruptcy bill 
because a means test will not reflect their real income or real ability 
to pay debts back. But I don't think that is true.
  The bill contains a rebuttal to the means test application when a 
court finds special circumstances. These are the ones I think we are 
discussing. A special circumstance that a military member could assert 
under this bill as it now exists--this bankruptcy bill--would include 
the fact that their income dropped in recent months due to a call to 
active duty or there have been excessive expenses arising as a result 
of being called to active duty. That assertion would keep the means 
test from applying to the military debt. No special exemption, it would 
appear, would be necessary for military members on this basis because a 
call to active duty that causes a drop in income, to me, would be 
clearly a special circumstance. The bill currently contemplates that, 
although I think, frankly, we could explicitly state that as a 
mandatory circumstance.
  Second, he asserts that this amendment is necessary to protect 
military members' homesteads. His amendment would apply to the Federal 
cap of $125,000 contained in the bill to all service members or allow 
the service members to choose the exemption level permitted by the 
State he resided in before becoming a service member. It opens up the 
homestead compromise we have battled so hard on and dealt with. I don't 
think it would affect many service members. Many of them live in 
housing provided by the military. Because the bankruptcy bill requires 
2 years of residency in a State before the State homestead exemption 
can apply, it is highly unlikely that military members will be often 
covered by it. They move frequently.
  The Senator also argues his amendment is necessary to protect service 
members from predatory loans and high-interest loans. I believe that 
this concern is well covered by current law. The Soldiers and Sailors 
Relief Act prevents interest charges greater than 6 percent from being 
collected on any type of debt owed by an Active-Duty service member. 
Even debts the service member made before being called to active duty 
are covered by this interest cap. We have dealt with this issue before. 
The House had a full debate on it. It was voted down there.
  The floor debate on the bankruptcy bill previously, S. 1920, which 
exempted veterans and others from the means test, was offered by 
Congresswoman Schakowsky in opposing the amendment. Chairman 
Sensenbrenner pointed out that the means-based test only applies to 
people with incomes above the median State average. I will repeat that. 
Anybody who is making above the median income could be impacted by the 
means test and, therefore, could be ordered to pay back some of the 
debt they have lawfully incurred. If they are unlawfully incurred, they 
cannot be made to pay them back. The court won't make them pay it back.
  But they could be made to pay back some of those based on how much 
their income is above median income. If they are making $200,000 a 
year, the judge may say they have to pay them all back. If they are 
making $50,000 and they owe $100,000 in debts, the court may conclude 
they only can pay back $15,000. That is how this will work out in 
reality.
  He points out that factor and notes that anyone who is below the 
State median income does not qualify on the means-based test and their 
bankruptcy petition cannot be tossed out of chapter 7 and put into 
chapter 13 where some debts are paid back.
  Chairman Sensenbrenner also agrees with my analysis that the issues 
have been taken care of in the most part since 1940 under the Soldiers 
and Sailors Relief Act which allows for the staying of legal 
proceedings against anybody on active duty.
  I think he points that out. We have some ideas. He makes another 
point I will not go into at length. I will say this: I am very 
concerned about our men and women in uniform. I want to make sure there 
are no loopholes or gaps in the Soldiers and Sailors Relief Act. I want 
to make sure this bankruptcy act in no way makes it more difficult for 
our soldiers than what they have today. I will be glad to look at this 
amendment and study it more carefully and perhaps offer an alternative 
that would be more constrained and would deal more directly with the 
problems. A veteran could be someone who has been in the country, off 
active duty, for quite a long time. I am not sure that adding all 
veterans to this exemption would be a good idea particularly. I have 
some real doubts about that.
  Mr. President, I state my opposition to the Durbin amendment. I look 
forward to analyzing it further, and if there are areas in which we can 
reach accord, I will be pleased to support that. If there are other 
needs of our service personnel that could be impacted positively by a 
bankruptcy reform bill, I am prepared to look at that.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Burr). The Senator from Illinois.


                     Amendment No. 16, As Modified

  Mr. DURBIN. Mr. President, I thank the Senator from Alabama for 
offering to work with me. It would be my wish and hope that we could 
find a bipartisan agreement on this issue. Either he or someone who is 
distributing information on the floor has raised I think a very valid 
issue about our reference to the term ``veteran'' in my amendment. What 
we were thinking of was a situation where some of our active-duty 
soldiers who are seriously wounded and transferred to hospitals, such 
as Walter Reed, find themselves needing to be discharged quickly so 
they can go into the veterans health system. So we included the term 
``veteran'' so it would apply to them as well.

[[Page S1828]]

  But someone has observed, correctly, by using the term ``veterans'' 
we have opened this up very broadly. So I send a modification to my 
amendment to the desk.
  The PRESIDING OFFICER. The Senator has that right. The amendment is 
so modified.
  The amendment, as modified, is as follows:

(Purpose: To protect servicemembers and veterans from means testing in 
  bankruptcy, to disallow certain claims by lenders charging usurious 
interest rates to servicemembers, and to allow servicemembers to exempt 
 property based on the law of the State of their premilitary residence)

        On page 13, between lines 13 and 14, insert the following:
       ``(D) Subparagraphs (A) through (C) shall not apply, and 
     the court may not dismiss or convert a case based on any form 
     of means testing, if--
       ``(i) the debtor or the debtor's spouse is a servicemember 
     (as defined in section 101 of the Servicemembers Civil Relief 
     Act (50 App. U.S.C. 511(1)));
       ``(ii) the debtor or the debtor's spouse is a veteran (as 
     defined in section 101(2) of title 38, United States Code) 
     and the indebtedness occurred in whole or in part while they 
     were on active military duty; or
       ``(iii) the debtor's spouse dies while in military service 
     (as defined in section 101(2) of the Servicemembers Civil 
     Relief Act (50 App. U.S.C. 511(2))).
       On page 67, between lines 18 and 19, insert the following:

     SEC. 206. DISALLOWANCE OF CLAIMS FILED ON HIGH-COST PAYDAY 
                   LOANS MADE TO SERVICEMEMBERS.

       (a) In General.--Section 502(b) of title 11, United States 
     Code, is amended--
       (1) in paragraph (8), by striking ``or'' at the end;
       (2) in paragraph (9), by striking the period at the end; 
     and
       (3) by adding at the end the following:
       ``(10) such claim results from an assignment (including a 
     loan or an agreement to deposit military pay into a joint 
     account from which another person may make withdrawals, 
     except when the assignment is for the benefit of a spouse or 
     dependent of the debtor) of the debtor's right to receive--
       ``(A) military pay made in violation of section 701(c) of 
     title 37; or
       ``(B) military pension or disability benefits made in 
     violation of section 5301(a) of title 38; or
       ``(11) such claim is based on a debt of a servicemember or 
     a dependent of a servicemember that--
       ``(A) is secured by, or conditioned upon--
       ``(i) a personal check held for future deposit; or
       ``(ii) electronic access to a bank account; or
       ``(B) requires the payment of interest, fees, or other 
     charges that would cause the annual percentage rate (as 
     defined by section 107 of the Truth in Lending Act (15 U.S.C. 
     1606)) on the obligation to exceed 36 percent.''.
       (b) Conforming Amendment.--Section 523 of title 11, United 
     States Code, is amended by adding at the end the following:
       ``(f) Notwithstanding paragraphs (2), (4), and (6) of 
     subsection (a), a debt is dischargeable in a case under this 
     title if it is based on an assignment of the debtor's right 
     to receive--
       ``(1) military pay made in violation of section 701(c) of 
     title 37; or
       ``(2) military pension or disability benefits made in 
     violation of section 5301(a) of title 38.''.
       On page 132, between lines 5 and 6, insert the following:

     SEC. 234. PROTECTION OF SERVICEMEMBERS' PROPERTY IN 
                   BANKRUPTCY.

       (a) In General.--Section 522(b) of title 11, United States 
     Code, as amended by section 224, is further amended--
       (1) in paragraph (1), as redesignated, by striking ``either 
     paragraph (2) or, in the alternative, paragraph (3) of this 
     subsection'' and inserting ``paragraph (2), (3), or (4)'';
       (2) by redesignating paragraph (4), as added by this Act, 
     as paragraph (5); and
       (3) by inserting after paragraph (3), as redesignated, the 
     following:
       ``(4) If the debtor is a servicemember or the dependent of 
     a servicemember, and the date of the filing of the petition 
     is during, or not later than 1 year after, a period of 
     military service by the servicemember, property listed in 
     this paragraph is--
       ``(A) property that is specified under subsection (d), 
     notwithstanding any State law that prohibits such exemptions; 
     or
       ``(B) property that the debtor could have exempted if the 
     debtor had been domiciled in the State of the debtor's 
     premilitary residence for a sufficient period to claim the 
     exemptions allowed by that State.''.
       (b) Definitions.--Section 101 of title 11, United States 
     Code, is amended--
       (1) by inserting after paragraph (13A), as added by this 
     Act, the following:
       ``(13B) `dependent', with respect to a servicemember, 
     means--
       ``(A) the servicemember's spouse;
       ``(B) the servicemember's child (as defined in section 
     101(4) of title 38); or
       ``(C) an individual for whom the servicemember provided 
     more than 50 percent of the individual's support during the 
     180-day period immediately before the petition;'';
       (2) by inserting after paragraph (39A), as added by this 
     Act, the following:
       ``(39B) `military service' means--
       ``(A) in the case of a servicemember who is a member of the 
     Army, Navy, Air Force, Marine Corps, or Coast Guard--
       ``(i) active duty (as defined in section 101(d)(1) of title 
     10); and
       ``(ii) in the case of a member of the National Guard of the 
     United States, service under a call to active service 
     authorized by the President or the Secretary of Defense for a 
     period of more than 30 consecutive days under section 502(f) 
     of title 32, for purposes of responding to a national 
     emergency declared by the President and supported by Federal 
     funds;
       ``(B) in the case of a servicemember who is a commissioned 
     officer of the Public Health Service or the National Oceanic 
     and Atmospheric Administration, active service; and
       ``(C) any period during which a servicemember is absent 
     from duty on account of sickness, wounds, leave, or other 
     lawful cause;'';
       (3) by inserting after paragraph (40B), as added by this 
     Act, the following:
       ``(40C) `period of military service' means the period 
     beginning on the date on which a servicemember enters 
     military service and ending on the date on which the 
     servicemember--
       ``(A) is released from military service; or
       ``(B) dies while in military service;''; and
       (4) by inserting after paragraph (51D), as added by this 
     Act, the following:
       ``(51E) `servicemember' means a member of the uniformed 
     services (as defined in section 101(a)(5) of title 10;''.
       On page 191, between lines 11 and 12, insert the following:

     SEC. 322A. EXEMPTION FOR SERVICEMEMBERS.

       Section 522 of title 11, United States Code, as amended by 
     sections 224, 308, and 322, is further amended by adding at 
     the end the following:
       ``(r) If the debtor or the spouse of the debtor is a 
     servicemember (as defined in section 101 of the 
     Servicemembers Civil Relief Act (50 U.S.C. App. 511(1))) or a 
     veteran (as defined in section 101(2) of title 38, United 
     States Code) if the indebtedness occurred in whole or in part 
     while they were on active military duty or the spouse of the 
     debtor dies while in military service (as defined in section 
     101(2) of the Servicemembers Civil Relief Act (50 U.S.C. App. 
     511(2))), and the debtor or the spouse of the debtor elects 
     to exempt property--
       ``(1) under subsection (b)(2), the debtor may, in lieu of 
     the exemption provided under subsection (d)(1), exempt the 
     debtor's aggregate interest, not to exceed $75,000 in value, 
     in--
       ``(A) real property or personal property that the debtor or 
     a dependent of the debtor uses as a residence;
       ``(B) a cooperative that owns property that the debtor or a 
     dependent of the debtor uses as a residence; or
       ``(C) a burial plot for the debtor or a dependent of the 
     debtor; or
       ``(2) under subsection (b)(3), and the exemption provided 
     under applicable law that may be applied to such property is 
     for less than $75,000 in value, the debtor may, in lieu of 
     such exemption, exempt the debtor's aggregate interest, not 
     to exceed $75,000 in value, in any property described in 
     subparagraph (A), (B), or (C) of paragraph (1).''.

  Mr. DURBIN. Mr. President, I want to explain briefly so the Senator 
from Alabama understands. We amended the term ``veteran'' in the 
amendment so it only applies to the situation where the veteran's 
indebtedness in whole or in part occurred during active duty. We were 
referring to veterans in general, and one person said: What if you were 
a veteran of World War II many years ago and your indebtedness had 
nothing to do with it? We have clarified it with this modification that 
it would be veterans whose indebtedness was incurred in whole or in 
part during their term of active duty.
  I might also say to my colleague from Alabama, we have a legitimate 
dispute about the Servicemembers' Civil Relief Act. I would like to 
join with him to find out which one of us is correct because we have 
been told that this Civil Relief Act does not apply to debts incurred 
after military service begins. The most significant limitation is that 
its primary protections apply only to obligations entered into before a 
person is called to active duty.
  So, ironically, it does not protect military families when they need 
it the most when additional debt is incurred to help make ends meet 
during active duty. Rather than belabor this point, I would like to 
join the Senator from Alabama and get to the bottom of it and find out 
who is right. It is an important point.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Wisconsin.
  Mr. SESSIONS. Mr. President, will the Senator yield for a unanimous 
consent request?
  Mr. FEINGOLD. I yield.
  The PRESIDING OFFICER. The Senator from Alabama.

[[Page S1829]]

  Mr. SESSIONS. Mr. President, I ask unanimous consent that the pending 
amendment be temporarily set aside to allow Senator Feingold to offer a 
first-degree amendment. Before the Chair rules, I indicate that it is 
my expectation to offer a second-degree amendment to the Durbin 
amendment or work out an agreement for two side-by-side first-degree 
amendments. While we are working out that agreement, we are prepared to 
go forward with the discussion on the Feingold amendment, with the 
understanding that we would then return and debate the Sessions 
amendment and the Durbin amendment and dispose of those matters first.
  Mr. DURBIN. Reserving the right to object, and I do not plan to 
object, it is my understanding that my amendment is pending.
  The PRESIDING OFFICER. That is correct.
  Mr. DURBIN. So that any amendment filed subsequently would follow it 
for consideration.
  The PRESIDING OFFICER. If the Feingold amendment is offered, it will 
be pending, but the understanding of the Chair of what is in the 
unanimous consent request is that the amendment of the Senator from 
Illinois would be considered when the Senator from Alabama is ready to 
second-degree that amendment.
  Mr. DURBIN. Thank you, Mr. President. I withdraw my reservation.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Wisconsin.


                            Amendment No. 17

  Mr. FEINGOLD. Mr. President, I have an amendment that I send to the 
desk.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The legislative clerk read as follows:

       The Senator from Wisconsin [Mr. Feingold] proposes an 
     amendment numbered 17.

  Mr. FEINGOLD. Mr. President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

        (Purpose: To provide a homestead floor for the elderly)

       On page 191, between lines 11 and 12, insert the following:

     SEC. 322A. EXEMPTION FOR THE ELDERLY.

       Section 522 of title 11, United States Code, as amended by 
     sections 224, 308, and 322, is amended by adding at the end 
     the following:
       ``(r) For a debtor whose age is 62 or older on the date of 
     the filing of the petition, if the debtor elects to exempt 
     property--
       ``(1) under subsection (b)(2), then in lieu of the 
     exemption provided under subsection (d)(1), the debtor may 
     elect to exempt the debtor's aggregate interest, not to 
     exceed $75,000 in value, in real property or personal 
     property that the debtor or a dependent of the debtor uses as 
     a residence, in a cooperative that owns property that the 
     debtor or a dependent of the debtor uses as a residence, or 
     in a burial plot for the debtor or a dependent of the debtor; 
     or
       ``(2) under subsection (b)(3), then if the exemption 
     provided under applicable law that may be applied to such 
     property is for less than $75,000 in value, the debtor may 
     elect in lieu of such exemption to exempt the debtor's 
     aggregate interest, not to exceed $75,000 in value, in any 
     such real or personal property, cooperative, or burial 
     plot.''.

  Mr. FEINGOLD. Mr. President, I am very concerned about the impact of 
this bankruptcy bill on our senior citizens. Older Americans, far more 
than the rest of us, often face crushing debt burdens because of the 
high cost of prescription drugs and other medical expenses, and they 
need the safety net of bankruptcy relief to deal with their resulting 
financial troubles. In fact, Americans over 65 are now the fastest 
growing age group filing for bankruptcy protection.
  Older Americans, far more than the rest of us, are often homeowners 
who have paid off their mortgages over decades of hard work. Their home 
equity often represents nearly their entire life savings, and their 
home is often their only significant asset. It is critical we ensure 
these older Americans are not forced to give up their hard-earned 
homes--the homes where they have raised their children and planned to 
spend their retirement--in order to seek the benefit of our bankruptcy 
system. These are not just pieces of real estate to these people; these 
are their havens, their sanctuaries, their life's work. Yet the 
bankruptcy law in its current form does not adequately protect older 
Americans from a horrible dilemma.
  For older homeowners, the homestead exemption in the bankruptcy laws 
is what should protect them from having to make the horrible decision 
to give up their homes in order to seek bankruptcy relief. This 
exemption legally protects the homestead--a personal residence--or some 
portion of its value from the claims of most creditors. It should mean 
that senior citizens faced with bankruptcy because they cannot pay off 
their massive medical expenses are allowed to keep their homes.
  In too many cases, this homestead exemption is woefully inadequate. 
The value of this exemption varies widely from State to State. While 
Federal law currently creates an alternative homestead exemption of 
just under $20,000, that low amount is just that, an alternative. Each 
State gets to decide whether it will allow its debtors to rely on this 
Federal alternative, and many do not. As a result, some States allow a 
much higher exemption, but many have a much lower exemption.
  In States such as Florida and Texas, there is a homestead exemption 
with an unlimited dollar value, meaning that any money invested in a 
home cannot be obtained by creditors. I should note, of course, that 
this creates other problems, which I will address in a few minutes. But 
other States allow a very limited value homestead exemption. In many 
States, the amount of equity a homeowner can protect in bankruptcy has 
lagged far behind the dramatic rise in home values in recent years. For 
example, in the State of Ohio, the homestead exemption is only $5,000, 
and in the Presiding Officer's State of North Carolina, the homestead 
exemption is $10,000. In this day and age, those paltry exemptions will 
do no good. We obviously have a problem, and it is hitting our older 
friends and family members the hardest.
  Think about it: In these low homestead exemption States, even 
indigent elderly homeowners who own a home free and clear worth only 
$30,000 or $40,000 cannot file for chapter 7 bankruptcy without losing 
their home. And they may not be able to file a chapter 13 case because 
they cannot afford to pay creditors the value of their home equity that 
is not exempt, as required by that chapter. Many elderly homeowners 
live solely on Social Security benefits, often no more than $800 to 
$1,000 per month. This is enough to subsist in their paid-off homes, 
while still paying taxes, utilities and other basic living expenses. 
But if they lose their homes, they will not be able to rent a decent 
place to live. Effectively, this means these older homeowners have no 
bankruptcy relief available to them at all. We have to address this 
gross inequity before we pass this bill. My amendment would create a 
uniform federal floor for homestead exemptions of $75,000, applicable 
only to bankruptcy debtors over the age of 62, protecting the lower- 
and middle-class senior citizens who need it most.

  I will give an example that illustrates why it is so important that 
we fix this problem and fix it now. Let me tell my colleagues about 
Mary Bobbit. Mary Bobbit is a 70-year-old widow who lives in North 
Carolina, where the homestead exemption is only $10,000. According to a 
local news story, she recently lost her husband to cancer, a battle 
that left her with more than $175,000 in unpaid medical bills. Her only 
remaining asset is the home that her family built themselves 26 years 
ago, a home that she paid off just last year. And now she is faced with 
a horrible dilemma, because if she files for bankruptcy in North 
Carolina, she will lose the home that she and her husband worked so 
hard to build and pay for.
  As Mary Bobbit's story shows, this is not a hypothetical problem. 
Despite the fact that older Americans tend to own their own homes and 
have greater financial experience compared to the rest of us, they are 
the fastest growing age group in bankruptcy. In the 1990s, the number 
of Americans 65 and older filing for bankruptcy tripled. Why is that?
  Well, older Americans simply do not have the same resources for their 
retirement years that they used to. They live on fixed incomes that are 
not keeping up with rising costs. Fewer and fewer Americans have 
pensions, and many Americans who are just hitting retirement age lost 
much of their retirement savings when the stock market bubble burst a 
few years ago.

[[Page S1830]]

  But one of the biggest reasons that older Americans go into 
bankruptcy is the inability to pay medical expenses. Between 
prescription drug costs and the costs of hospitalization, medical 
expenses can add up quickly for someone on a fixed income. Medicare 
simply is not providing the help that many of them need. In fact, 
medical expenses are the cause of more than half of all bankruptcies 
filed by debtors over the age of 50.
  Another big factor in the rising bankruptcy rate of older Americans 
is job loss. People who are nearing retirement age and lose their jobs 
due to mergers and down-sizing can find it very difficult to find a new 
job. If you are in your late 50s and lose a job, just try to find 
someone to hire you at the same wages you were making before. It is not 
easy, and the results can be devastating.
  Job loss is also a problem for the increasing percentage of older 
Americans who are finding that they have to return to work after 
retirement in order to make ends meet, giving up the American dream of 
security and leisure in retirement. In fact, nearly half of seniors say 
they plan to continue working during retirement because they cannot 
survive financially otherwise. Senior citizens are reporting that if 
they lose even a low-paying, part-time job at places like McDonald's or 
Wal-Mart, they may no longer be able to afford their basic living 
expenses.
  Yet another disturbing trend is that the credit card debt of 
Americans over age 65 increased dramatically in the 1990s, in part 
thanks to the fact that they can now charge many prescription drug and 
other medical expenses. I am very disturbed by the idea that seniors 
would end up having to pay credit card interest rates of even 20 
percent in order to pay for the medical treatment they need.
  Older Americans are increasingly the victims of unscrupulous 
predatory lenders. According to the AARP, elderly Americans are three 
times more likely to be targeted. In fact, according to a Harvard 
study, nearly one in five older Americans in bankruptcy filed their 
petition at least in part to avoid constant, harassing, 24-hour-a-day 
collection calls or other actions.
  All of this rather sad picture makes one thing very clear. We are not 
talking about people who were reckless with their spending and think 
they can use or manipulate the bankruptcy laws to get out of it. We are 
talking about responsible people who have worked toward retirement 
their whole lives, yet whether because of devastating medical costs, 
job loss, or some other tragedy, find themselves in a financial 
emergency and are unable to pay their debts. These people turn to the 
bankruptcy system only as a last resort. They should not also be forced 
to give up their homes for doing so.
  We cannot allow this to continue. We have to fix this problem.
  I believe my amendment offers a solution to help them. Federal law 
should protect the elderly in States where the homestead exemption is 
very low. The optional Federal bankruptcy exemptions allow a homeowner 
to protect only a little under $20,000, and even then States can simply 
ignore that Federal alternative and require their debtors to use the 
State exemptions, which are often much lower. My amendment would create 
a uniform Federal floor for homestead exemptions of $75,000, applicable 
only to bankruptcy debtors over the age of 62. States could no longer 
impose lower exemptions on their seniors. This would permit senior 
homeowners to file for bankruptcy without losing what is usually the 
only significant asset they have: their homes. And if my amendment were 
adopted, the U.S. Congress would not be the first to acknowledge that 
this is a problem for the elderly. Both California and Maine have 
recognized that elderly debtors deserve increased homestead protection. 
California recently raised the exemption for the elderly to $150,000, 
and Maine has an exemption for debtors over 60 of $70,000. It is about 
time we caught up with these forward-thinking State legislators and 
gave our seniors the protection they need.
  I do want to briefly address the very serious problem that I alluded 
to earlier, which is that some wealthy Americans have exploited the 
unlimited homestead exemption available in certain States. This 
certainly is not a new issue; we have had years of debate over the 
unlimited homestead exemptions in some states that permit wealthy 
people to file bankruptcy and retain their mansions. One frequently 
cited example of abuse is Bowie Kuhn, the former baseball commissioner 
whose law firm went into bankruptcy. After creditors seized his home in 
the Hamptons and were about to attach his mansion in New Jersey, Mr. 
Kuhn acquired a multi-million dollar home in Florida and protected it 
from his creditors. Florida, of course, is one of the States with an 
unlimited homestead exemption. Section 322 of the bankruptcy bill 
attempts to address this problem, but does so only for a relatively 
small number of people. It treats the poor and middle class harshly 
while still letting some wealthy debtors, who are clearly abusing the 
system, shelter millions of dollars. I agree with my senior colleague 
from Wisconsin, Senator Kohl, and the distinguished Senator from 
Alabama that this loophole must be addressed. Unfortunately, I do not 
think the homestead exemption limitation in this bill does the job as 
well as it could, but I am afraid we will have to turn to that issue on 
another day.

  My amendment addresses the flip side of the homestead issue. It has 
no effect whatsoever on the homestead provision agreed to by Senator 
Kohl in the 2002 conference, which remains in this new bill. Rather 
than being concerned with the relatively small number of high-profile 
wealthy abusers of the system, my amendment is aimed at the thousands 
upon thousands of elderly homeowners who are being squeezed by medical 
bills and rising home prices into an untenable position.
  Let's be honest. Despite all the investment opportunities available 
to many in this country, for a very large number of seniors, the only 
retirement plan they have is this: pay off your house, and live on 
Social Security. People in that situation can survive, but not if they 
get hit with a financial emergency, usually a severe medical problem, 
and live in a State that has a low homestead exemption. We need to help 
them, and we need to do it now.
  The bankruptcy system should provide a safety net for families truly 
in need of relief. This senior homeowner protection amendment is a 
reasonable solution to a growing problem. I strongly urge my colleagues 
to support this amendment, and I ask unanimous consent that a letter of 
support for this amendment from the AARP be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                         AARP,

                                                    March 1, 2005.
     Hon. Russell D. Feingold,
     Hart Senate Office Building, U.S. Senate, Washington, DC.
       Dear Senator Feingold: Debate on S. 256, the ``Bankruptcy 
     Abuse Prevention and Consumer Protection Act of 2005'', has 
     begun on the floor of the Senate and we understand that you 
     are prepared to offer an amendment to S. 256 that creates a 
     uniform federal floor for homestead exemptions of $75,000 
     that is applicable only to bankruptcy debtors over the age of 
     62. AARP supports this amendment, and urges the Senate to 
     adopt it as part of the legislation to help safeguard older 
     Americans from losing their homes when they find it necessary 
     to file for bankruptcy.
       Individuals and families that are near or of retirement 
     age, and confronted with the unavoidable choice of filing for 
     bankruptcy, very often find themselves in an ever tightening 
     vice: at the end of their working careers, with little or no 
     time or opportunity to recover financially, and with very few 
     assets. Experts cite the financial problems of older 
     Americans as being based on an array of factors, among them: 
     job loss, medical expenses, death of a spouse, divorce, 
     financial support for children and grandchildren and less 
     retirement income. But it is job loss and medical expenses 
     that top the list of reasons for indebtedness and bankruptcy.
       For millions of older persons, their homes represent their 
     principal financial asset and their personal independence. 
     Today, the federal bankruptcy exemptions allow a homeowner to 
     protect only a little under $20,000 in home equity, and many 
     states allow even less. The dramatic increases in home prices 
     over recent years have caused a special problem for older 
     homeowners who need bankruptcy relief from overwhelming debt 
     that is often due to large medical expenses. The amount of 
     equity a homeowner can protect in bankruptcy has not kept up 
     with the rise in home prices, so that even an indigent 
     elderly homeowner who owns a home worth only $30,000 or 
     $40,000 cannot file a chapter 7 bankruptcy without losing 
     that home and cannot file a chapter 13 case because he cannot 
     afford to pay creditors the value of the equity that is not 
     exempt, as required by that chapter.

[[Page S1831]]

       The irony of the situation is that under existing law 
     affluent debtors in a number of states are allowed to keep 
     homes of unlimited value. Should we punish the remaining 
     older Americans twice--for having to file for personal 
     bankruptcy under either Chapter 7 or 13, and to lose what 
     often is their only remaining retirement asset?
       We urge Members of the Senate to provide this modest 
     bankruptcy relief for older Americans. If you have any 
     questions, please do not hesitate to contact me, or call Roy 
     Green of our Federal Affairs staff at 202-434-3800.
           Sincerely,
                                                    David Certner,
                                        Director, Federal Affairs.

  The PRESIDING OFFICER. The Senator from Alabama.
  Mr. SESSIONS. Mr. President, Senator Feingold has been very alert to 
the issues of this bill, and he has contributed to this legislation. We 
have agreed some and disagreed some. We have had a lot of fun 
discussing the issues, and I know I have learned a good bit from it.
  Let me say, frankly, where we are on homestead. That has been an 
intensely debated matter for 8 years. We have reached a compromise on 
how to handle homestead, and rather than cracking down on the abuses of 
those people who move to States with unlimited homesteads, we basically 
have agreed as a Senate that the States get to decide how much should 
be exempted under the bankruptcy law. In other words, each State gets 
to decide.
  States need to begin to think about what their limits are and whether 
they need to change them. The Senator noted that California has raised 
its exemption for a home. Others will probably do the same, and some 
have already done so.
  It threatens this legislation in a fundamental way if we now go in 
and say we are going to override the State laws about what the 
homestead exemption should be. I do not think we should do that. I 
think it could help kill this bill. I know Senator Feingold is not a 
fan of it, and I do not think we should do this.
  With regard to the abuses in the homestead legislation, we did put in 
language that cracked down on the ability of someone to move to a State 
that has a more favorable law and place an unlimited amount of equity 
into a very expensive home and file bankruptcy and be able to keep that 
equity which they could then reconvert to cash.
  I think that is a problem. I would like to have seen this go farther, 
but we didn't make that, we didn't reach that bridge. It was a bridge 
too far. We failed to do that. It is one item in the bill I think we 
could have done better with, frankly.
  I will say this. The exemption, fundamentally, should apply to 
everyone, 62 above or below, as far as I can see. A young family, I 
don't know why they would not need the same protections a senior would. 
Right now they all get the same. It is whatever the State decides.
  So I would have to rise in objection to the Feingold amendment on the 
basis that it is contrary to the State prerogatives in this area, the 
State deference that we have given repeatedly over the years. It is 
contrary to that. It would be a Federal imposition of a homestead floor 
and it is contrary to a very fragile agreement we have reached in this 
body over what the homestead exemption should be. It could, in fact, 
jeopardize the successful passage of the bill.
  The PRESIDING OFFICER. The Senator from Wisconsin.
  Mr. FEINGOLD. Let me thank the Senator from Alabama, not only for his 
willingness to engage on the merits of this amendment, but for his 
willingness to engage on a number of difficult subjects, whether it be 
the homestead exemption or landlord-tenant issues. When the Senate 
takes up legislation, we typically start with a good discussion in 
committee, make some progress toward agreement, and then come to the 
floor. And when we go to the conference committee between the Houses, 
we also sometimes manage to come up with an agreement.
  It is regrettable, through no fault of the Senator from Alabama, that 
in this case we are starting this process on the floor. I think had 
these amendments been taken seriously in committee, we could have found 
some common ground and not had to take up the time of the whole body, 
but this is where we are.
  I do believe this amendment is a reasonable extension of something in 
which the Senator from Alabama is already involved. His principal 
concern about this amendment is apparently that we would be overriding 
State law in the area of homestead exemptions. But the Senator, as he 
has indicated, has been a party to an agreement that would do exactly 
that when it comes to the high end of homestead exemptions. It is not 
as if I picked a new area where I am suggesting that State laws are 
inadequate. What I am arguing is that if we are going to be dealing 
with some of these outrageous abuses of the bankruptcy system 
perpetrated by the very wealthy, let's also take the opportunity to 
make sure that the average senior citizen in this country, who 
desperately wants to protect their home and has to go into bankruptcy, 
has some minimum protection.
  To me, this is not an extreme proposal. We only pass these bankruptcy 
bills once in a great while. As I understand it, the last one was 
passed in 1978. There clearly is a trend across the country in places 
like Maine and California, where legislators are recognizing that there 
is a special, severe problem for many of our seniors. I agree with the 
Senator from Alabama, it would be terrific if we could extend this 
protection to everybody. Perhaps that is something we should consider. 
But there is a particular problem when it comes to seniors, who have no 
way of making money anymore, and who are beset with unexpected medical 
bills, whether it be prescription medicine or some other bills. They 
are stuck. They don't have any other way to save their home. This 
problem just cries out for a minimum Federal standard of the kind this 
amendment proposes.

  I hope my colleagues consider this amendment. It is offered in good 
faith. It is not something that should in any way upend the overall 
bill because we have already engaged in a discussion about the changes 
that need to be made at the high end of the homestead exemption, and 
the bill already includes such a provision. So I ask my colleagues to 
give an independent and fresh look at this, given how important it is 
to senior constituents in every State of the Union.
  I yield the floor.

                          ____________________