Congressional Record, Volume 151 Issue 21 (Tuesday, March 1, 2005)

[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.

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

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.

____________________