[Congressional Record Volume 151, Number 28 (Thursday, March 10, 2005)]
[Senate]
[Pages S2459-S2462]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2005--
                               Continued

  Mr. HATCH. Mr. President, I rise today to speak in favor of S. 256, 
the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 
and to thank all of the people who made this bill possible. This 
bankruptcy bill has been a long time coming. We all know how bankruptcy 
claims have skyrocketed since the last major bankruptcy reform bill in 
1978. We all know about the abuses of the system.
  Well, that is about to change for the better. This bill is about 
fairness and accountability. We have made some important changes in 
this legislation. This bill contains a debtor's bill of rights with new 
protections that prevent bad actors from preying upon the uninformed.
  The bill also includes new consumer protections under the Truth in 
Lending Act, such as new required disclosures regarding minimum monthly 
payments and introductory rates for credit cards. It protects consumers 
from unscrupulous creditors, with new penalties on creditors who refuse 
to negotiate reasonable payment schedules outside of bankruptcy.
  S. 256 provides for protection of educational savings accounts, and 
it gives equal protection for retirement savings in bankruptcy. It 
helps women and children by providing a comprehensive set of 
protections for child and domestic support throughout the bankruptcy 
process.
  This legislation dramatically revises the reaffirmation agreement 
provisions of the Code. It imposes critical disclosure requirements 
that will put a stop to abusive practices. It makes the provisions 
relating to farmers in chapter 12 permanent and broadens its 
provisions. It cleans up the law governing complex exchanges and 
thereby reduces systemic risk in our marketplace. It acts to stop 
abuse.
  When this bill hit the floor on Monday, February 28, I mentioned that 
we were in the last leg of a legislative marathon. The finish line is 
finally in sight. I am pleased to have been a part of this process and 
I am even more pleased we are able to pass this important legislation, 
and I anticipate that it will pass shortly. This bill has been a long 
time in development. I am proud of what we have been able to 
accomplish. Today it seems it is finally going to cross the finish 
line, and it is well worth it.
  This bill may not lead to a severe reduction in the number of 
bankruptcies. I believe, though, that it will reduce the number of 
fraudulent and abusive filings and help educate consumers to keep their 
financial houses in order. This is always an important goal. No 
responsible society can long countenance the open flouting and abuse of 
its laws.
  This bill, with its means test, will discourage such abusive filings 
by restricting access to chapter 7 liquidation by those with relatively 
high incomes. We should all stand behind a law that requires people 
with the ability to repay their debts to actually repay those debts.
  Most of our debate on this bill has focused around the means test. 
There is no doubt that this will discourage some bankruptcy filings, 
but I also hope our credit counseling provisions will work to persuade 
even some low-income debtors that there is another way out.
  Right now, too many are only hearing one part of the story: Declare 
bankruptcy. Liquidate your debts. Some attorneys pushing this line, 
however, leave out the part about the years of ruined credit that 
result, the inability to get a car loan or a house loan. My hope is our 
modest credit counseling provisions will persuade some people to stay 
out of bankruptcy and meet their obligations, do what is right, and 
keep their credit alive.
  While a great majority of Senators support this bill, I know not all 
of my colleagues are pleased. Last night my friend from Massachusetts, 
Senator Kennedy, again voiced his strong opposition to this 
legislation. This was probably clear from my response. I vehemently 
disagree with his opinions about this bill, but I hope he understands 
that we are trying our best.
  Could we have done better? I have no doubt about that, not for a 
second, but I also know this bill has benefitted from some of Senator 
Kennedy's suggestions over the years. We have not ignored him, and I 
hope he understands we appreciate his participation.
  I also understand some of my colleagues feel that they may not have 
been treated fairly in this process. My desire throughout this process, 
and the desire of my colleagues who supported this bill, was always to 
act as an honest broker who took the suggestions of the other side with 
appropriate seriousness. I understand the frustration from some on the 
other side at the inability to get amendments agreed to or considered 
on the floor, but I hope they in turn can understand that we have tried 
our best on this side to balance all of the competing interests in this 
body

[[Page S2460]]

while also trying to get this very important bill done.
  In particular, I think we could have done a better job of working 
through the technical amendments offered by Senator Feingold. Truth be 
told, I do not think all of these amendments were merely technical 
amendments. Be that it as it may, Senator Feingold had a right to 
submit his amendments at the committee and then on the floor. Perhaps 
the consideration of the Feingold amendments would have been more 
complete if we had all focused on these proposals earlier in this 
debate. I fully respect the right of the distinguished Senator from 
Wisconsin to offer his amendments, even if we know he is opposing the 
underlying bill, which he always has. Getting all the parties on board 
is an uphill climb.

  I was given the assignment by Chairman Specter to try to get this 
bill reported by the last recess. We accomplished that goal. In that 
process, I know Senator Feingold feels he did not get a fair hearing in 
the committee. I hope the final outcome today persuades him otherwise.
  For my part, I instructed my staff to meet with the staff of the 
distinguished Senator from Wisconsin after the markup. Our staffs met 
on a number of subsequent occasions. We were able to work out several 
agreements. Frankly, I was sympathetic to several features of other of 
his amendments. As we all recognize, proposing an amendment is much 
easier than getting an agreement on an amendment. I want him to know 
that we tried.
  In discussions with the sponsor of the bill, Senator Grassley, the 
chairman of the Judiciary Committee, Senator Specter, our leadership, 
Senator Sessions, who has played a significant role on this bill and 
others, we had to make a number of determinations over what amendments 
to support and what to exclude from the bill. These were not easy 
decisions, and sometimes they had to be made in conjunction with 
leaders in the House of Representatives, which is not unusual. We do 
try to work with them, if we can. In this case, I think we have been 
working with them.
  We could not accept all of Senator Feingold's amendments. I think he 
probably knows that, too. Our staffs made the effort to work through 
both the substance and the politics of the issues, and these 
consultations have borne some fruit. That is important to state, 
because I do not want my colleague to feel badly or feel he has not 
been treated fairly. I wish we could have found still more common 
ground, but after consulting with and facilitating consultations 
between Senator Feingold's staff and my staff and other Senate staff, 
we at least made some progress.
  I thank and congratulate Senator Grassley, the prime sponsor of this 
bill over the last 8 years. He has worked extraordinarily hard on this 
bill. It has been a long time in coming. My hat, as usual, is off to 
him. Senator Sessions is another Senator whose hard work made this 
possible. We all appreciate his work in the committee and on the floor 
during the last few weeks.

  I would also thank the majority leader, Senator Frist, and the 
majority whip, Senator McConnell, and the chairman of the Judiciary 
Committee for their efforts on behalf of this legislation. Chairman 
Specter has been here working hard for the people of Pennsylvania only 
days after his cancer treatments, and that is not easy to do, and 
certainly not easy since he has a continuation of those treatments. He 
is a heroic figure, in my eyes, for the way he has handled himself in 
this very difficult time.
  I must also thank Chairman Shelby, and Senator Sarbanes of the 
Banking Committee. We all know how vital the Banking Committee was to 
this process. We could not have gotten this done without their help.

  I believe that several Senators from across the aisle deserve 
recognition as well. I want to once again thank the Minority Leader, 
Senator Reid, and the Minority Whip, Senator Durbin, for helping to 
move this bill through the Senate.
  Senators Biden and Carper have worked tirelessly for years on this 
legislation, and they have taken some tough votes to get it done. 
Senator Nelson from Nebraska has also shown great resolve and deserves 
recognition for his efforts, particularly with respect to the 
provisions affecting farmers. Senator Johnson has also been committed 
to this legislation and I thank him.
  No thank you list would be complete without the Senator from Vermont. 
My dear friend Senator Leahy and I have not always agreed on every 
aspect of this legislation, but we have worked hard to make it better. 
Senator Leahy developed two important amendments that were accepted. 
Similarly, Senator Feingold--who has been an ardent opponent of this 
legislation--has nevertheless dedicated himself to improving it. I have 
enjoyed working with him, and several other Democratic members of the 
Judiciary Committee over the years--including Senators Feinstein, Kohl, 
Kennedy, Schumer and Durbin--to get this bill done.
  I would also like to take a moment to thank all of the staff who 
worked so hard to make this happen. I know that several of them--on 
both sides of the aisle--have not seen their significant others in 
weeks. We owe them a great debt of gratitude. If my colleagues would 
permit me, I would like to name a few of them.
  I think the record should reflect that Rene Augustine, a former 
counsel now at home with her new-born child, and Makan Delrahim and 
Manus Cooney, both former Judiciary Committee Chief Counsels, worked 
for years on this legislation and it would not have been possible but 
for their efforts. Similarly, John McMickle, a former staffer of 
Senator Grassley who worked on this bill while he was in the Senate, 
has taken an enormous amount of time away from his young children to 
help on this project.
  For staff who still work here, I think that Senator Grassley's chief 
counsel, Rita Lari-Jochum, should be singled out for her hard work and 
dedication to this bill. She has helped manage this process over the 
last several weeks, and she has done a fantastic job. Similarly, Mike 
O'Neill, Judiciary Committee Chief Counsel, and Harold Kim, Chief Civil 
Counsel, have done an outstanding job--as have the whole Judiciary 
team. There are several new counsels in that office that were thrown 
into the crucible in their starting weeks. First with class action, and 
now with bankruptcy. The record should reflect the professionalism and 
excellence with which Ivy Johnson, Tim Strachan, Ryan Triplette, 
Hannibal Kemmerer, and Nathan Morris have conducted themselves. They 
are a fantastic group.
  In Senator Sessions office, no one could overlook his chief counsel, 
William Smith, or his deputy chief counsel Cindy Hayden. Amy Blakenship 
and Wendy Fleming also with Senator Sessions, did a great job as well. 
They all did wonderful job.
  In the Majority Leader and Majority Whip's office, Eric Ueland, 
Sharon Soderstrom, and Allen Hicks led the team. John Abegg in Senator 
McConnell's office, proud father of a baby girl born on the day this 
bill hit the floor, nevertheless managed to get the job done. Kyle 
Simmons, Brian Lewis, and Malloy McDaniel all worked vigorously to plan 
and manage the strategy and votes on amendments. Stephen Duffield and 
his team at the R.P.C. has also provided timely and accurate 
information on the bill on a daily, and when needed, hourly, basis.
  As my colleagues all know, the Banking Committee played an important 
role in this process. Senator Shelby is fortunate to have people like 
Kathy Casey, Doug Nappi and Mark Oesterle working for him.
  I would also like to thank the House Judiciary Committee staff--they 
have been an invaluable resource and we would not have been able to get 
this done without them. As always, Phil Kiko provided a steady hand 
steering important legislation. Susan Jensen is a treasure trove of 
information and she has devoted herself to this endeavor. Stephanie 
Moore and Perry Applebaum of Representative Conyer's office, I am sure 
will help the legislation move through the House.
  The hardworking people in the legislative counsel's office have also 
undertaken a Herculean effort and flourished in the process. I believe 
that 125 amendments were filed on this bill, and that does not include 
the 50 or so that we had in Committee. That is a lot of drafting of 
complex legislation and we all owe Bill Jensen, Matt McGhie and Amy 
Gaynor our thanks for their contributions during this long trip. I

[[Page S2461]]

would add Bob Schiff of Senator Feingold's staff, who worked to make 
this a better bill. It is a pleasure to work with him and he is someone 
we respect. I wish we could have done more for him and his great boss. 
We have done the best we can.
  Finally, on my own staff, Bruce Artim, Kevin O'Scannlain, Perry 
Barber and Brendan Dunn all worked very hard on this legislation.
  My personal executive assistant, Ruth Montoya, has put up with an 
awful lot over these last few weeks, and I appreciate her as well as my 
chief of staff Trish Knight, and Susan Cobb and the many others who 
literally have worked so hard to help me over these last several 
weeks--frankly, over the last many years. I know there are many others 
I have not been able to recognize, and they should all know what a 
wonderful job I believe they have done. I believe we have an important 
achievement with this bill, and I think it is only a matter of time 
until we get this bill passed on the floor, which will be a good end.
  Mr. President, the bankruptcy legislation cures some abuses in the 
Bankruptcy Code regarding executory contracts and unexpired leases.
  One provision, Section 404(a) of the bill, amends Section 365(d)(4) 
of the Bankruptcy Code. Presently, Section 365(d)(4) provides a retail 
debtor 60 days to decide whether to assume or reject its lease. A 
bankruptcy judge may extend this deadline for cause--and therein is the 
problem. Some experts believe that too many bankruptcy judges have 
allowed this exception essentially to eliminate any notion of a 
reasonable and firm deadline on a retail debtor's decision to assume or 
reject a lease. Some bankruptcy judges have been extending this 
deadline for months and years, often to the date of confirmation of a 
plan.
  This situation can be troublesome. For example, a shopping center 
operator is a compelled creditor. It has little if any choice but to 
continue to provide space and services to the debtor in bankruptcy. 
Yet, the current Code permits a retail debtor as long as years to 
decide what it will do with its leases. Coupled with the increased use 
of bankruptcy by retail chains, the Bankruptcy Code is seen by some to 
be tipped unfairly against the shopping center operator.
  Some stores curtail their operations or go dark, and still the lessor 
cannot regain control of its space.
  This legislation, like the conference report in the last two 
Congresses, acts to curb this abuse. It imposes a firm deadline on a 
retail debtor's decision to assume or reject a lease. It permits a 
bankruptcy trustee to assume or reject a lease on a date which is the 
earlier of the date of confirmation of a plan or the date which is 120 
days after the date of the order for relief. A further extension of 
time may be granted, within the 120 day period, for an additional 90 
days, for cause, upon motion of the trustee or lessor. Any subsequent 
extension can only be granted by the judge upon the prior written 
consent of the lessor: either by the lessor's motion for an extension, 
or by a motion of the trustee, provided that the trustee has the prior 
written approval of the lessor. This is important. We are limiting the 
bankruptcy judges' discretion to grant extensions of the time for the 
retail debtor to decide whether to assume or reject a lease after a 
maximum possible period of 210 days from the date of entry of the order 
of relief. Beyond that maximum period, there is no authority in the 
judge to grant further time unless the lessor has agreed in writing to 
the extension.
  Retail debtors filing for bankruptcy will undoubtedly factor into 
their plans this new deadline. Most retail chains undertake a careful 
review of their financial condition and business outlook before they 
file for bankruptcy. They will already have an understanding of which 
leases are ones they wish to assume and which ones they wish to dispose 
of. The legislation gives them an additional 120 days to decide on what 
to do with their leases, once they file for bankruptcy. Beyond that 120 
day time period, an additional 90 days can be granted for cause. A 
further extension may be negotiated by the retail debtor and the lessor 
if circumstances warrant, and any such extension can be granted by a 
judge only with prior written consent of the lessor. Further, a 
lessor's prior written approval of one such extension does not 
constitute approval for any further extensions--each such extension 
beyond the 210-day period requires the lessor's prior written approval.

  The bill in Section 404(b) also amends Section 365(f)(1) of the 
Bankruptcy Code to make sure that all of the provisions of Section 
365(b) of the code are adhered to and that 365(f) of the code does not 
override Section 365(b).
  This addresses another problem under the Bankruptcy Code. The bill 
helps clarify that an owner should be able to retain control over the 
mix of retail uses in a shopping center. When an owner enters into a 
use clause with a retail tenant forbidding assignments of the lease for 
a use different than that specified in the lease, that clause should be 
honored. Congress has so intended already, but bankruptcy judges have 
sometimes ignored the law.
  Congress made clear, in Section 365(b)(1) and 365(f)(2)(B), that the 
trustee may assume or assign an executory contract or unexpired lease 
of the debtor, only if the trustee gives adequate assurance of future 
performance under the contract or lease.
  In Section 365(b)(3), Congress provided that for purposes of the 
Bankruptcy Code:

     adequate assurance of future performance of a lease of real 
     property in a shopping center includes adequate assurance--
       (A) of the source of rent and other consideration due under 
     such lease, and in the case of an assignment, that the 
     financial condition and operating performance of the proposed 
     assignee and its guarantors, if any, shall be similar to the 
     financial condition and operating performance of the debtor 
     and its guarantors, if any, as of the time the debtor became 
     the lessee under the lease;
       (B) that any percentage rent due under such lease will not 
     decline substantially;
       (C) that assumption or assignment of such lease is subject 
     to all provisions thereof, including (but not limited to) 
     provisions such as a radius, location, use, or exclusivity 
     provision, and will not breach any such provision contained 
     in any other lease, financing agreement, or master agreement 
     relating to such shopping center; and
       (D) that assumption or assignment of such lease will not 
     disrupt any tenant mix or balance in such shopping center.

  Congress added these provisions to the Code in recognition that a 
shopping center should be allowed to protect its own integrity as an 
ongoing business enterprise, notwithstanding the bankruptcy of some of 
its retail tenants. A shopping center operator, for example, must be 
given broad leeway to determine the mix of retail tenants it leases to. 
Congress decided that use or similar restrictions in a retail lease, 
which the retailer cannot evade under nonbankruptcy law, should not be 
evaded in bankruptcy.
  It is my understanding that some bankruptcy judges have not followed 
this Congressional mandate. Under another provision of the Code, 
Section 365(f), a number of bankruptcy judges have misconstrued the 
Code and allowed the assignment of a lease even though terms of the 
lease are not being followed. This appears to ignore Section 365(b)(3).
  For example, if a shopping center's lease with an educational 
retailer requires that the premises shall be used solely for the 
purpose of conducting the retail sale of educational items, as the 
lease in the In re Simon Property Group. LP v. Learningsmith, Inc. (D. 
Mass. 2000) case provided, then the lessor has a right to insist on 
adherence to this use clause, even if the retailer files for 
bankruptcy. The clause is fully enforceable if the retailer is not in a 
bankruptcy proceeding, and the retailer or the bankruptcy trustee or 
judge should not be able to evade it in bankruptcy. Otherwise, the 
shopping centers operator could lose control over the nature of its 
business.
  In the Learningsmith case, the judge allowed the assignment of the 
lease to a candle retailer because it offered more money than an 
educational store to buy the lease, in contravention of Section 
365(b)(3) of the Code. As a result, the lessor lost control over the 
nature of its very business, operating a particular mix of retail 
stores. If other retailers file for bankruptcy in that shopping center, 
the same result can occur.
  In the past, courts have disagreed about whether Section 365(f) 
overrides the provisions of Section 365(b)(3). For example, in the case 
of In re Rickles Home Ctrs., Inc., 240 B.R. (D.Del. 1999), appeal 
dismissed, 209 F.3d 291 (3d Cir.), cert. denied, 531 U.S. 873 (2000), 
the

[[Page S2462]]

judge disregarded the use clause and allowed a lease sale to go through 
to a non-conforming user. However, in In re Trak Auto Corp., 367 F.3d 
237 (4th Cir. 2004), an appellate court held that a use clause must be 
strictly enforced under Section 365(b)(3) on sale of the lease, 
notwithstanding Section 365(f). This legislation provides the necessary 
clarity by amending Section 365(f)(1) to help make clear it operates 
subject to all provisions of Section 365(b).
  I note that Section 365(d)(4) of the Bankruptcy Code applies to cases 
under any chapter of Title 11. Language to that effect in the current 
Code's Section 365(d)(4) is deleted because it is repetitive of 
Sections 103(a) and 901 of the Code, which already make clear that 
provisions like Section 365(d)(4) apply to all cases under Title 11.
  This bill creates new legal protections for a large class of 
retirement savings in bankruptcy. This measure has widespread support 
from a long list of groups, ranging from the American Association of 
Retired Persons, to the Small Business Council of America and the 
National Council on Teacher Retirement.
  Let me take this opportunity to point out that the assets of some 
pension plans already are protected from bankruptcy proceedings. The 
United States Supreme Court has ruled in Patterson v. Shumate, reported 
at 504 U.S. 753 (1992), that assets of pension plans which have, and 
are required by law to have, anti-alienation provisions, are excluded 
from bankruptcy estates.
  Let me be absolutely clear that this provision is not intended in any 
way to diminish the protections offered under existing law and under 
the United States Supreme Court's decision in Patterson v. Shumate, but 
rather, is intended to provide protection to other retirement plans and 
accounts not currently protected.
  Mr. President, this has been a battle, there is no question about it, 
like all hotly contested issues are. But I think virtually everybody 
has contributed, and we have had some tough times on the floor. We have 
had even some bad feelings from time to time. But we have been at this 
for 8 solid, difficult years. It is unfortunate we could not work out 
more amendments, also, but we couldn't and still have this bill pass, 
hopefully for the last time. We worked in good faith to try to do that.
  For those who feel they have not been treated as fairly as I would 
certainly have wanted to treat them or I feel I have treated them and 
others as well have treated them, we feel bad about that and hope they 
will forgive us for not being able to make some of the changes that 
perhaps we would have made had this been the first year of this bill 
and we didn't have the difficulty of meeting the suggestions of our 
friends over in the other body.
  We think they have done a terrific job. The people in the House of 
Representatives are tremendous leaders, from Chairman Sensenbrenner 
right on through the whole Judiciary Committee and, of course, the 
leadership over in the House as well and others who are not on the 
Judiciary Committee but are concerned about this very important bill. 
They work closely with us. It is difficult for them and it is difficult 
for us, but that is the way these two bodies ought to work together, 
and this bill is a perfect illustration of what can happen if good 
people can get together, compromise on some of these issues that can be 
compromised, and yet stand firmly so we can pass legislation like this 
that will benefit the whole country.
  In my final remarks, let me recognize the efforts of Ed Pagano and 
Bruce Cohen of Senator Leahy's office and Jim Flug and Jeff Teitz of 
Senator Kennedy's office for all the hard work they have done over the 
years on this issue as well. It is a pleasure to work with staff on the 
Judiciary Committee. They are bright. They are articulate. They are 
brilliant, as a matter of fact. That is what you want in Judiciary 
Committee staffers. I wish those on the minority side would not be 
nearly as tough as they are, but I respect them for being that way.
  With that, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. HATCH. Mr. President, I ask unanimous consent that the order for 
the quorum call be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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