[Congressional Record Volume 151, Number 30 (Monday, March 14, 2005)]
[House]
[Page H1407]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           ASSET PROTECTION TRUST LOOPHOLE IN BANKRUPTCY BILL

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Illinois (Mr. Emanuel) is recognized for 5 minutes.
  Mr. EMANUEL. Mr. Speaker, as the House takes up the bankruptcy 
legislation, a glaring loophole remains untouched in this so-called 
reform bill. It is known as the Millionaire's Loophole. It is a proven 
windfall for the very wealthy and the very well connected. It was 
created by five States that passed laws exempting asset protection 
trusts from the Federal bankruptcy code.
  These trusts allow wealthy individuals to stash funds, often in 
offshore accounts, for the purpose of hiding their assets from 
creditors after they declare bankruptcy.
  What we are, in fact, doing in this bill is creating two bankruptcy 
laws, one for the well-connected and one for middle class families. 
Middle class families, over half of them who declare bankruptcy, do it 
because of health care costs, and they are forced because of higher 
hospital costs or other type of health care expenses they did not 
expect and they do not have coverage, they seek bankruptcy protection. 
The wealthy, they have a special loophole here that protects their 
assets, wherever they may be, and sometimes in foreign accounts, and 
therefore, they have a bankruptcy law, one that treats them and all of 
their assets with a certain standard and another one that treats middle 
class families who are usually facing a health care crisis. That is not 
the way this legislation should be drafted.
  We should have one bankruptcy bill for every American, not two 
bankruptcy bills, one for the very wealthy and connected and one for 
middle class families struggling with health care costs.
  Whether the assets are villas, yachts, investments or a suitcase full 
of cash, they are untouchable in bankruptcy reorganizations for the 
well-to-do. Neither creditors nor the courts can reach into the asset 
protection trusts.
  As one bankruptcy expert observed in the Wall Street Journal, ``With 
this loophole, the rich won't need to buy houses in Florida or Texas to 
keep their millions.''
  What is ironic here is the bankruptcy bill is titled The Bankruptcy 
Abuse Prevention and Consumer Protection Act. If this loophole is not 
abuse, what is? While the bill keeps asset protection trusts in place, 
it makes it very hard for those who fall behind to work themselves out 
of the financial trouble they face.
  More than half of all the bankruptcies in America are the result of 
catastrophic medical bills. Middle class families cannot pay. Rather 
than dealing with the health care crisis of uncontrollable costs, of 
lack of coverage, what has the infinite wisdom of this Congress done? 
Decided to come up with a bankruptcy piece of legislation that treats 
the wealthy one way and with one standard of protection and throws the 
middle class in front of the train, but if you can afford a high priced 
lawyer to set up an offshore trust, you are better off in bankruptcy 
court than if you are a middle class family trying to pay off of a 
massive hospital bill.
  The right way to address this problem is to have bankruptcy 
legislation that treats every American the same, regardless of 
circumstance, regardless of income. That is not what this legislation 
does.
  My colleague and I, the gentleman from Massachusetts (Mr. Delahunt) 
are offering an amendment to deal with this in the Committee on the 
Judiciary and to address this discrepancy in the law, but by preserving 
the asset protection trust loophole, the bankruptcy bill is protecting 
wealthy deadbeats from the same punishment, the same standards, the 
same rule of law that the legislation imposes upon every American, 
regardless of income.
  Regrettably, the Senate voted down an amendment to close this 
loophole. We are going to be offering this amendment both in the 
Committee on the Judiciary as well as in the full House. I am glad that 
my colleague, the gentleman from Massachusetts (Mr. Delahunt), has 
joined me in this effort.
  Our legislation would force the wealthy individuals and well-
connected who are trying to cheat the system to limit the funds they 
can protect to a maximum of $125,000, and importantly, this amendment 
does not affect retired Americans or take anything away from their nest 
egg and retirement security. It specifically carves out an exemption 
for retirees. It also protects charitable, educational and other trusts 
set aside for legitimate purposes.
  Mr. Speaker, what kind of values does our bankruptcy code reflect 
when the abuses of the wealthy deserve more leeway than middle class 
families struggling with health care costs? We must address this 
discrepancy and these double standards continuously. We have it in our 
tax code. We have it in our educational system. We have it in our laws 
which allow our American corporations to set up in Bermuda and avoid 
taxes here in the country while middle class families struggle. We 
should not have bankruptcy legislation pass the United States Congress 
that sets up two laws, one that can afford lawyers and accountants to 
protect them and another one that is struggling and middle class 
families that are struggling to pay health care costs.
  We can do better. It is time that this Congress show the wisdom to 
understand that every American will have the same laws applied to 
itself regardless of income.

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