[Congressional Record Volume 151, Number 47 (Tuesday, April 19, 2005)]
[Extensions of Remarks]
[Page E704]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2005

                                 ______
                                 

                               speech of

                           HON. DENNIS MOORE

                               of kansas

                    in the house of representatives

                        Thursday, April 14, 2005

  Mr. MOORE of Kansas. Mr. Speaker, I rise today in support of S. 256, 
the Bankruptcy Abuse Prevention and Consumer Protection Act.
  The bankruptcy bill before us today is the product of years of 
bipartisan discussions and compromises, and while this legislation is 
not perfect, it is a serious, good faith effort to reform our 
bankruptcy laws and reduce the worst abuses in the consumer bankruptcy 
system. The House has passed substantially similar legislation with 
strong majorities in each of the last four Congresses, and the Senate 
followed suit last month when it passed S. 256 by a 3-1 margin. 
Bankruptcy filings have increased by 70 percent over the last decade, 
and last year alone Americans filed over 1.6 million consumer 
bankruptcy petitions. S. 256 will not eliminate bankruptcy filings in 
our country, but it is a necessary effort to change the status quo and 
ensure that only those debtors who most need the bankruptcy system will 
be able to use it.
  S. 256 would raise the repayment priority of domestic support 
obligations, including alimony and child support, from seventh to 
first, and would make failure to pay domestic support obligations a 
cause for conversion or dismissal of a debtor's case.
  S. 256 would also protect tax-exempt retirement savings accounts from 
creditors' claims. The bill expressly upholds the Supreme Court's 
recent ruling that creditors may not seize Individual Retirement 
Accounts [IRAs] when people file for bankruptcy, ensuring protection 
for retirement accounts relied upon by millions of Americans. 
Consequently, IRAs now join 401(k)s, Social Security, and other 
benefits tied to age, illness or disability that are afforded 
protection under bankruptcy law.
  Further, S. 256 would make non-dischargeable credit card purchases of 
$500 or more, if made within 90 days of filing for bankruptcy, and all 
cash advances that total $750 or more, if made within 70 days of 
filing. Sometimes consumers who know that they will have to file for 
bankruptcy protection make excessive purchases on credit with the full 
knowledge that they will never have to repay this debt. Approximately 
$44 billion in consumer debt is erased each year through bankruptcy, 
and this discharged debt increases the costs of goods and services for 
all consumers. Retailers pass on to consumers the costs that are lost 
to bankruptcy, and the means test included in S. 256 could save between 
$4 billion and $5 billion of this discharged debt.

  Additionally, the bill seeks to tighten the homestead exemption by 
limiting the amount of equity a homeowner could protect if a piece of 
property in a homestead exemption state is purchased within the 40-
month period prior to a bankruptcy filing. Bankruptcy filers convicted 
of a range of crimes, including fraud, violations of securities laws, 
and criminal acts resulting in injury or death would lose the ability 
to shield their assets in property holdings regardless of when they 
purchased their property. The bankruptcy bill's homestead exemption 
provisions attempt to ensure that wealthy debtors with the means to 
payoff at least some of their debts will no longer be able to hide 
behind the bankruptcy system.
  As some opponents of the bill have noted, some debtors are forced to 
file for bankruptcy as a result of unmanageable medical bills, divorce, 
or job loss. These financial hardships unfortunately happen every day, 
and too often prevent honest, hardworking individuals and families from 
getting ahead or pulling themselves out of debt. This legislation seeks 
to protect the ability of these debtors to file for relief under 
Chapter 7 of the bankruptcy code by creating a means test that will 
continue to allow low-income debtors who earn less than the median 
income of the state in which they live to file under Chapter 7. 
According to the 2000 Census, the median household income in my 
congressional district is approximately $51,000. The means test 
recognizes that those in our society who are the least able to repay 
their debts should have the opportunity to enjoy a fresh start in life. 
And because many debtors are forced to file for bankruptcy as a result 
of medical expenses, S. 256 allows bankruptcy filers to challenge the 
means test by demonstrating ``special circumstances,'' such as a 
serious medical condition, that justify additional expenses or 
adjustments to their income. Individuals who are forced to file for 
bankruptcy due to medical expenses should be able to emerge from 
bankruptcy with the possibility of a second chance in life.
  Finally, S. 256 contains several provisions that seek to improve 
consumers' financial literacy in an attempt to decrease the total 
number of future bankruptcy filings. The bill would require debtors to 
receive credit counseling from a non-profit credit counseling agency 
prior to filing for bankruptcy, and requires filers to complete an 
approved instructional course on personal financial management before 
receiving a discharge under either Chapter 7 or Chapter 13.
  Mr. Speaker, while S. 256 is certainly not a perfect piece of 
legislation, it is my hope that this bill will reduce the number of 
bankruptcy filings in our country and maintain a fair bankruptcy system 
for those who need it the most in our society.

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