[Congressional Record (Bound Edition), Volume 146 (2000), Part 16]
[Senate]
[Pages 23424-23429]
[From the U.S. Government Publishing Office, www.gpo.gov]



                           BANKRUPTCY REFORM

  Mr. WELLSTONE. Mr. President, I am going to take a few moments. I 
know Senator Kennedy is here on the floor, and I believe Senator 
Feingold may be coming down as well. In any case, I want colleagues to 
know next week when we do get back to the bankruptcy bill, whenever it 
is, there are a number of Senators who are ready to speak on this bill 
and go into its substance.
  I think the 100-0 vote is an indication that we do not mind going 
forward with the bill, but we do intend to speak about this legislation 
because the more people know about this legislation, the more likely 
Senators will vote against it. We certainly intend to have the debate, 
and if there is a cloture vote next week--there may or may not be--we 
intend to do everything we can to defeat this legislation. We have time 
to debate this legislation next week. If it goes to beyond cloture, we 
will have more hours then to debate this legislation. Let's take one 
step at a time.
  I will point out to Senators the process first, and then we will go 
to substance. I do not know whether or not this is an argument that 
wins with the public. The argument about this bankruptcy bill on 
substance wins with the public. We have had some discussion about the 
scope of the conference and rule XXVIII.
  This was a State Department authorization bill. We had an ``invasion 
of the body snatchers'' where all of the content dealing with State 
Department reauthorization has been taken out and bankruptcy has been 
put in. It is a clear abuse of the legislative process. I doubt whether 
any Senator who views himself as a legislator can be comfortable with 
the way we are proceeding.
  I believe there are many Senators who are going to want to speak 
about this outrageous process. I do not know if I have ever seen 
anything like this where we have a State Department reauthorization 
bill conference report

[[Page 23425]]

that is hollowed out, gutted completely, and replaced by the bankruptcy 
reform bill conference report. It is unbelievable. It is beyond 
anything I ever imagined could go wrong in the Senate. It is a way to 
jam something through, but in one way I can understand why the majority 
leader and others would try to jam this through because the content, 
the actual legislation itself, is so egregious.
  I simply point out to Senators that there is not one word, not one 
aspect of this legislation--next week I will have a chance to talk a 
lot about it; we will talk a lot about this legislation--there is not 
one word, not one provision, not one sentence, not one section which 
holds credit card companies or large banks accountable for their 
predatory practices. There is no accountability whatsoever.
  We have nothing in this legislation that holds them accountable, but 
what we do have is legislation that, first of all, rests on a faulty 
premise. The bill addresses a crisis that does not exist. We keep 
hearing these scare statistics, which, by the way, do not jibe with the 
empirical evidence that there has been all these increased bankruptcy 
filings. In fact, bankruptcy filings have fallen dramatically over the 
last 2 years.
  We have heard about the abuse. The American Bankruptcy Institute 
points out that, at best, we are talking about 3 percent of the people 
who file chapter 7 who actually could pay back their debts; 3-percent 
abuse, and for 3-percent abuse, what we are doing is tearing up a 
safety net for middle-income people, for working-income people, for 
low-income people who are trying to rebuild their lives.
  Do we do anything about health care costs? No. Is the No. 1 cause of 
bankruptcy medical bills? Yes. Do we do anything about raising the 
minimum wage? No. Do we do anything about affordable housing? No. Do we 
do anything about affordable prescription drugs for elderly people? No. 
But the banking industry and the credit card industry get a free ride, 
and we pass a piece of legislation which is so harsh that it will make 
it difficult for middle-income people, much less low-income people, to 
rebuild their lives.
  Hardly anybody abuses this. No one wants to go through bankruptcy. 
People are doing it because there is a major illness in their family. 
They are doing it because somebody lost their job. They are doing it 
because of some financial catastrophe. When people today try to rebuild 
their lives, we come to the floor of the Senate with a piece of 
legislation basically written by the credit card industry, written by 
the big financial institutions. They are the ones with all the clout. 
They are the ones with all the say.
  I say to my colleagues, it is not coincidental that every civil 
rights organization opposes this; that every labor organization opposes 
this; that almost every single women's and children's organization 
opposes this; that the vast majority of the religious communities and 
organizations oppose this.
  Today we had a vote to proceed, but next week there will be an all-
out debate and we will focus on the harshness of this legislation, the 
one-sidedness of this legislation. By the way, this legislation in this 
hollowed out sham conference report is worse than the legislation that 
passed the Senate.
  Now we have a bill that says to women, single women, children, low- 
and moderate-income families: You are not going to be able to rebuild 
your lives; we are going to pass a piece of legislation that is going 
to make it impossible for you to rebuild your lives even when you have 
been put under because of a huge medical bill, no fault of your own. At 
the same time, for those folks who have lots of money, if they want to 
go to one of the five States where they can put all their money into a 
$1 million or $2 million home, they are exempt; they are OK.
  This is what the majority party brings before the Senate. It is 
unbelievable. No wonder they have to do it through this ``invasion of 
the body snatchers'' conference report. They take a State Department 
conference report, gut it, take out every provision that deals with the 
State Department reauthorization, and put in a bankruptcy bill that is 
even more harsh than the one that passed the Senate that is 
anticonsumer, antiwomen, antichildren, antiworking people and I think 
anti some basic values about fairness and justice.
  I hope next week--I do not hope, I know--there will be a sharp 
debate, and we are prepared to debate this; we are prepared to use 
every single privilege we have as Senators to fight this tooth and 
nail.
  And next week there will be a long, spirited discussion about this 
piece of legislation.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER (Mr. Smith of Oregon). The Senator from 
Massachusetts.
  Mr. KENNEDY. Mr. President, I want to, first of all, thank my friend 
and colleague, the Senator from Minnesota, for his very eloquent 
statement, and most of all for all of his good work in protecting 
working families in this country on this extremely important piece of 
legislation.
  I, too, am troubled, as I mentioned earlier today, by the fact that 
with all the unfinished business we have in the Senate that now with 
the final hours coming up next week, we are being asked to have an 
abbreviated debate and discussion on the whole issue of bankruptcy 
without the opportunity for amendments. Effectively, we are being asked 
to take it or leave it on legislation which is going to affect millions 
of our fellow citizens.
  I had wished that we had scheduled other legislation, as I mentioned 
earlier today. I wish we were willing to come on back to the Elementary 
and Secondary Education Act or in terms of a Patients' Bill of Rights 
or a prescription drug program for our seniors in our country.
  As someone who has been traveling around my own State, this is what I 
hear from families all over Massachusetts: Why isn't the Senate doing 
its business? Why didn't it do its business reauthorizing the 
Elementary and Secondary Education Act? This is the first time in 34 
years that it has not done so. Why is it 3 weeks late in terms of 
appropriating funding for education, of which we hear a great deal in 
the Presidential debates? And in the Congress, aren't we somehow 
sensitive to what our leaders are saying in the Republican and 
Democratic parties about the importance of education? Here we are now 3 
weeks late, and the last appropriation, evidently, is going to be the 
education one. That is not the way that we think we ought to be doing 
business.
  So we find ourselves coming back to this issue--or will next week--on 
the question of whether we are going to accept bankruptcy legislation.
  I want to make a few points at the outset of my remarks: some 
proponents of this legislation argue that all the outstanding concerns 
about the bill have been resolved and that the problems have been 
fixed. That is simply untrue. It is a myth that women and children are 
protected under the provisions of this bill.
  Over 30 organizations that advocate for women and children wrote us 
and said that by increasing the rights of many creditors--including 
credit card companies, finance companies, auto lenders, and others--the 
bill would set up a competition for scarce resources between parents 
and children owed child support, and commercial creditors, both during 
and after bankruptcy. Contrary to the claims of some, the domestic 
support provisions included in the bill would not solve these problems.
  I have here a list of advocates for women and children who are 
opposed to this bill. I listened recently, a few hours ago, to a very 
impassioned statement by one of my colleagues about how the women and 
children were being protected. Here is a list--and I will include the 
list in the Record--of groups that, for the life of their years, have 
been advocates for children and women. These groups say that provisions 
in the conference committee report are going to put children and women 
at serious risk and that the proposed bankruptcy law will do a 
significant disservice to their rights. This is not only what these 
various groups have said, but this is also the conclusion of the 82 
bankruptcy scholars I

[[Page 23426]]

have listed that I will include in the Record.
  Mr. President, I ask unanimous consent that the letter written by 82 
bankruptcy scholars to our colleagues outlining the provisions of the 
conference report that put women and children at risk be printed in the 
Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                                September 7, 1999.

     Re The Bankruptcy Reform Act of 1999 (S. 625)

     Hon. Orrin Hatch,
     Chairman, Committee on the Judiciary,
     U.S. Senate, Washington, DC.

     Hon. Patrick Leahy,
     Ranking Member, Committee on the Judiciary,
     U.S. Senate, Washington, DC.
       Dear Senators: We understand that the United States Senate 
     is scheduled to consider S. 625, the Bankruptcy Reform Act of 
     1999, in the near future. This letter offers the views of the 
     eighty-two (82) undersigned professors of bankruptcy and 
     commercial law on important consumer bankruptcy aspects of 
     this legislation.
       We recognize the concern that some individuals and families 
     are filing for chapter 7 bankruptcy to be relieved of 
     financial obligations when they otherwise could repay some or 
     all of their debts. Fostering increased personal 
     responsibility is a worthwhile aim. However, we believe that 
     S. 625 as currently drafted will not achieve the goals of 
     bankruptcy reform in an equitable and effective manner, and 
     we fear that some provisions of the bill have the potential 
     to do more harm than good.
       Specifically, we urge consideration of two principal 
     points:
       The ``means test'' in S. 625 may not identify those 
     individuals with the ability to repay a substantial portion 
     of their debts, while at the same time it may work 
     considerable hardship on financially strapped individuals and 
     families filing bankruptcy petitions that are not abusive.
       This bill contains much more than a means test. Dozens of 
     provisions in S. 625 substantially enhance the rights of a 
     variety of creditor interests and increase the cost and 
     complexity of the system. Taken as a whole, these provisions 
     may adversely affect women and children--both as debtors and 
     creditors--as well as other financially vulnerable 
     individuals and families.


                               means test

       The cornerstone of consumer bankruptcy reform is the 
     ``means test.'' Why have a means test? The perception is that 
     some debtors with a meaningful ability to repay their debts 
     are filing chapter 7 to discharge those debts, and instead 
     should repay their debts in chapter 13. A means test is 
     supposed to find and exclude those ``can-pay'' debtors from 
     chapter 7. The trick is identifying the real abusers at an 
     acceptable cost, without unfairly burdening those ``honest 
     but unfortunate'' debtors who legitimately need chapter 7 
     bankruptcy relief.
       In thinking about the proper design of a means test, it 
     first is essential to understand the extent to which 
     individuals and families are actually abusing the bankruptcy 
     system. Since last year's debates on bankruptcy reform, a 
     study funded by the independent and nonpartisan American 
     Bankruptcy Institute found that less than 4% of consumer 
     debtors could repay even 25% of their unsecured nonpriority 
     debts if they could dedicate every penny of income to a 
     repayment plan for a full 5 years. In short, for about 96% of 
     consumer debtors, chapter 7 bankruptcy is an urgent 
     necessity. Of course, the fact that most debtors cannot pay 
     does not mean that the S. 625 means test will not affect 
     them.
       Last year, the Senate worked hard on a bankruptcy reform 
     bill that went through substantial revision and ultimately 
     passed by a vote of 97 to 1 (S. 1301). S. 1301 was re-
     introduced this year (now S. 945, known as the Durbin-Leahy 
     bill), but was not the starting point for this year's 
     bankruptcy reform debate, and many key provisions of S. 625 
     differ substantially from those in S. 1301, including many 
     details of the means test:
       S. 625 uses a rigid, arbitrary, nondiscretionary 
     mathematical test to define ``abuse''; whether a debtor could 
     repay 25% of $15,000 of unsecured nonpriority debts over 5 
     years versus S. 945, which considers whether a debtor could 
     repay 30% of such debts over 3 years in a chapter 13 plan 
     under the standards used in chapter 13 today. In an effort to 
     impose a standardized and objective means test, S. 625 
     contains loopholes that permit high income debtors to escape 
     the means test by incurring extra secured debt or reducing 
     income. Individualized discretion vested in the hands of 
     those closest to the front--the able bankruptcy judges--will 
     be more effective in identifying abusive cases.
       S. 625 uses rigid IRS collection standards, which have been 
     criticized by Congress in other debates, to determine the 
     allowable expenses of families versus S. 945, which analyzes 
     actual expenses and whether those expenses are reasonable. 
     The IRS collection standards are used by the IRS on a case-
     by-case basis and are not well suited to form the basis of an 
     objective bankruptcy means test, particularly because they do 
     not automatically cover critical expenses such as health 
     insurance and child care. As noted by House Judiciary 
     Committee Chairman Henry Hyde, using the IRS collection 
     standards as part of a bankruptcy means test may produce 
     substantial hardship for financially troubled families. That 
     hardship is unnecessary when there are other more effective 
     ways to determine whether a debtor has the ability to repay 
     debts.
       S. 625 measures debtors' ability to pay over 5 years versus 
     S. 945, which measures ability to pay over 3 years, which is 
     currently the standard duration of chapter 13 repayment 
     plans. Already, two-thirds of individuals who file under 
     chapter 13 do not make it to the end of a 3-year plan. It is 
     unrealistic, and perhaps even a bit misleading, to gauge an 
     individual's ability to pay over 5 years when the likelihood 
     of that happening is not very high.


     Adverse Effect of Consumer Bankruptcy Overhaul on Financially 
         Vulnerable Families, such as Single Parent Households

       Spanning approximately 350 pages, S. 625 clearly is much 
     more than a means test. Many of the provisions in this reform 
     effort, particularly those that enhance creditors' rights and 
     complicate bankruptcy procedures, substantially alter the 
     relief available in both chapter 7 and chapter 13 repayment 
     plans. These changes may or may not do much to prevent abuse 
     of the system, but for the most part they apply to all 
     bankruptcy cases and may produce unintended consequences.
       Last year, numerous Senators, Administration officials, and 
     bankruptcy experts expressed concern that certain elements of 
     bankruptcy reform may increase the hurdles for financially 
     troubled women and children to collect support payments and 
     gain financial stability. Since then, a set of domestic 
     support provisions has been added to the bill. Those 
     provisions may be helpful to state support enforcement 
     agencies and, in some instances, to women and children trying 
     to collect support. However, those provisions are not at all 
     responsive to the concerns originally identified. A close 
     look suggests that these concerns persist:
       First: Women and children as creditors will have to compete 
     with powerful creditors to collect their claims after 
     bankruptcy.
       Current bankruptcy law provides that deadbeat debtor 
     husbands and fathers cannot be relieved of liability for 
     alimony, maintenance, and support, which means that those 
     women and children as creditors are still entitled to collect 
     domestic support from the debtor after he emerges from 
     bankruptcy. Importantly, relatively few other debts are 
     usually excluded from discharge, increasing the likelihood 
     that the support recipients will be able to collect both 
     past-due and ongoing support payments. S. 625 substantially 
     alters that situation and increases the number of large and 
     powerful creditors who can continue to collect their debts 
     after bankruptcy, competing with women and children to 
     collect their debts after bankruptcy. Women and children are 
     likely to lose that competition.
       Following are just a few examples of how S. 625 increases 
     the competition women and children will face:
       Debtors will remain liable for more credit card debts after 
     the bankruptcy process is over. This will be true even for 
     debtors who dedicate every penny to a 5-year chapter 13 
     repayment plan.
       Debtors will be pressured to retain legal liability for 
     more consumer debts by signing reaffirmation agreements, 
     particularly in connection with debts incurred with the 
     charge cards of large retail stores.
       More of the debtor's limited resources will be siphoned off 
     to pay creditors claiming that their debts are secured by the 
     debtor's property, even if that property is nearly worthless.
       Second: Giving ``first priority'' to domestic support 
     obligations does not address the problem.
       Arguing that the bill now favors the claims of women and 
     children, proponents of this reform effort emphasize that the 
     bill gives ``first priority'' to domestic support 
     obligations. In practice, this change in priority is not 
     responsive to the major problems for women and children in 
     this bill. Why is this so?
       Changing the priority in distribution during bankruptcy 
     will make a difference to women and children in less than 1% 
     of the cases, and could actually result in reduced payments 
     in some instances.
       The priority provision does not affect priority or 
     collection rights after the bankruptcy case is over. 
     Collecting after bankruptcy--not during bankruptcy--is often 
     the significant issue for support recipients.
       Third: Substantial enhancements of creditors' rights, 
     without sufficient protections to keep those powers in check, 
     undercut the opportunity for financial rehabilitation for 
     women and children who file for bankruptcy themselves.
       It is estimated that 540,000 women will file bankruptcy 
     alone in 1999. Many of the provisions that harm the interests 
     of women as creditors will hurt women who use the system as 
     debtors, some of whom file after being unable to collect 
     support. S. 625 is replete with provisions that tighten the 
     screws

[[Page 23427]]

     on families who legitimately need debt relief through 
     bankruptcy, and also contains many new roadblocks and 
     cumbersome informational requirements that will substantially 
     increase the cost of accessing the system for the families 
     who are most in need of debt relief and financial 
     rehabilitation.
       As professors of commercial and bankruptcy law, we urge the 
     distinguished members of the United States Senate to enact 
     bankruptcy reform that restores an appropriate balance to the 
     legitimate interests of all debtors and creditors. Bankruptcy 
     law is a very complex system. Great care must be taken when 
     revising that system not to make things worse. We have faith 
     that you can bring about positive change.
       Thank you for your consideration.

  Mr. KENNEDY. I will just read at this time this particular paragraph 
of the letter:

       Last year, numerous Senators, Administration officials, and 
     bankruptcy experts expressed concern that certain elements of 
     bankruptcy reform may increase the hurdles for financially 
     troubled women and children to collect support payments and 
     gain financial stability. Since then, a set of domestic 
     support provisions has been added to the bill. Those 
     provisions may be helpful to state support enforcement 
     agencies and, in some instances, to women and children trying 
     to collect support. However, those provisions are not at all 
     responsive to the concerns originally identified. A close 
     look suggests that these concerns persist:
       Women and children as creditors will have to compete with 
     powerful creditors to collect their claims after bankruptcy.

  There it is: ``Women and children as creditors will have to compete 
with powerful creditors to collect their claims after bankruptcy''--
period.
  Who do you think is going to win? The powerful creditors or the women 
and the children? The women who might be out there trying to collect 
alimony, or the mothers who, as a result of a separation or divorce, 
are trying to get child support, or the creditors who are represented 
by powerful financial interests and a whole battery of lawyers? Who do 
we think is going to win?
  Those who have studied the bankruptcy laws--without being Republican 
or Democrat--have all stated their belief that creditors are going to 
win. As a result, the women and children are going to be put at risk. 
So we are going to hear a great deal about how this legislation 
protects women and children. It does not. It does not. And we will 
welcome the opportunity to engage in that debate as this process moves 
along.
  A second point that is mentioned in this letter--I will again just 
read a portion of it:

       Giving ``first priority'' to domestic support obligations 
     does not address the problem.
       Arguing that the bill now favors the claims--

  This is an additional reference to the point about women and 
children--

       Arguing that the bill now favors the claims of women and 
     children, proponents of this reform effort emphasize that the 
     bill gives ``first priority'' to domestic support 
     obligations. In practice, this change in priority is not 
     responsive to the major problems for women and children in 
     the bill. Why is this so?
       Changing the priority in distribution during bankruptcy 
     will make a difference to women and children in less than 1 
     percent of the cases, and could actually result in reduced 
     payments in some instances.

  Second:

       The priority provision does not affect priority or 
     collection rights after the bankruptcy case is over. 
     Collecting after bankruptcy--not during bankruptcy--is often 
     the significant issue for support recipients.

  Here it is. They know how to work the language. The credit card 
companies know how to work the language to give the facade that they 
are protecting the women and children, but they are not. They are 
putting them at greater risk.
  Why, with all the things that need to be done in this country at this 
time, we are trying to stampede the Senate into legislation that is 
going to put women and children at greater risk when they are facing 
hardships in their lives, is beyond my comprehension in one respect, 
but it is very understandable in another respect; and that is because 
of the same reasons that we are not getting a Patients' Bill of Rights 
up before us, because of the power of the HMOs and the HMO industry 
that are daily putting at risk the well-being and the health of 
American patients all across this country.
  Even though there is a bipartisan majority in the House and in the 
Senate, the Republican leadership is refusing to bring that bill up for 
a vote. At the same time, they are developing what they are calling 
balanced budget legislation to try to give allegedly a restoration of 
some funding to assist some providers because of the cuts that were 
made at the time of the balanced budget amendment a few years ago, 
which took a great deal more out of those providers than ever was 
intended. It is generally agreed that we would restore some of those 
funds. Who has the priority under the Republicans? The HMOs. They want 
to give them the money whether they agree to continue to provide the 
health care or not to our Medicare beneficiaries. They just dropped 
close to a million of them last year, and they are here with their 
hands out to get another payoff.
  Well, we should ask, why have we gotten this legislation? It is quite 
clearly because of the credit card companies that have been willing to 
make those contributions as well. Let the contributions fall where they 
may, whether they include the Democrats or the Republicans. There is no 
question the Republican leadership has put us in the position of 
bringing this proposal up in the final hours of the Congress.
  Proponents also argue that the bill provides relief to small 
businesses which are filing for bankruptcy, but the legislation in many 
ways makes it more difficult for small businesses to reorganize. The 
effect is, more and more small businesses will fail and thousands of 
American workers will lose their jobs. That is the reason the various 
organizations that represent workers are strongly opposed to it. We 
heard from one of our colleagues that this is going to make it a great 
deal easier for small businesses. Why then are organizations that are 
representing these workers coming out so strongly in opposition? They 
understand that the provisions of the small business proposal impose 
more onerous and costly requirements on small businesses than they do 
on big businesses.
  The bill requires that small business debtors comply with a host of 
new bureaucratic filing requirements and periodic reports. Large 
businesses are not subject to these requirements. Senior management of 
small business debtors must attend a variety of meetings at the U.S. 
trustee's discretion. Senior management of large businesses do not. 
Under this bill, small business debtors are subject to an extra layer 
of scrutiny by the U.S. trustee who must assess whether the debtor 
lacks business viability and should be dismissed out of bankruptcy. 
Large business debtors are not. Small business debtors are subject to 
repeated filing restrictions. Large business debtors are not.
  I am not suggesting that large businesses should be subject to all of 
these provisions. I am suggesting, however, that these provisions 
should be reconsidered.
  The PRESIDING OFFICER. The Senator's time has expired.
  Mr. KENNEDY. Are we under a time constraint?
  The PRESIDING OFFICER. Ten minutes.
  Mr. KENNEDY. Mr. President, I ask unanimous consent for 3 more 
minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. KENNEDY. Mr. President, I will have more to say about this. I 
think it is very important to understand that traditionally when we get 
legislation, we ask who are the beneficiaries and who will pay the 
price for the legislation. We balance those various factors.
  Quite frankly, when we look at this legislation, the people who will 
bear the hardship for the fact that there is some abuse in the 
bankruptcy laws--that we could all agree need attention and need to be 
addressed--are the most vulnerable in our society and are paying an 
extremely unfair price. That is absolutely wrong. We are going to have 
a good opportunity to address that in the debate to come.
  I thank the Chair and yield the floor.
  Mr. SESSIONS. Mr. President, I am compelled to respond to some of the 
outlandish allegations that have been made against the bipartisan 
bankruptcy bill that passed this Senate twice with over 90 votes, I 
believe, both times. It is a bill that has been under

[[Page 23428]]

discussion for well over 2 years. I personally negotiated not long ago 
with the White House and Senator Reid the last problem we had with the 
bill. We worked that out to the satisfaction of those who were 
negotiating it. I thought we were well on the way to finally passing 
this bill.
  What we have in this body is a group of Senators who vote for it but, 
when the chips are down, don't help us get it up for the final vote.
  The suggestion that there has been no opportunity for debate is 
certainly wrong. We debated it in committee, extensively in the 
Judiciary Committee, where I am a member. We debated it on the floor 
two separate years and earlier this year in great detail. We received a 
whole host of amendments, and we debated those amendments in detail. We 
voted on those amendments. It has gone to conference. Now we have a 
bill on the floor, and Senators are complaining that they can't now 
offer more amendments. You don't amend a conference report after it has 
been to conference. That is true of every bill that ever goes through 
this body.
  It is shocking to me to hear some of the things that have been said 
about this bill. What this legislation does is say we have to do 
something about this incredible increase in the filing of bankruptcies 
in America. Over a million--it has doubled in 10 or 12 years--is the 
number of people who have been filing bankruptcy. Why is that so? 
Because you can go to your bankruptcy lawyer and if you owe $30,000 and 
you make $30,000 a year, you can file bankruptcy, not pay your debts, 
not pay one dime that you owe--not a dime--and walk away scot-free by 
filing under chapter 7. That is happening every day in this country, 
and it is an absolute abuse. It is wrong.
  The family that does its best every day to pay its debts and tries to 
do right, are they chumps? Are they dumb because they don't run up a 
bunch of debts and not pay their debts and then go down to the 
bankruptcy lawyer and just file bankruptcy, even though they could have 
paid those debts if they tried to do so?
  This bill addresses at its fundamental core the bankruptcy machine 
that is out there being driven by advertising you see on your TVs 
virtually every night all over America until 11 or 12 o'clock. There 
are these ads: Got debt problems? Call old Joe, the bankruptcy lawyer. 
He will take care of you.
  Do you know what they tell them when they get there? They say: First 
of all, Mr. Client, you need to pay me $1,000, $2,000.
  I really don't have that, Mr. Lawyer.
  Don't pay any more debts. Get all your paychecks. Collect all your 
paychecks. Bring the money to me. Keep paying on your credit card. Run 
up your debt, and then we will file bankruptcy for you, and we will 
wipe out all the debts; you won't have to pay them.
  The lawyer gets his money. There are lawyers of whom I am aware 
personally who get paid $1,000 or more and have done 1,000 or more in 1 
year. That is $1 million a year, just routine, running this money 
through the system, basically ripping off people who need to be paid.
  Make no mistake about it, when an individual does not pay what he 
owes and what he could pay, we all pay. Who pays? The one who is honest 
and pays his debts. He ultimately gets stuck with higher interest 
rates. The businesses lose money and can't afford to operate. That is 
what is happening.
  They say: Well, it is health care. If you have severe medical 
problems and you are not able to pay your debts, you ought not to have 
to pay your debts.
  But why should you be able to not pay the hospital, if you can? That 
is the question. If you can pay the bill, shouldn't you pay it? That is 
the question.
  The fundamental part of this bill is, if you are making above median 
income in America, that is adjusted by how many children you have. If 
you have more children, your income level goes up for median income--
the factors included in that. So if you can't pay your debt, you get to 
wipe out all your debts just like today under chapter 7. If your income 
is $100,000 a year and you owe $50,000 and you can easily pay at least 
some of that $50,000, under this law--and you make above median 
income--you can ask the creditors whom who you are not paying to ask 
the judge to put you into chapter 13. The judge may say: Mr. Debtor, 
you owe $50,000. We don't believe you can pay all the debt. You need to 
pay $10,000 of that back, and you will pay it so much a month over 3 
years in chapter 13.
  Chapter 13 is not a disaster. It is not a horrible thing. As a matter 
of fact, in my State, chapter 13 is exceedingly popular. I believe more 
than half of the bankruptcy filings in Alabama are filed under chapter 
13 instead of chapter 7, which just wipes out your debt. With chapter 
13, you go to the judge and say: I have more debts than I can pay. The 
creditors are calling me, and I can't pay all of them at once. The 
judge says: OK, stop. Pay all of your money to the court, and we will 
pay it out to each one of these creditors so much a month. You get to 
have so much to live on for you and your family.
  It works pretty well. We need to do more of this. That is what this 
legislation will do. That is the fundamental principle.
  They say: Well, it doesn't do anything about credit card 
solicitations.
  This isn't a credit card bill. This is a debt bill. This is a 
bankruptcy bill. We have a banking committee that deals with credit 
card legislation. We had votes on credit card legislation on the floor, 
and people have had their say. Some passed, and some didn't. This is 
not a credit card bill. This is a bill to reform a legal system in 
America, the bankruptcy court system, which is a Federal court system 
that I believe is in a disastrous condition.
  We have had this surge of bankruptcy filings. It has become a common 
thing to just up and file for bankruptcy. People used to have a severe 
aversion to ever filing for bankruptcy. Now that is being eroded by the 
advertisements and so forth that they see. There is an abuse going on.
  They say it does not do anything for women and children. I am 
astounded at that. Under this law, alimony and child support will be 
moved up to the No. 1 priority in bankruptcy--even above the lawyers. 
That is probably why we got such an objection. The bankruptcy lawyers 
are the ones stirring this up, in my view.
  That means if a deadbeat dad wants to file bankruptcy and doesn't pay 
his debt, comes in and has a low or moderate salary and doesn't want to 
pay anybody, under the old law his child support was way down behind 
the lawyer fees, bankruptcy fees, and some other things. We moved it up 
to No. 1. The first money that comes into the bankruptcy pot, if there 
is any, comes in there. Normally, that money goes to pay child support, 
which is, I believe, a historic move in favor of children.
  This bill has broad support. It was suggested earlier that small 
business is being hurt by it. Small business favors it. They all favor 
this.
  We are not stampeding this bill. This bill has been delayed 
unconscionably. It should have passed 2 years ago. It should have 
passed last year. It ought to pass this year. We have a veto-proof 
majority in the House and a veto-proof majority in the Senate.
  It helps this economy. It helps bring integrity back into the system. 
It allows individuals to go down there to bankruptcy and represent 
themselves. They don't even have to have a lawyer. It has a lot of 
different things in it that are good. It eliminates a lot of loopholes 
and abuses that everybody agrees need to be fixed.
  I can't understand this. It seems to me there is some sort of effort 
to yell, scream, and just say how horrible it is, and perhaps provide 
some figleaf to encourage the President to veto this bill. I hope he 
does not.
  They say: Well, it has a protection in there for millionaires to have 
money in their houses in Florida and Texas and States that have an 
unlimited homestead exemption.
  That is a problem. I have fought to eliminate that. We were not able 
to do that. The States that have the historic State procedures on this 
fought us tooth and claw. But this bill makes substantial progress 
toward eliminating that view. There is no doubt that the problem with 
homestead is far better in this legislation today than it

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is under current law if we don't do anything about it. A vote against 
this bill is a vote to keep the ineffective, bad current law, and not 
make the improvement this bill makes.
  I believe it is good legislation. Senator Grassley has worked on it 
tenaciously. We have been very cooperative with others who have 
problems. Time and again, it has been fixed to accommodate concerns 
that others would have. I believe it is a fair bill. I believe it is a 
good bill. I believe it is time for this country to improve what is 
going on in bankruptcy all over America today. And most bankrupts are 
entitled to it and need it.
  But there are substantial numbers with high incomes who could pay 
large portions of that debt, if they wanted to. But once they talked to 
those lawyers who tell them they don't have to, they file under chapter 
7 and wipe out much of their debts, and they go on leaving someone else 
to carry the burden.
  I thank the Chair for the time. I yield the floor.
  Mr. GRASSLEY. Mr. President, I'm glad we're getting around to the 
bankruptcy bill. I think we've got a good product. This conference 
report is basically the Senate-passed bankruptcy bill with certain 
minimal changes made to accommodate the House of Representatives. The 
means-test retains the essential flexibility that we passed in the 
Senate. The new consumer protections sponsored by Senator Reed of Rhode 
Island relating to reaffirmations is in this report. The credit card 
disclosures sponsored by Senator Torricelli are also in this final 
conference report. We also maintained Senator Leahy's special 
protections for victims of domestic violence and Senator Feingold's 
special protections for expenses associated with caring for non-
dependent family members.
  So, Mr. President, on the consumer bankruptcy side, we maintained the 
Senate's position.
  On the business side of things, we kept Senator Kennedy's changes to 
the small business provisions. We have kept the international trade 
section intact. The financial netting provisions were updated to 
reflect technical changes suggested by the House. The new netting 
provisions, however, have universal support.
  Finally, Mr. President, I want to make one point crystal clear. 
Because of objections from the other side of the aisle, we have been 
delayed in getting this conference report up. Because of this delay and 
these kind of underhanded tactics, Congress has allowed chapter 12 to 
just expire. Chapter 12 gives family farmers a real chance to 
reorganize their affairs. But that's gone now. This bill restores 
chapter 12. This conference report also expands the eligibility for 
chapter 12 so more farmers will have access to these special 
protections. Also, Mr. President, this conference report gives farmers 
in chapter 12 much-needed capital gains tax relief.
  We hear a lot about helping farmers around here. This bill gives us a 
chance to do a lot of good. We should get on with passing this bill 
right away and stop playing political games with our farmers.
  The PRESIDING OFFICER. The Senator from New Jersey is recognized.

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