[Congressional Record (Bound Edition), Volume 147 (2001), Part 1]
[House]
[Pages 1058-1060]
[From the U.S. Government Publishing Office, www.gpo.gov]



    BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2001

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Pennsylvania (Mr. Gekas) is recognized for 5 minutes.
  Mr. GEKAS. Mr. Speaker, the purpose of the special order to which I 
am

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attached today is to announce the introduction of the new bankruptcy 
reform act that we hope will be enacted into law during this current 
session and swiftly to arrive at the President's desk for signature. We 
are naming the new effort the Bankruptcy Abuse Prevention and Consumer 
Protection Act of 2001, and we have over 50 cosponsors already even at 
the early stages of this session to help us shepherd through much-
needed bankruptcy reform.
  Mr. Speaker, my colleagues will recall that in the waning days of the 
last session, the House by voice vote and the Senate by an overwhelming 
vote of 70 to 28 approved the bankruptcy bill of the last term only to 
have it vetoed by President Clinton in the last days of the 
congressional session during the year 2000. So we have to start all 
over again.
  In starting all over again, Mr. Speaker, we are adopting as the 
starting vehicle about 99 and 44/100 percent of the bill that was 
approved in the last days of the last session by both the House and the 
Senate, which was of course veto-proof. In the previous House vote, 
there were 315 votes, well over the veto-proof level, and in the Senate 
it was 70 over something which also allows for veto override. Happily, 
we may not require a veto-proof majority in this current session 
because we believe that bankruptcy reform could be part and parcel of 
President Bush's overall plan to meet the unstable economy head on to 
prevent some of the worst consequences of an economic downturn. It fits 
in perfectly.
  Two main themes are part of the new bankruptcy reform effort to which 
I allude. These same two themes guided our actions from the very 
beginning. The first theme, and the most important one, is that it is 
tailored to make certain that anyone who is so overwhelmed by debt, so 
swamped by the inability to pay one's obligations that that individual 
after a good close look at his circumstances would be entitled to a 
fresh start, to be discharged in bankruptcy, to be free of the debts 
that so overwhelmed him. That is a salient feature of this bankruptcy 
reform bill and the ones that we were able to get these favorable votes 
to accomplish in the last two sessions.
  So we never lose sight of, nor will we ever lose sight of, the real 
purpose of bankruptcy reform or any bankruptcy legislation to allow an 
American citizen the right to gain a fresh start after finding himself 
incapable of meeting his obligations. But the other tandem theme that 
is also part of what we have been doing for the last 3 years, and which 
will be an important feature of the new bill, will be that certain 
provisions will be put into place which will make certain that those 
people who have an ability to repay some of their debts will be 
compelled to do so, so that instead of a Chapter 7 filing which will 
give that automatic almost-fresh start, we will be able to shepherd 
some of the debtors into Chapter 13 and propose a plan and adopt a plan 
by which they could over a period of time repay some of the debt out of 
their then-current earnings.
  This is a well-balanced concept which we are presenting to the 
American people and to the Congress so that we can help join in the 
fight to make sure that our economy remains stable throughout the 
ensuing several years and into the next decade.
  Some of the contentious features that we found occurred on the floor 
of the House and in committee throughout the last 3 years have been so 
well settled now and are part and parcel of the new proposal that we 
believe that only a modicum of new hearings will be needed either in 
the Senate or in the House for final resolution of the final wording 
that will go into the bankruptcy reform bill to which we refer. We had 
some 13 hearings within a year to determine what was out there in the 
business world and in the consumer world that was important enough for 
us to note and to provide language to accommodate.
  Mr. Speaker, I am asking for cosponsorship.
  I am proud to introduce H.R. 333, the Bankruptcy Abuse Prevention and 
Consumer Protection Act of 2001, today together with original 
cosponsors from both sides of the aisle.
  This bill is identical to the conference report that accompanied H.R. 
2415, the Gekas-Grassley Bankruptcy Reform Act of 2000, which passed 
the House by voice vote last October and passed the Senate with a veto-
proof vote of 70 to 28 less than 2 months ago. The only revisions 
consist of a title change and the deletion of a provision that has 
already become law.
  This bill is a further perfection of its predecessor, H.R. 833, the 
Bankruptcy Reform Act of 1999, which I introduced on February 24, 1999. 
With more than 100 cosponsors, H.R. 833 had overwhelming bipartisan 
support in the House as further evidenced by a vote on final passage of 
313 to 108.
  The bill I am introducing today consists of a comprehensive package 
of reforms pertaining to consumer and business bankruptcy law. It also 
includes provisions regarding the treatment of tax claims, enhanced 
data collection, and international insolvencies.
  This bill responds to several developments affecting bankruptcy law 
and practice. Based on data released by the Administrative Office of 
the United States Courts, bankruptcy filings have increased 
exponentially. Between 1994 and 1998, the number of filed bankruptcy 
cases grew by more than 72 percent. In 1998, bankruptcy filings, 
according to the Administrative Office, reached an ``all-time high'' of 
more than 1.4 million cases. Paradoxically, however, this dramatic 
increase in bankruptcy filing rates occurred during a period when the 
economy continued to be robust, with relatively low unemployment and 
high consumer confidence.
  Coupled with this development was the release of a study that 
estimated financial losses in 1997 resulting from these bankruptcy 
filings exceeded $44 billion, a loss equal to more than $400 per 
household. This study projected that even if the growth rate in 
personal bankruptcies slowed to only 15 percent over the next 3 years, 
the American economy would have to absorb a cumulative cost of more 
than $220 billion.
  The Judiciary Committee began its consideration of comprehensive 
bankruptcy reform early in the 105th Congress. On April 16, 1997, the 
Subcommittee on Commercial and Administrative Law conducted a hearing 
on the operation of the bankruptcy system that was combined with a 
status report from the National Bankruptcy Review Commission. This was 
the first of 13 hearings that the subcommittee held on the subject of 
bankruptcy reform over the ensuring 2 years. Eight of these hearings 
were devoted solely to consideration of H.R. 833 and its predecessor, 
H.R. 3150, the Bankruptcy Reform Act of 1998. Over the course of these 
hearings, more than 120 witnesses, representing nearly every major 
constituency in the bankruptcy community, testified. With regard to 
H.R. 833 alone, testimony was received from 69 witnesses, representing 
23 organizations, with additional material submitted by other 
individuals and groups.
  The heart of the bill's consumer bankruptcy reforms is the 
implementation of a mechanism to ensure that consumer debtors repay 
their creditors the maximum that they can afford. The needs-based 
formula articulates objective criteria so that debtors and their 
counsel can self-evaluate their eligibility for relief under chapter 7 
(a form of bankruptcy relief where the debtor generally receives a 
discharge of his or her personal liability for most unsecured debts). 
These reforms are not intended to affect consumer debtors lacking the 
ability to repay their debts and deserving of an expeditious fresh 
start.
  The bill's debtor protections include significant new credit card 
disclosure specifications and the requirement that billing statements 
and other related materials contain explanatory statements with regard 
to introductory interest rates and minimum payments. These additional 
disclosures will give debtors important information to enable them to 
better manage their financial affairs so that they can avoid fiscal 
disaster.
  Important reforms intended to help debtors understand their rights 
and obligations with respect to reaffirmation agreements are also 
included in the legislation. To enforce these protections, the bill 
requires the Attorney General to designate a U.S. attorney for each 
judicial district and a FBI agent for each field office to have primary 
responsibility regarding abusive reaffirmation practices, among other 
responsibilities.
  In addition, the legislation substantially expands a debtor's ability 
to exempt certain tax-qualified retirement accounts and pensions. It 
also creates a new provision that allows a consumer debtor to exempt 
certain education IRA and state tuition plans for his or her child's 
postsecondary education from the claims of creditors.
  Most importantly, the legislation's credit counseling provisions will 
give consumers in financial distress an opportunity to learn about

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the consequences of bankruptcy--which can be very devastating to their 
credit rating, among other matters--and about alternatives to 
bankruptcy, as well as how to manage their finances, so that they can 
avoid future financial difficulties.
  Other debtor protections include heightened requirements for those 
professionals and others who assist consumer debtors in connection with 
their bankruptcy cases, expanded notice requirements for consumers with 
regard to alternatives to bankruptcy relief, and the institution of a 
pilot program to study the effectiveness of consumer financial 
education for debtors. The legislation also addresses a problem under 
the current law with respect to those individuals who are precluded 
from obtaining bankruptcy relief because they simply cannot afford to 
pay the requisite bankruptcy filing fees and related charges. Under the 
legislation, these fees and charges may be waived in appropriate cases.
  With regard to business bankruptcy reform, the bill addresses the 
special problems that small business cases present by instituting a 
variety of performance criteria and enforcement mechanisms to identify 
and weed out those debtors who are unable to reorganize. It also 
requires more active supervision of these cases by United States 
Trustees and the bankruptcy courts. The bill includes provisions 
dealing with business bankruptcy cases, in general, and family farmer 
bankruptcies, in particular. It also clarifies the treatment of certain 
financial contracts under the banking laws as well as under the 
Bankruptcy Code. The bill responds to the special needs of family 
farmers by making chapter 12 of the Bankruptcy Code--a form of 
bankruptcy relief available only to eligible family farmers--permanent.
  The small business and single asset real estate provisions of the 
bill are largely derived from consensus recommendations of the National 
Bankruptcy Review Commission. Many of these recommendations received 
broad support from those in the bankruptcy community, including various 
bankruptcy judges, creditor groups, and the Executive Office for United 
States Trustees.
  The bill, in addition, contains several provisions having general 
impact with respect to bankruptcy law and practice. These include a 
provision permitting certain appeals from final bankruptcy court 
decisions to be heard directly by the court of appeals for the 
appropriate circuit. Another general provision of the bill requires the 
Executive Office for United States Trustees to compile various 
statistics regarding chapter 7, 11, and 13 cases, to make these data 
available to the public, and to report annually to Congress on the data 
collected.
  It is also important to note that the legislation includes a plethora 
of provisions intended to protect the interests of women and children. 
For example, the legislation--
  Gives domestic support obligations the highest entitlement to payment 
in bankruptcy cases where there are assets available to pay the claims 
of creditors. Current law only accords a seventh level payment priority 
to these claims.
  Establishes a uniform and expanded definition of the term ``domestic 
support obligation'' to better protect the rights of women and children 
with support claims and to reduce litigation.
  Prevents deadbeat parents from enjoying the benefits of bankruptcy 
relief without having first satisfied their spousal and child support 
obligations.
  Ensures that bankruptcy cannot be used by deadbeat parents to 
interfere with the enforcement efforts of federal, state and local 
authorities with respect to overdue child support obligations.
  Ensures that bankruptcy cannot be used by deadbeat parents to 
interfere with the enforcement efforts of federal, state and local 
authorities with respect to overdue child support obligations.
  Does not allow deadbeat parents to discharge other obligations 
relating to divorce or separation agreements.
  Requries those who are responsible for the administration of 
bankruptcy cases to provide important information and notices to their 
holders of spousal or child support claims as well as to state child 
support agencies.
  Many professionals and organizations responsible for federal child 
support enforcement programs such as the National District Attorneys 
Association, the National Association of Attorneys General, and the 
National Child Support Enforcement Association (which represents more 
than 60,000 child support professionals across America) have 
enthusiastically expressed their support for these important reforms.
  I urge my colleagues to support H.R. 333, the Bankruptcy Abuse 
Prevention and Consumer Protection Act of 2001.

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