[Congressional Record (Bound Edition), Volume 147 (2001), Part 3]
[Senate]
[Pages 3374-3384]
[From the U.S. Government Publishing Office, www.gpo.gov]



                     BANKRUPTCY REFORM ACT OF 2001

  The PRESIDING OFFICER. Under the previous order, the Senate will now 
resume consideration of S. 420, which the clerk will report.
  The assistant legislative clerk read as follows:

       A bill (S. 420) to amend title 11, United States Code, and 
     for other purposes.

  Pending:

       Schumer amendment No. 25, to ensure that the bankruptcy 
     code is not used to exacerbate the effects of certain illegal 
     predatory lending practices.
       Feinstein amendment No. 27, to place a $2,500 cap on any 
     credit card issued to a minor, unless the minor submits an 
     application with the signature of his parents or guardian 
     indicating joint liability for debt or the minor submits 
     financial information indicating an independent means or an 
     ability to repay the debt that the card accrues.
       Leahy amendment No. 20, to resolve an ambiguity relating to 
     the definition of current monthly income.
       Conrad modified amendment No. 29, to establish an off-
     budget lockbox to strengthen Social Security and Medicare.
       Sessions amendment No. 32, to establish a procedure to 
     safeguard the surpluses of the Social Security and Medicare 
     hospital insurance trust funds.

  Mr. WELLSTONE. Madam President, I will summarize these amendments 
before we get into whatever debate might take place. I say to the 
Senator from Iowa, as he looks over the amendments, one of the 
amendments I am hoping will meet with his approval. Let me explain them 
very quickly and then go into the payday loan amendment.
  The first amendment is protecting the legal rights of retirees of 
bankrupt companies. This amendment simply clarifies companies in 
bankruptcy must fulfill their legal obligations as plan administrators 
and plan sponsors of employee and retirement benefit plans. I think 
Senator Sessions has some interest in this amendment, as well.
  Companies occasionally stop administering benefit programs during 
bankruptcy. This means retiree benefit plans are left without anybody 
in charge, which results in the failure to pay out benefits to workers 
such as reimbursements for covered health care costs. This often occurs 
toward the end of bankruptcy, either a 7 or 11, when there is not much 
left of the business. The company's management and bankruptcy trustees 
are trying to wind up the business, and the benefit programs quite 
often end up falling between the cracks.
  I have a specific situation in Minnesota but I know Senator Sessions 
and others can talk about this in their own States. In Minnesota, LTV 
Corporation shut down and 1,300 people are out of work. People have no 
jobs. They are out of work. Those out of work, the younger workers, are 
terrified they will lose their health care coverage in 6 months. Those 
who worked longer will lose coverage within a year. But the retirees 
are terrified they will not have their health care benefits any longer 
after the bankruptcy proceeding. The persons ordinarily responsible for 
the management of the benefits programs may have been laid off and 
those who remained refuse to administer the plan. This can happen.
  Or it may be a ``lights out bankruptcy'' where the power is shut off, 
the doors are locked, and all functions of the company cease. However, 
even in these cases, the firm is required to either terminate any 
benefit plans or to continue to administer them.
  This is what our amendment does. We don't impose any new burdens on 
the companies. The companies are already required by law to continue to 
administer the plans that have not been terminated or to administer 
plans that are part of the trust. This amendment simply results in 
companies fulfilling their current legal obligations without any 
expensive litigation on the part of the workers. We are just trying to 
codify this into law.
  Let me talk about how this helps LTV workers and retirees. Health 
care and other benefits for retirees at LTV are guaranteed by a trust 
fund known as the Voluntary Employee Benefit Association Trust Fund, 
also referred to as the VEBA trust funds. The trust cannot be wiped out 
even if LTV is liquidated in bankruptcy, but LTV must administer the 
VEBA for workers to get any of the benefits and guarantees. We have no 
reason to believe as of now that LTV will not fulfill its obligation to 
administer the VEBA. This amendment simply provides added assurance in 
case the worst happens. So it is an important amendment for a lot of 
retirees who are worried that somehow through the bankruptcy processes 
companies are not going to provide them with their retiree benefits.
  I will give a real-world example of the worst case scenario. In 
August of 2000, Gulf States Steel in Alabama locked its doors after 
failing to conclude a chapter 11 reorganization. Over 1,000 
steelworkers immediately, and with little warning, lost their jobs. The 
union had ordered a VEBA trust as part of the workers' contract. That 
trust, made up of employee contributions, is intended to cover the 
costs of retiree health plans under just this scenario.
  Gulf States still refuse to administer the trust so the assets and 
income are not being used to cover the workers' health care costs.
  Since September of last year, Gulf States retirees have effectively 
had no health care coverage because they cannot access the resources of 
their own VEBA.
  Absent the changes made in the bankruptcy law by this amendment, the 
union will be forced to file an expensive and lengthy lawsuit to force 
the company to comply with the law. The lawsuit could take months--for 
all I know, it could take years --to resolve and will do little to 
address the immediate needs of the retirees. Again, as the several 
examples I have given indicate, I think this is almost a fix.
  I am hopeful there will be support for this amendment. It is 
certainly the right thing to do. It is one of several amendments I want 
to lay down.
  The second amendment is the payday loan amendment. I assume since we 
are talking about this today that there may be some time to talk about 
it. This is an amendment to protect the legal rights of retirees of 
bankrupt companies which I hope fits in with my colleague's definition 
of reform.
  The second amendment I propose is an amendment that almost passed 
last Congress. I hope it will pass this time. It will curb a form of 
predatory lending which targets low- and moderate-income families.
  I apologize for having to read. Usually I don't do that. But I am not 
a lawyer. I find some of these proposals and some of the language of 
bankruptcy to be technical and not all that easy.
  This amendment would prevent claims in bankruptcy on high-cost credit 
transactions in which the annual interest rate exceeds 100 percent.

[[Page 3375]]

  I know my colleague from Iowa doesn't much like the payday loan 
amendment. I know that. I have heard him speak about it. That is what I 
am talking about, these payday loans and car title pawns.
  Payday loans are intended to extend small amounts of credit--
typically $100-500--for an extremely short period of time--usually a 
week to two weeks. The loans are marketed as giving the borrower ``a 
little extra till payday,'' hence the term payday loan. The loans work 
like this: the borrower writes a check for the loan amount plus a fee. 
The lender agrees to hold the check until an agreed upon date and give 
the borrower the cash. On the due date, the lender either cashes the 
check or allows the borrower to extend the loan by writing a new check 
for the loan amount plus an additional fee. But calculated on an annual 
basis, these fees are exorbitant. For example, a $15 fee on a two week 
loan of $100 is an annual interest rate of 391 percent. Rates as high 
as 2000 percent per year have been reported on these loans.
  I am just saying I don't think that crowd ought to have claims under 
bankruptcy that are resolved for these high-cost transactions with the 
kind of exorbitant and outrageous interest they can charge.
  Car title pawns are one month loans secured by the title to vehicles 
owned by the borrower. Typical title pawns cost 300 percent interest. 
Consumers who miss payments have their cars repossessed. In some 
States, consumers do not receive the proceeds from the sale of 
repossessed vehicles--even if the value of the car far exceeds the 
amount of the loan! For example, a borrower might put up their $2000 
car as collateral for a $100 car title loan--at an outrageous interest 
rate--and if the borrower defaults, the lender can take the car, sell 
it, and keep the full $2,000 without returning the excess value back to 
the borrower. Such schemes are almost more lucrative if the borrower 
does default! Often, the borrower is required to leave a set of keys to 
the car with the lender, and if the borrower is even one day late with 
a payment he might look out the window and find the car gone.
  I don't think these kind of lenders ought to be given special 
treatment. Nobody needs to charge this type of interest rate for a 
loan. Indeed, this industry is grossly profitable as a result. An 
investors report by Stephens Incorporated on the industry stated that 
an operator of a payday lending establishment could expect a return on 
investment of 48 percent in nine months to a year and could expect 
profit margins to be in excess of 30 percent! As a result, the payday 
loan industry has exploded in growth in states with favorable 
regulatory systems and many more states have changed their laws to 
allow this type of lending. California has seen 1,600 payday loan store 
fronts spring up since the legislature made the business legal in 1997. 
Wisconsin went from 17 store fronts in 1995 to 183 in early 1999. 
Stephens Inc. reported that there were 6,000 storefronts making payday 
loans in 1999 across the country, but estimates the potential 
``mature'' market as being 24,000 stores nationwide generating $6 
billion in fees. With these kinds of profits, only your conscience will 
keep you out of this business.
  I say to my colleague, these sleazy debt merchants expanding their 
tentacles into our cities and towns is the mirror image of the retreat 
of mainstream financial institutions from these same communities.
  Poor people are forced to get their loans from these loan sharks. As 
banks merge and close branches, their former customers--often unable to 
access the new, consolidated locations--have little choice but to deal 
with the seamy underbelly of the financial services industry.
  That is what I am talking about. And the Stephens report notes, that 
even with the market saturated, lenders need not expect losses in 
profits which is further evidence that the payday lender truly has a 
captive customer base who has little market power to drive prices down.
  We are talking about the exploitation of vulnerable citizens and poor 
people who are charged outrageous interest rates, and we should do 
something about it.
  This was a close vote last time. I expect to win the vote on this 
amendment this time.
  The worst part is that many borrowers are unable to pay the loan when 
it comes due. They then extend the loan, for another fee and then 
extend it again. Often such borrowers may end up carrying several 
payday loans and rolling them over from week to week as the fees 
skyrocket. Additionally, there is a perverse incentive for the lender 
to encourage the borrower to defer payment on the loan, because of the 
additional fee that the lender can charge for deferring the loan for 
another week or two weeks. It is fine for these unscrupulous loan 
sharks to extend the loan. According to an analysis by brokerage firm 
Piper Jaffrey as reported in the Washington Post, ``established 
customers'' of one payday lender engage in 11 transactions per year and 
could end up paying $165 to $330 for a $100 loan.
  The following from the June 18, 1999 New York Times is typical of the 
horror stories associated with payday lending, quote:

       Shari Harris who earns around $25,000 a year as an 
     information security analyst, was managing money well enough 
     until the father of her two children, 10 and 4, stopped 
     paying $1,200 in child support. ``And then,'' Ms. Harris 
     said, ``I learned about the payday loan places.'' She 
     qualified immediately for a two-week $150 loan at Check Into 
     Cash, handing it a check for $183 to include the $33 fee. ``I 
     started maneuvering my way around until I was with seven of 
     them,'' she said. In six months, she owed $1,900 and was 
     paying fees at a rate of $6,000 a year. ``That's the sickness 
     of it,'' Ms. Harris said. ``I was in a hole worse than when I 
     started. I had to figure a way to get out of it.''

  Madam President, I could go on and on. I think my colleagues know 
what this is about. Let me just simply say, there is no question that 
these high-interest-rate loans take advantage of low- and moderate-
income working people. On the face of it, paying 300 percent or 500 
percent or 800 percent for a $100 loan or $200 loan is unconscionable, 
but that is exactly the issue. These folks may not always have a 
choice.
  Often borrowers turn to payday lenders and car title pawns because 
they cannot get credit any other place. So these borrowers are a 
captive audience, unable to shop around to seek the best rates, are 
uninformed about their choices, and unprotected from coercive 
collection practices. There is no way the borrower can win. At best 
they are robbed by high interest rates, and at worst their lives are 
ruined by a $100 loan which spirals out of control.
  These loans, I say to my colleague from Iowa, and others, are 
patently abusive. They should not be protected by the bankruptcy 
system. And because they are so expensive, they should be completely 
dischargeable in bankruptcy so debtors can get a true fresh start and 
so more responsible lenders' claims are not ``crowded out'' by these 
shifty operators.
  Why should unscrupulous lenders have equal standing in bankruptcy 
court with a community banker or a credit union that tries to do right 
by their customers? Lenders should not be able to take advantage of 
their customers' vulnerability through harassment and coercion.
  My amendment simply says, if you charge over 100 percent annual 
interest on a loan, and the borrower goes bankrupt, you cannot make a 
claim on that loan or the fees from that loan. In other words, the 
borrower's slate is wiped clean of your usurious loan, and he or she 
gets a fresh start. Additionally, such lenders will be penalized if 
they try to collect on their loan using coercive tactics.
  I say to Senators, I am going to repeat this one more time today. And 
I assume tomorrow, before the vote, I will have a chance to summarize.
  The amendment says, if you charge over 100 percent annual interest on 
a loan, and the borrower goes bankrupt, you cannot make a claim on that 
loan or the fees from that loan. These borrowers are going to be wiped 
clean of the lender's usurious loan, and they get a fresh start. 
Additionally, what this amendment says is that these lenders are going 
to be penalized if they try to collect by using coercive practices.

[[Page 3376]]

  I do not know how anybody can vote against this amendment. But that 
has happened to me before on the floor of the Senate. I have said that. 
Amendments do not always get adopted. This amendment should be adopted.
  This amendment is a commonsense solution to the problem I have 
described. It allows the Senate to send a message to loan sharks. We 
say this to these loan sharks: If you charge an outrageous interest 
rate, if you profit from the misery and misfortune of others, if you 
stack the deck against the customers so they become virtual slaves to 
their indebtedness, you can get no protection in bankruptcy court for 
your claims.
  I say to my colleagues on the other side of the aisle, and, as I have 
found out, Democrats, you should support this amendment. If a lender 
wants to make these kinds of loans, under my amendment, the lender can 
do it. But if he wants to be able to file claims in bankruptcy, he or 
she could charge no more than 100 percent interest. I do not believe 
any of my colleagues would come to the floor to claim that 100 percent 
interest is an unreasonable ceiling. This amendment is in the spirit of 
reducing bankruptcies. I believe it will significantly improve the 
bill, and I urge its adoption.
  I have just one other amendment to discuss.


                            Amendment No. 35

  Mr. WELLSTONE. Madam President, I have three amendments at the desk. 
I ask unanimous consent, they be reported separately.
  The PRESIDING OFFICER. Without objection, it is so ordered. The 
pending amendment is set aside, and the clerk will report the 
amendments.
  The assistant legislative clerk read as follows:

       The Senator from Minnesota [Mr. Wellstone] proposes an 
     amendment numbered 35.

  Mr. WELLSTONE. I ask unanimous consent reading of the amendment be 
dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

      (Purpose: To clarify the duties of a debtor who is the plan 
               administrator of an employee benefit plan)

       At the appropriate place, insert the following:

     SEC. __. DUTIES WITH RESPECT TO A DEBTOR WHO IS A PLAN 
                   ADMINISTRATOR OF AN EMPLOYEE BENEFIT PLAN.

       (a) In General.--Section 521(a) of title 11, United States 
     Code, as so designated by section 106(d) of this Act, is 
     amended--
       (1) in paragraph (4), by striking ``and'' at the end;
       (2) in paragraph (5), by striking the period at the end and 
     inserting ``; and''; and
       (3) by adding at the end the following:
       ``(6) unless a trustee is serving in the case, if at the 
     time of filing, the debtor, served as the administrator (as 
     defined in section 3 of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1002)) of an employee benefit 
     plan, continue to perform the obligations required of the 
     administrator.''.
       (b) Duties of Trustees.--Section 704(a) of title 11, United 
     States Code, as so designated and otherwise amended by this 
     Act, is amended--
       (1) in paragraph (10), by striking ``and'' at the end;
       (2) in paragraph (11), by striking the period at the end 
     and inserting ``; and''; and
       (3) by adding at the end the following:
       ``(12) where, at the time of the time of the commencement 
     of the case, the debtor served as the administrator (as 
     defined in section 3 of the Employee Retirement Income 
     Security Act of 1974 (29 U.S.C. 1002)) of an employee benefit 
     plan, continue to perform the obligations required of the 
     administrator;''.
       (c) Conforming Amendment.--Section 1106(a) of title 11, 
     United States Code, is amended by striking paragraph (1) and 
     inserting the following:
       ``(1) perform the duties of the trustee, as specified in 
     paragraphs (2), (5), (7), (8), (9), (10), (11), and (12) of 
     section 704;''.
       Amend the table of contents accordingly.


                            Amendment No. 36

  The assistant legislative clerk read as follows:

       The Senator from Minnesota [Mr. Wellstone] proposes an 
     amendment numbered 36.

  Mr. WELLSTONE. I ask unanimous consent reading of the amendment be 
dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

    (Purpose: To disallow certain claims and prohibit coercive debt 
                         collection practices)

       At the end of subtitle A of title II, add the following:

     SEC. 204. DISALLOWANCE OF CERTAIN CLAIMS; PROHIBITION OF 
                   COERCIVE DEBT COLLECTION PRACTICES.

       (a) In General.--Section 502(b) of title 11, United States 
     Code, is amended--
       (1) in paragraph (8), by striking ``or'' at the end;
       (2) in paragraph (9), by striking the period at the end and 
     inserting ``; or''; and
       (3) by adding at the end of the following:
       ``(10) such claim arises from a transaction--
       ``(A) that is--
       ``(i) a consumer credit transaction;
       ``(ii) a transaction, for a fee--

       ``(I) in which the deposit of a personal check is deferred; 
     or
       ``(II) that consists of a credit and a right to a future 
     debit to a personal deposit account; or

       ``(iii) a transaction secured by a motor vehicle or the 
     title to a motor vehicle; and
       ``(B) in which the annual percentage rate (as determined in 
     accordance with section 107 of the Truth in Lending Act) 
     exceeds 100 percent.''.
       (b) Unfair Debt Collection Practices.--
       (1) In general.--Section 808 of the Fair Debt Collection 
     Practices Act (15 U.S.C. 1692f) is amended--
       (A) in the first sentence, by striking ``A debt collector'' 
     and inserting the following:
       ``(a) In General.--A debt collector''; and
       (B) by adding at the end the following:
       ``(b) Coercive Debt Collection Practices.--
       ``(1) In general.--It shall be unlawful for any person 
     (including a debt collector or a creditor) who, for a fee, 
     defers deposit of a personal check or who makes a loan in 
     exchange for a personal check or electronic access to a 
     personal deposit account--
       ``(A) to threaten to use or use the criminal justice 
     process to collect on the personal check or on the loan;
       ``(B) to threaten to use or use any process to seek a civil 
     penalty if the personal check is returned for insufficient 
     funds; or
       ``(C) to threaten to use or use any civil process to 
     collect on the personal check or the loan that is not 
     generally available to creditors to collect on loans in 
     default.
       ``(2) Civil liability.--Any person who violates this 
     section shall be liable to the same extent and in the same 
     manner as a debt collector is liable under section 813 for 
     failure to comply with a provision of this title.''.
       (2) Conforming amendment.--Section 803(6) of the Fair Debt 
     Collection Practices Act (15 U.S.C. 1692a(6)) is amended by 
     striking ``808(6)'' and inserting ``808(a)(6)''.
       On page 253, line 15, insert ``as amended by this Act,'' 
     after ``Code,''.
       On page 253, line 16, strike ``period'' and insert 
     ``semicolon''.
       Amend the table of contents accordingly.


                            Amendment No. 37

  The assistant legislative clerk read as follows:

       The Senator from Minnesota [Mr. Wellstone] proposes an 
     amendment numbered 37.

  Mr. WELLSTONE. I ask unanimous consent reading of the amendment be 
dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

(Purpose: To provide that imports of semifinished steel slabs shall be 
 considered to be articles like or directly competitive with taconite 
pellets for purposes of determining the eligibility of certain workers 
      for trade adjustment assistance under the Trade Act of 1974)

       At the appropriate place, insert the following:

     SEC. __. DETERMINATION OF ELIGIBILITY FOR TRADE ADJUSTMENT 
                   ASSISTANCE IN CASES INVOLVING TACONITE PELLETS.

       For purposes of determining, under section 222 or 250 of 
     the Trade Act of 1974 (19 U.S.C. 2272 and 2331), the 
     eligibility of a group of workers for adjustment assistance 
     under chapter 2 of title II of the Trade Act of 1974, 
     increased imports of semifinished steel slabs shall be 
     considered to be articles like or directly competitive with 
     taconite pellets.

  Mr. WELLSTONE. Madam President, again, I say to my friend from Iowa, 
there are three amendments I have on the floor. I assume we will have 
debate about payday loans. I say to my colleague from Iowa--I know what 
he believes--I do not believe these loan sharks should get the same 
protection under this bankruptcy bill, and I am hoping to get his 
support.
  The first amendment that I talked about earlier, which clarifies that 
the companies in bankruptcy must fulfill their legal obligations as 
plan administrators and plan sponsors, is an amendment that we may or 
may not have to debate. I am hoping to get full support for it.
  The third amendment I have offered is an amendment--and I say to my 
colleagues, I think Senator Dayton will

[[Page 3377]]

either be down here later today or tomorrow to speak about these 
amendments, both on the protection of retirees and also this trade 
adjustment assistance amendment to the bankruptcy bill.
  Madam President, this is a hugely important amendment. Both Senators 
from Michigan are cosponsors of the bill, and they may want to speak on 
this amendment. Again, I say to my colleague from Iowa, it may very 
well be that Senator Baucus may come down, and we may have a colloquy 
on this and talk about other ways of trying to accomplish the same 
goal, but I offer the amendment today as a basis for the discussion 
that we are going to have.
  This amendment goes to why all too many people find themselves in 
bankruptcy. We have a situation where many taconite workers in 
Michigan, and certainly in northeast Minnesota, have now lost their 
jobs, and some are losing their jobs. The problem is, when it comes to 
trade adjustment assistance, which is a lifeline program, where these 
workers, whether they are in their 30s or 40s or 50s, are provided with 
some financial help, be it income, be it being able to go back to 
school, be it money for relocation--we do not know yet, we are going to 
be talking to the Secretary of Labor on Wednesday about this--but we 
are very concerned that the taconite workers are not included.
  In other words, the flaw to trade policy right now, which affects 
trade adjustment assistance, is that these taconite workers are not 
viewed as being in competition with slab steel or semifinished steel 
that comes to the market. We have had an import surge of slab steel and 
semifinished steel. And when it comes into this country, with this 
import surge, all of the trade legislation will say to steel workers: 
You will be eligible for trade adjustment assistance when you are 
competing with foreign steel and, for whatever reason, there is an 
import surge. But in this highly integrated industry, the shame of it 
and the flaw to this is that taconite workers are not covered.
  The reason I talk about this as an amendment to the bankruptcy bill 
is, look, if you lose your job--next to medical bills, the other two 
reasons most people file for bankruptcy is loss of job or divorce. In 
the iron range in Minnesota there is a tremendous amount of economic 
pain. Senator Dayton and I are in a rush to try to get as much help to 
these workers as possible, just as any Senator, Democrat or Republican, 
would be doing the same for people in their State.
  I have introduced this amendment. There may come a time when I will 
have a discussion with Senator Baucus as to other ways we can approach 
this. There is a meeting with Secretary Chao on Wednesday. Senator 
Dayton is very engaged in this as well. We are doing it together. This 
may be an amendment on which we may not have an up-or-down vote because 
we might be able to move it forward with some other way of getting at 
it.
  It is a huge problem. These workers are out of work, and they are not 
eligible for the trade adjustment assistance. The same import surge 
that is affecting them affects other workers. We are just desperately 
trying to work out a fix to get them some help. It may be that I could 
do that with Senator Baucus and Senator Grassley and others in another 
way.
  This is not some trump political thing I am doing. It is very painful 
to see people who are so desperate and who fall between the cracks and 
are not getting the help they need.
  Those are the three amendments I have. I know there are other 
colleagues who are coming to the floor. I will wait to see what kind of 
response there is from the other side. I am hopeful we can at least 
have this one amendment incorporated into this bill that will provide 
retirees with some protection. I am hoping the amendment will be 
accepted. I believe Senator Sessions may also be engaged on this 
question. I am hopeful.
  On the payday loan, I wait to hear from my colleagues from the other 
side.
  I yield the floor.
  Mr. GRASSLEY. Madam President, 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. LOTT. Madam President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. LOTT. Madam President, it is my understanding that three 
amendments have been offered today by Senator Wellstone. Would the 
Senator clarify? Has he offered three amendments that are now pending 
for discussion, or does he intend to do so? What is the status on his 
amendments?
  Mr. WELLSTONE. The majority leader is correct. I was here in the 
beginning of the debate last week and I offered one. I have offered 
three now. I have a number of other amendments to offer, but I have 
offered three; correct.
  Mr. LOTT. I understand there are still some 80-plus amendments to be 
disposed of just from the other side of the aisle. I guess there are 
probably a dozen or more on this side of the aisle, not counting the 
relevant amendments that were identified from the list that might be 
offered. So we still have a lot of work to do.
  I do know that on Friday, and today, some work was accomplished. 
Senator Wellstone is certainly carrying through with his commitment to 
offer amendments dealing with bankruptcy. I know the staffs have been 
working on both sides to see if we can find a way to complete this 
without the necessity of a cloture vote this week. However, we have to 
dispose of this bill this week.
  As Senator Daschle and I discussed on the floor last Thursday, it is 
our intent to offer a cloture today or tomorrow, to make sure we have 
enough time to complete this very important legislation. It is my 
intent--and I see Senator Daschle here now--to file cloture in order to 
assure passage of the bill this week. If we can make substantial 
progress by Wednesday, or if some agreement can be reached that would 
limit the number of amendments, certainly I would be open to that.
  I think the record is clear. I have repeatedly tried to move this 
legislation and I have tried to be respectful of the committee process, 
which we have followed, and also to be respectful of the Senator from 
Minnesota, who feels strongly about this legislation, as others do. It 
is time that we make sure we get it completed this week.
  I am prepared to send a cloture motion to the desk to the pending 
legislation. Before I do that, I say to Senator Daschle I will be glad 
to yield for any comment he might have.
  Mr. DASCHLE. Madam President, I appreciate Senator Lott's expression 
of intent here. As we said last week, there is a real hope that we can 
resolve whatever procedural difficulties we face in accommodating the 
desire the majority leader has noted: that we schedule a vote for final 
passage sometime before the end of this week.
  It is clear now we really do have a number of pieces of legislation 
that have to be addressed, including campaign finance reform as early 
as next Monday or Tuesday. In order to accommodate that schedule, it 
would be best if we could complete our work on this bill before Friday.
  I will be supportive of whatever procedural arrangements we can make 
that respect the rights of Senators on both sides to be heard. I want 
to accommodate those Senators who may have amendments that will fall if 
cloture is invoked, if we can address those amendments first early in 
the week so we can make sure those who have other ideas and other 
proposals can be accommodated.
  I will work with the majority leader to try to find a way to schedule 
a vote on cloture, if it comes to that, perhaps later in the day on 
Wednesday. Our preference is later in the day to accommodate those 
Senators, with an expectation that we can certainly finish the bill by 
Friday. I will work with our colleagues to see what arrangements best 
suit their needs.
  Mr. WELLSTONE. May I ask a question of my colleagues?
  Mr. LOTT. I am not clear, I may have yielded the floor.

[[Page 3378]]


  Mr. DASCHLE. I yield to the Senator from Minnesota.
  Mr. WELLSTONE. I appreciate that. That is very gracious of Senator 
Daschle.
  Just to clarify a couple of things, this is the third time we have 
really had debate. On Monday and Friday, we know a lot of Senators are 
not around. I came back. It seems to me, if I may express my dissent, 
that the majority leader asked for a list of amendments prematurely. We 
all know that Senators, to protect themselves, list a number of 
amendments they may not use, and now that is being used as an argument 
for filing a cloture motion.
  I work with the majority leader. We all disagree at times. I think it 
violates the spirit of what we talked about. I remember coming to the 
Senate floor and having a discussion that we would have substantive 
debate on the bankruptcy bill and Senators could offer those 
amendments.
  We are just now starting that process, and now we are talking about 
filing for cloture. We have had 2 days on this bill. We all know on 
Monday and Friday people do not come. I am here, but a lot of people do 
not come. The majority leader asked for a list, and people listed a lot 
of amendments to protect themselves. In my humble opinion, the majority 
leader is using that as a pretext for premature filing of cloture, 
which goes against what I thought we were going to do with this bill.
  I will finish. I know both leaders look as if they are more than 
ready to respond. We have a lot of amendments. People come out with 
amendments, and we go at it. If it takes 2 weeks to do a bill, we have 
done that on many bills. I do not understand why we are not doing that 
on this bill.
  Mr. DASCHLE. The Senator perceives my stance correctly. I was 
prepared to respond. I must say I am not sympathetic to that argument, 
and I am very sympathetic oftentimes of the admonitions and suggestions 
of the Senator from Minnesota. Fridays and Mondays are legitimate 
legislative days.
  Mr. WELLSTONE. To be clear, I am not arguing they are not. I am just 
saying----
  Mr. DASCHLE. I will be happy to yield again in a moment. I have done 
everything to encourage Senators to come to the floor to offer their 
amendments. For some reason, we have gotten into this habit of thinking 
any amendment offered after 6 in the evening is not really considered 
prime time, or it is not considered to be a legitimate time to offer an 
amendment. Fridays and Mondays are considered, for some reason, not 
equal in quality to Tuesday, Wednesday, or Thursday as times to offer 
amendments.
  We have to break out of that mind set. We have done everything to 
petition Senators to come to the floor today to offer amendments. We 
did it on Friday.
  Those Senators who now express some concern they are going to be 
precluded from offering amendments--when they passed up the opportunity 
on Friday, they passed up the opportunity to offer amendments later in 
the evening, they passed up the opportunity to come here on Monday--are 
not going to get much sympathy.
  I am very sympathetic to many of the substantive questions raised by 
Senators with their amendments, but procedurally, if they are concerned 
about it, they ought to be here. They ought to come to the floor to 
offer these amendments.
  I am hopeful we will get more reaction than we have so far, at least 
for the remainder of the day and tonight.
  Mr. WELLSTONE. I will finish up. I say to our Democratic leader two 
things: No. 1, it still does not speak to my point--we talk about 
substantive debate, which is the commitment we made on this bill. Quite 
often, we are talking about 2 weeks of amendments and debate going 
through those amendments. All of a sudden, with the bankruptcy bill, we 
are talking about Friday and Monday as litmus test days and people need 
to be here. I am all for that. I am here.
  I find it interesting that in the haste to get through this bill--I 
understand a whole lot of folks and a whole lot of powerful folks are 
for it--I think this violates what I heard stated last week. There are 
a lot of important amendments that are going to be clotured out now, 
and I think that goes against the agreement. I am expressing my dissent 
on it.
  Mr. DASCHLE. I appreciate that. If I may, before yielding the floor--
and I will certainly yield so the majority leader can respond as well--
I am told that we asked virtually every author on Friday if they could 
be prepared to come to the floor on Friday to offer at least one 
amendment, and not one of our colleagues responded to that.
  Again, I want to use these days productively. We are not using them 
very productively if we cannot even offer one amendment for 
consideration and a vote at some point Friday or Monday.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Mississippi.
  Mr. LOTT. Madam President, I appreciate Senator Daschle's efforts. He 
and I have worked very hard to be fair on this legislation. I have the 
same problems he has. I do not want the burden to appear just to be on 
his side of the aisle. We have difficulty getting our Senators to offer 
amendments on Fridays and Mondays and even Thursday afternoons. Even 
though there are often very legitimate reasons that we cannot proceed 
late into the evening on Thursday, we are not able to do so.
  I say to Senator Wellstone, yes, he was here I think on Friday and 
again this morning. Back on January 22, Senator Daschle and I started 
talking about trying to move this legislation. We have been trying to 
move it ever since. Even though I filed cloture, that does not end it. 
Amendments can be debated, amendments can be voted on, and we still 
have some opportunity to work through this, perhaps without cloture. I 
am not sure that is possible. It may not be.
  The point Senator Daschle made was we have to go to campaign finance 
reform, and at some point we have to go to the budget resolution. The 
law requires we do it before April 15, so we are getting to the point 
where other things will overtake this bill.


                             Cloture Motion

  Mr. LOTT. Madam President, I send a cloture motion to the desk to the 
pending legislation.
  The PRESIDING OFFICER. The cloture motion having been presented under 
rule XXII, the Chair directs the clerk to read the motion.
  The assistant legislative clerk read as follows:

                             Cloture Motion

       We the undersigned Senators, in accordance with the 
     provisions of rule XXII of the Standing Rules of the Senate, 
     do hereby move to bring to a close debate on the motion to 
     proceed to S. 420, an original bill to amend title 11, United 
     States Code, and for other purposes:
         Trent Lott, Robert F. Bennett, Chuck Grassley, Orrin G. 
           Hatch, Susan Collins, Pat Roberts, Lincoln Chafee, 
           Strom Thurmond, Frank H. Murkowski, Mitch McConnell, 
           Rick Santorum, Jeff Sessions, Richard G. Lugar, Gordon 
           Smith of Oregon, George V. Voinovich, and Bill Frist.

  The PRESIDING OFFICER. The cloture motion is addressed to the motion 
to proceed, and I am advised we are on the bill.
  Mr. LOTT. Madam President, if I may make a parliamentary inquiry, in 
view of the revision, I believe the clerk will need to read the whole 
cloture motion again.


                             cloture motion

  The PRESIDING OFFICER. The cloture motion having been presented under 
rule XXII, the Chair directs the clerk to read the motion.
  The assistant legislative clerk read as follows:

                             Cloture Motion

       We the undersigned Senators, in accordance with the 
     provisions of rule XXII of the Standing Rules of the Senate, 
     do hereby move to bring to a close debate on S. 420, an 
     original bill to amend title 11, United States Code, and for 
     other purposes:
         Trent Lott, Robert F. Bennett, Chuck Grassley, Orrin G. 
           Hatch, Susan Collins, Pat Roberts, Lincoln Chafee, 
           Strom Thurmond, Frank H. Murkowski, Mitch McConnell, 
           Rick Santorum, Jeff Sessions, Richard G. Lugar, Gordon 
           Smith, George Voinovich, and Bill Frist.


[[Page 3379]]

  Mr. LOTT. Madam President, as just stated, this cloture vote will 
occur on Wednesday unless it is changed by consent. The Democratic 
leader and I will discuss the bill and make a determination as to the 
timing. I am sure it will be in the afternoon, and we will see how late 
that will need to be. It would be affected by what has been achieved.
  I ask that the mandatory quorum under rule XXII be waived.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. LOTT. I yield the floor.
  Mr. DASCHLE. If I might say to the majority leader, as I understand 
it, a number of amendments, in fact, over 20 amendments, have been 
cleared on our side. I guess we are awaiting some indication as to 
whether or not those amendments might be cleared on the majority side. 
That would move things along as well in terms of scheduling amendments. 
If Senators know those amendments have been adopted, we would be in a 
better position to whittle down the list and determine which of those 
amendments still need floor consideration.
  Mr. LOTT. Keeping with full disclosure on this, I think our staffs 
have been working on that, and I think we did clear a number of 
amendments like this last time this bill was up. We were in hopes at 
some point perhaps that this could be done in such a way that we would 
not have to go to conference and the bill could be accepted by the 
House. It does not appear that will be possible.
  We will try to clear as many of the amendments as possible. I will 
take it up with the chairman when we complete our action.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Massachusetts.
  Mr. KENNEDY. Madam President, is it appropriate to ask consent to set 
aside the pending amendment and proceed to other amendments to the 
bankruptcy bill?
  Mr. GRASSLEY. Will the Senator yield for a question?
  Mr. KENNEDY. I am happy to yield.
  Mr. GRASSLEY. Madam President, would the Senator tell us the content 
of the amendment, or is there a copy we can have?
  Mr. KENNEDY. It is an amendment dealing with health insurance 
benefits for the debtor's monthly expenses permitted in the 
consideration of the means test, the opportunity for those going 
through the process to be able to have included consideration for 
paying their health insurance and premiums.
  Mr. GRASSLEY. I apologize. We have a copy.
  The PRESIDING OFFICER. Is there objection to the request of the 
Senator from Massachusetts? Without objection, it is so ordered.


                            Amendment No. 38

  The PRESIDING OFFICER. The clerk will report the amendment.
  Mr. KENNEDY. This is an amendment that if we had a cloture motion we 
would not have qualified, yet it is absolutely relevant.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Massachusetts [Mr. Kennedy], for himself, 
     Mr. Rockefeller, and Mrs. Clinton, proposes an amendment 
     numbered 38.

  Mr. KENNEDY. Madam President, I ask unanimous consent that reading of 
the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

   (Purpose: To allow for reasonable medical expenses, and for other 
                               purposes)

       On page 10 between lines 17 and 18, insert the following:
       ``(V) In addition, if the debtor does not have health 
     insurance benefits, the debtor's monthly expenses shall 
     include an allowance to purchase a health insurance policy 
     for the debtor, the dependents of the debtor, and the spouse 
     of the debtor in a joint case if the spouse is not otherwise 
     a dependent.

  Mr. KENNEDY. Madam President, the Bankruptcy Reform Act of 2001 
includes a means test that determines whether debtors will be granted 
relief under Chapter 7 of the bankruptcy code or whether they must 
enter into a Chapter 13 repayment plan. Supporters of the bill believe 
it will prevent abuse in the bankruptcy system. I believe, as do the 
experts, that it is problematic.
  For better or worse, however, the means test is in the bill and it 
requires a calculation of the debtor's monthly expenses based on the 
Internal Revenue Service collection standards. The IRS standards 
provide for food, clothing, transportation, and some health care-
related expenses. What the IRS standards don't provide for is the cost 
of health care insurance for many debtors, particularly those who 
recently lost their insurance or may not have been able to afford it.
  The amendment I'm offering today says that if a debtor doesn't have 
health care insurance, the bankruptcy court must include a reasonable 
allowance for health care insurance for the debtor, his or her 
dependents, and his or her spouse, when calculating the debtor's 
monthly expenses.
  This amendment is necessary because many Americans declare bankruptcy 
because of health care-related problems. A recent report tells us that 
nearly half of the 1.2 million Americans who file for bankruptcy do so 
because of medical problems. According to the report, in 1999, an 
estimated 326,000 families filed for bankruptcy because of an illness 
or injury to themselves or a family member and an additional 267,000 
families had substantial medical bills. That is extraordinary. Again, 
in 1999, an estimated 326,000 families filed for bankruptcy because of 
an illness or an injury to themselves or a family member and an 
additional 267,000 families had substantial medical bills. Almost 
600,000--nearly half of all those who filed for bankruptcy--filed for 
medical reasons.
  During discussion of this legislation, we've found that there are 
three major reasons why people are filing for bankruptcy. One is job 
related and that is triggered for the most part, not completely but for 
the most part, because of the various mergers, downsizing and pink 
slipping effecting great numbers of Americans. Second, many women are 
filing for bankruptcy after falling on hard times as a result of 
divorce, lack of alimony, or lack of child support payments. And the 
third reason is health related. The explosion of health care costs, 
particularly in the area of prescription drugs, and the general cost of 
health insurance has led many to file for bankruptcy.
  Close to 600,000 bankruptcies involve families or individuals--half 
of all of those who are going into bankruptcy --have health-related 
bankruptcies.
  Two hundred and sixty-seven thousand of those who filed for 
bankruptcy in 1999 had no health insurance. A report published in 
Norton's Bankruptcy Adviser says:

       The data reported here serve as a reminder that self-
     funding medical treatment and loss of income during a bout of 
     illness or recovery from an accident make a substantial 
     number of middle class families vulnerable to financial 
     collapse.

  Some families once had health insurance but, in an attempt to avoid 
bankruptcy, let their policy payments lapse so every penny could be 
used to buy food and pay the rent. Those families later find themselves 
in bankruptcy without an appropriate health insurance safety net.
  Others never had health insurance because they simply could not 
afford it. And, others lost their insurance when they lost their job.
  For example, one debtor tells us that he had a heart attack which led 
to quadruple bypass surgery. He amassed outrageous medical bills that 
he could not pay because he didn't have medical insurance. He then had 
to declare bankruptcy. Another debtor told us that the loss of a job, 
which led to loss of health care, precipitated bankruptcy. She used 
credit cards, to pay for COBRA insurance and prescription drugs. The 
COBRA insurance won't last for very long, and soon she will be without 
any health insurance at all.
  These families are now among the 43 million Americans who have no 
health insurance, and we must ask, what happens to them? The children 
fail to get a healthy start in life because their parents cannot afford 
the eye glasses or hearing aids or doctors visits they need. Family 
income and energy are sucked away by the high financial and emotional 
cost of uninsured illness. An older couple sees hope for a dignified

[[Page 3380]]

retirement dashed when the savings of a lifetime are washed away by a 
tidal wave of medical debt.
  Without health insurance, many families forgo health care. One-third 
of the uninsured go without needed medical care in any given year. 
Eight million uninsured Americans fail to take the medication that 
their doctor prescribes, because they cannot afford to fill the 
prescription. 400,000 children suffer from asthma but never see a 
doctor. 500,000 children with recurrent earaches never see a doctor. 
Another 500,000 children with severe sore throats never see a doctor. 
32,000 Americans with heart disease go without life-saving and life-
enhancing bypass surgery or angioplasty.
  Overall, 83,000 Americans die each year because they have no 
insurance. It is the seventh leading cause of death in America today.
  Given these facts, the Federal Government shouldn't be in the 
business of telling people to repay their credit card debts rather than 
pay for health care insurance. And, debtors shouldn't be forced to 
choose between eating and purchasing health care insurance while being 
forced to repay creditors. To avoid this Hobson's choice, when 
determining whether a debtor can repay his creditors, the bankruptcy 
court must consider health insurance premiums part of the debtors' 
monthly expenses.
  I hope my colleagues will support this amendment. It adds some 
fairness and balance to an unnecessarily harsh bill.
  This is something that can be dealt with by the bankruptcy judges. 
Obviously, the amount of repayment is going to depend to some extent on 
the size of the family's health insurance premium, and perhaps to some 
extent on where they live and the cost of health insurance in that 
area. But all of those kinds of calculations are readily made by the 
bankruptcy court and by bankruptcy judges.
  This does not mean an unreasonable additional kind of responsibility. 
And, beyond that, for those who are strong in terms of the bankruptcy 
reform, this makes sense from their point of view because what happens 
is the individual who is in bankruptcy will be kept healthier and their 
families will be healthier and able to at least move towards meeting 
their responsibilities under the bankruptcy court, if they are able to 
go ahead and afford those health insurance premiums.
  It is a win-win situation. It is a win in terms of those who are 
going to have responsibility for meeting their debts because they won't 
find additional kinds of drain on scarce resources, and it means they 
will be healthier and be able to afford to repay. It also works to the 
advantage of the individual and their families.
  I believe this makes a good deal of sense. I look forward to my good 
friend from Iowa enthusiastically embracing this amendment so that I 
might get onto my second amendment which is equally commendable.
  The PRESIDING OFFICER (Mr. Voinovich). The Senator from Iowa is 
recognized.
  Mr. GRASSLEY. First of all, Mr. President, whether I enthusiastically 
endorse this or not, the Senator from Massachusetts knows that he can 
lay his amendment aside and move on to another amendment that he wants 
adopted since we will not be voting on these amendments until tomorrow.
  The first thing I want everyone who has questions to know about this 
legislation is that we want people who have health insurance to 
maintain their health insurance when they go into bankruptcy because 
our legislation provides that health expenses, including health 
insurance, under the IRS guidelines--which are used by the bankruptcy 
court in deciding the ability to repay debt under our means test--are 
fully accounted for.
  Not only are health insurance premiums subtracted, but all health 
care costs are subtracted out of a person's ability to pay in making a 
determination whether they go into chapter 7 where they get a 
completely fresh start, or whether they go into chapter 13 to make a 
determination of whether or not they have the ability to repay. If they 
are in chapter 13, then the extent to which they repay the final 
judgment is that those people in chapter 13 will not get off scot-free.
  But in making that determination, all health costs are taken into 
consideration.
  The reason I take some time to emphasize that point is because we 
have had several speeches on the floor of the Senate that say and imply 
we do not want to take into consideration all those health care costs 
in making that determination. We even had the Time magazine article of 
last spring in which there were several case studies done by Time 
magazine with the implication that if this legislation passed, those 
people would not be able to get into bankruptcy court for fair 
consideration of whether or not they could repay their bills, and 
whether or not they get a fresh start.
  In a lot of those case studies, there was the implication that they 
were going into bankruptcy court because of high health costs.
  In every one of those instances, as I have said before on the floor 
of this Senate, those folks used in that magazine article would have 
been able to get a fresh start under our legislation.
  Consequently, we still have this brought up as somehow a problem of 
our bill because we are not going to take into consideration people who 
are in bankruptcy being able to maintain their health costs and health 
insurance.
  I asked the question last week for those Senators who think we do not 
give adequate consideration through the IRS guidelines of whether or 
not somebody should be in chapter 7 or chapter 13: If we don't, do we 
give credit for 100 percent of health cost? If 100 percent isn't 
enough, would 101, 102, or 110 percent be enough?
  Now we get to this situation that Senator Kennedy has brought to our 
attention.
  I give the prelude to this by saying our legislation takes into 
consideration 100 percent of health care costs, including paying health 
insurance.
  If the person does not have health insurance before going into 
bankruptcy court, obviously the person does not have an expense out 
there to claim in bankruptcy court.
  It seems to me what Senator Kennedy is trying to do here--because we 
already allow people who have health insurance to maintain that health 
insurance as one of those legitimate costs--is raise the possibility 
that a debtor who did not have health insurance before he went into 
bankruptcy court ought to be able to carve out a portion of the 
creditor's claims, and would be able to get a fringe benefit, or a 
benefit they did not have before they went into court.
  I think we have a couple of questions to ask. Is there any provision 
in this amendment that requires the debtor to use this allowance for 
health insurance? And is there any provision to verify that the money 
is being used for health insurance if it is allowed?
  Since the debtor wasn't using the allowance for health insurance 
before bankruptcy, it seems to me we need some guarantees on how the 
money will be spent.
  I have those questions. If the Senator wants to respond to those, he 
can. If he doesn't, there are questions out there that have to be 
answered.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Massachusetts is recognized.
  Mr. KENNEDY. Mr. President, I would be glad to work out the question 
as to how the debtors are going to make sure they are going to get an 
allocation in terms of health insurance--to make sure it would be used 
for that particular purpose. I would be glad to work out over the 
nighttime those kinds of protections. But I say the answer would be the 
same way that particular provision applies to food and rent. You do not 
have the additional written in stone with regard to food and rent in 
this particular proposal. But if you want additional kinds of 
protections to ensure that it goes to insurance, I do not think that is 
going to be really a stumbling block.
  Now let me just respond to the general theme my good friend from Iowa 
discussed.
  This amendment simply ensures that while a debtor is repaying his 
creditors, he has enough money to purchase

[[Page 3381]]

health insurance for himself and his family. The supporters of the 
legislation assert that the other necessary expense provisions in the 
IRS collection standards include health care insurance for all debtors. 
That simply is not true. The other necessary expense provision does say 
that other expenses, which may meet the necessary expense test, 
includes health care. But if a debtor has recently lost his health 
insurance or lost his job--and therefore his health insurance--health 
care insurance premium expenses will not be included in his monthly 
expense allowance. And the IRS staff confirms that.
  So a Senator says: Look, if they paid their health care insurance 
premium at the time, we will make sure they will be able, within the 
IRS means test, to pay their premium as well.
  The point is, as we have seen with great numbers of people, almost 
half of those who have gone into bankruptcy have done so because of 
health-related expenses. The great majority of those are losing their 
health insurance, or they have health insurance and it does not cover 
these catastrophic additional kinds of costs, or they have lost their 
job and lost their health insurance. They are not provided for.
  Here is somebody who has worked hard all their life, paid into their 
health insurance, then they lose their job, lose their health, and they 
run into one of these catastrophic illnesses, and they had been paying 
the premiums all of this time. But there is no provision for them, even 
though they have conscientiously provided health insurance for 
themselves and their families throughout their employment. They cannot 
even work that out with the restrictive language here.
  There ought to be a reasonable way of ensuring that those people are 
going to get health insurance within the means test standard, which 
supposedly looks at essential needs. I think getting health insurance 
is an essential need. It is as important for many people as food and a 
roof over their heads.
  As we've seen, many people are unable to take the prescription drugs 
they need. We find, from all the medical indicators, the number of 
people who do not have health insurance and who end up actually dying.
  So that is what the bill that is before the Senate fails to respond 
to; and those are the real facts out there in terms of these 
individuals losing their jobs and losing their health insurance. They 
find out that even though they paid into their health insurance over a 
lifetime, they run into these catastrophic kinds of additional 
illnesses--here they were, paying in, working hard--and, under the 
language in the bill, there is virtually no kind of inclusion for them.
  I think health insurance protection for their families makes an 
enormous amount of sense with regard to individuals, and it makes an 
enormous amount of sense in terms of the individual's ability to meet 
their responsibilities of payment under the Bankruptcy Act.
  It just seems to me that those are the additional kinds of 
protections we are talking about. It isn't that this individual is 
going to be able to set the sky as the limit, and try to walk out of 
there with a good deal of free cash in their pockets.
  We would be glad to include in the Record very extensive analyses of 
what the costs are for individual workers and for families, using GAO 
figures. We could make that part of the Record. That could be a pretty 
clear indication of a reasonable standard that might be used or might 
be followed. But that is why I believe this is so important.
  In many ways, this amendment, as I mentioned, will improve the 
debtor's chance of being able to repay his creditors while also 
ensuring that he and his family have a decent--not luxurious but 
decent--standard of living.
  If the debtors are able to purchase health insurance, they will be 
able to withstand the predictable and unpredictable circumstances that 
are part of everyday living--the birth of a child, a previous 
undiagnosed illness, necessary trips to the doctor's office. Instead of 
scraping for pennies to pay those bills, the debtor and his family will 
have the health insurance that every American needs. Instead of failing 
to meet the obligations of a chapter 13 repayment plan, all available 
resources must go to unexpected health care expenses. The debtor can 
meet both obligations.
  So I hope we can continue to visit this issue and see what we might 
be able to work out.


                            Amendment No. 39

  Mr. KENNEDY. If it is the desire of the floor manager, I ask 
unanimous consent that the existing amendment be temporarily laid aside 
and we go to the amendment which is what they call the cap on IRA 
assets.
  The PRESIDING OFFICER. Is there objection?
  Mr. KENNEDY. I believe the Senator has that amendment.
  Mr. GRASSLEY. Reserving the right to object, and I will not object, 
before we go on to his next amendment and lay this one aside, I hope I 
can continue a dialog between the staff of the Senator from 
Massachusetts and my staff to see if we can make arrangements, so that 
we know the money that is set aside is used for health insurance, that 
it is verifiable, that it would not be used for some sort of Cadillac 
insurance policy that maybe the person would not otherwise have had in 
their place of employment, and things of that nature. If we could talk 
about that, we might be able to work something out.
  Mr. KENNEDY. Sure. I appreciate the attitude of the Senator. We would 
be glad to try to follow through with that. I am grateful for the 
Senator's interest and sensitivity. I appreciate that.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will report the amendment.
  The legislative clerk read as follows:

       The Senator from Massachusetts [Mr. Kennedy] proposes an 
     amendment numbered 39.

    (Purpose: To remove the dollar limitation on retirement savings 
                        protected in bankruptcy)

       Beginning on page 101, line 10, strike all through page 
     102, line 2.

  Mr. KENNEDY. Mr. President, this bankruptcy bill includes a provision 
that would undermine existing pension law by allowing creditors to 
claim workers' retirement savings in bankruptcy. One of the greatest 
domestic policy challenges facing Congress is the challenge of ensuring 
that elderly Americans do not live in poverty. After a lifetime of hard 
work, senior citizens deserve a secure and comfortable retirement.
  Clearly, we need to do more to improve the private pension system. 
Nearly half of all working Americans--some 73 million men and women--do 
not have pension coverage. The lack of pension security is a critical 
issue. It is a women's issue, because only 39 percent of working women 
are covered by a pension plan. It is a civil rights issue, because only 
26 percent of Hispanic workers and 38 percent of African-American 
workers have pension coverage.
  So it is imperative that Congress do all it can to expand pension 
coverage and encourage retirement savings. We must work to improve our 
retirement savings system--not move backward. The provision in the 
bankruptcy bill that would cap the amount of retirement savings held in 
individual retirement accounts that can be exempted from a debtor's 
bankruptcy estate is a step backward.
  Federal pension laws are intended to protect workers by guaranteeing 
that their retirement savings will be there when they retire. The 
entire pension community--worker groups, employers, mutual fund 
companies, and other pension service providers--are united in 
opposition to a cap on retirement savings for three reasons: one, it is 
unnecessary, two, it is unworkable, and three, it would discourage 
savings and portability.
  First, a cap on IRA savings is unnecessary because Federal tax law 
already imposes strict limits on IRA contributions. The cap is aimed at 
preventing wealthy individuals from trying to stuff assets into their 
IRAs before declaring bankruptcy. But because IRA contributions are 
limited to only $2,000 per year, wealthy individuals cannot stuff 
assets into an IRA before filing bankruptcy as a way to avoid paying 
debts. At the rate of $2,000 per year, it would take about 40 years to 
accumulate retirement savings of $1 million.

[[Page 3382]]

  Second, the cap is unworkable. It will be extremely difficult--if not 
impossible in many cases--to administer. There are thousands of IRA 
accounts with balances in excess of $1 million due to rollovers from 
401(k) plans and other retirement vehicles. Under the current bill, 
those rollover amounts (and the earnings on them) would not be 
available to creditors. However, a bankruptcy court will need to sort 
through those accounts to determine how much of the account came from 
direct IRA contributions and how much came from rollovers.
  The court will also be forced to calculate how much of the earnings 
in the account should be attributed to the IRA contributions and how 
much should be attributed to the rollovers amounts. That will be a time 
consuming administrative burden with no benefit to creditors.
  Third, the cap will discourage retirement savings and portability. 
Using retirement savings in IRAs to satisfy personal debts is 
unprecedented, and collides head-on with efforts by Congress to 
encourage individuals to save for retirement. Already, more than 60 
percent of workers who change jobs take their retirement savings and 
spend the money rather than rolling the money into another retirement 
vehicle.
  The cap will undermine the trust that over 35 million American 
households have placed in the IRA as a safe and secure retirement 
savings vehicle, and will discourage workers from rolling money into 
their IRAs when they change jobs.
  I believe this provision would jeopardize the retirement security of 
American workers. This is simply the wrong message for Congress to 
send, particularly at a time when we are trying to encourage additional 
private-sector retirement savings to ensure retirement income security 
for the aging baby boom generation.
  Mr. President, I hope this amendment will be accepted. I suggest the 
absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRASSLEY. Mr. President, I take this opportunity to tell my 
colleagues why the amendment offered by the Senator from Massachusetts 
is a very bad amendment.
  First, I want to make clear that this amendment applies just to IRAs; 
it does not apply to pensions. In addition, I would like to have people 
reflect on the position of the Senator from Massachusetts on this 
amendment and the position on the previous amendment. It seems to me 
the Senator from Massachusetts is very much in character with his 
amendment on making sure there is a preservation for the ability of 
people in bankruptcy to keep health insurance. That, for a long time, 
has been a concern of his for people who have needed health insurance, 
maybe couldn't afford it--how to be able to get it to the people. Of 
course, when bankruptcy steps in, it is very appropriate for him to 
offer an amendment that would preserve health insurance for people. 
That would most often fall into the category of his protecting those 
people who have lesser incomes.
  So it is quite out of character for me to respond to the Senator from 
Massachusetts about an amendment about a provision in this bill where 
we have a $1 million cap that protects retirement accounts and that you 
would have to have resources over that $1 million in determining the 
ability to repay.
  As the author of this legislation, I am very embarrassed that I would 
have in my own legislation a $1 million cap that would say people could 
protect $1 million from their creditors as they went into bankruptcy. 
That $1 million cap is in here because I didn't want any cap 
whatsoever. I had to make an arrangement with Senator Kennedy last year 
to reach compromise on this matter, and we compromised on $1 million.
  In addition, for the Senator from Massachusetts, who never is very 
often found defending the economic needs of those over $1 million a 
year in savings and wanting to protect that $1 million from bankruptcy, 
it seems to me somewhat out of character for him. It makes it a lot 
easier for me to oppose his amendment that would eliminate the cap on 
IRA savings.
  He argues that the $1 million cap would be difficult to administer 
because 401(k)s and other retirement rollovers are excepted from this 
cap. He argues that the cap will be an administrative hassle with no 
benefit to creditors. I argue that the bankruptcy bill is all about 
having people who can repay their debts do just that--in other words, 
pay their debts.
  How many times have you heard me say the purpose of this bankruptcy 
legislation is, for those who are gaming the system, those who are 
using the bankruptcy laws for financial planning, that if you have the 
ability to repay, you are no longer going to get off scot-free.
  People who have the ability to repay their debts should not be 
protected just because they have stashed away an IRA account. That is 
why we have this $1 million cap. I don't even think the cap should be 
there, but it was part of the compromise last year. We need to have a 
cap on these savings so that people who can pay will be required to pay 
a portion of their debts.
  I don't think the super-rich should have additional protections just 
because they can squirrel away their money in a retirement account. The 
$1 million cap is consistent with our policy of encouraging people to 
put away money for retirement, but we also need to balance this with a 
policy that people who buy goods and other merchandise should pay for 
them if they can. We can't allow deadbeats to get away with stiffing 
creditors. That is why our bankruptcy bill is here. That is what it is 
all about: Imposing some responsibility on people who can pay their 
debts.
  I would like to give you an example about abuse of the system. This 
is from a press report. Dr. Neil Solomon declared bankruptcy after 
three female patients sued him for sexual misconduct and sought $160 
million in damages. Dr. Solomon paid these women less than $100,000, 
while keeping a home in Baltimore, MD, valued at $323,000, a Mercedes 
Benz, valued at $42,000, and $2.2 million in a retirement savings 
account.
  Congress should place reasonable limits on the ability of highly 
compensated persons, such as Dr. Solomon, to shield millions of dollars 
from creditors simply because the assets are deposited in retirement 
accounts.
  Clearly, Congress never intended for savings in retirement accounts 
to become safe havens for the wealthy who seek to avoid paying their 
bills by declaring bankruptcy.
  I also point out to my friend from Massachusetts his position is much 
contrary to his position in regard to the homestead exemption. He says 
people who can pay their debts should not be able to shelter their 
assets in a million-dollar homestead. But at the same time, he seems to 
be saying that people should be able to shelter their assets in $1 
million IRA accounts. That is what he is doing right now by lifting 
that $1 million cap.
  Moreover, I don't think the provision in our bill will impose an 
administrative burden, particularly because the amount of the cap is so 
high. I don't think it is unworkable, and I doubt that the 
administrative burden charge will ever materialize.
  In addition, I remind my colleagues this is an agreement that was 
agreed to in the compromise pension bill last year. I didn't want this 
cap in here, but I took it in the process of doing what I could to 
alleviate some fears so this legislation could get passed. In other 
words, we cut a deal, and I hope we stick by this deal. We need to 
retain the hard limit of $1 million on the amount of IRA money that any 
person who declares bankruptcy can shield from his or her creditors. 
Just because it is a retirement account does not mean you can get away 
from paying your debts with it. This is just plain wrong because this 
is anti fraud and abuse reform, and it is badly needed. I strongly urge 
my colleagues to reject the amendment.

[[Page 3383]]

  I wish to point out that we put the exclusion of rollovers in the 
bill at the request of the Senator from Massachusetts. So if the 
Senator is concerned about administrative burdens, we would be happy to 
take out the exclusion of rollovers. But my point to the Senator from 
Massachusetts is that we cannot have this both ways.
  I also suggest that I was lobbied against any restriction. I was 
lobbied on the protection of pensions and IRAs from being a source of 
repayment to creditors--not by individuals going into bankruptcy or 
people who had strongly felt views as individuals that this money 
should be protected from the creditors.
  The source of interest in this legislation came from the pension and 
insurance industries of my State who felt they did not want to be 
bothered by the bankruptcy courts, so they wanted to retain protection 
for pensions and for IRAs. They tried to make this historical claim 
that it had always been this way. It is one thing to work on the floor 
of the Senate to protect the interests of the little guy who is going 
into bankruptcy; it is also OK to work on the Senate floor to make sure 
we do preserve the ability of people to retire with dignity. It is 
quite another thing to protect the interests of those who want to 
retain a high lifestyle after they have gone into bankruptcy and, at 
the same time, be in retirement. But it is quite another thing to 
protect the interests of all the big business companies of America that 
are writing this business and don't somehow want to deal with the 
bankruptcy courts.
  I ask my colleagues to oppose the amendment by the Senator from 
Massachusetts. I yield the floor.
  The PRESIDING OFFICER. The Senator from Massachusetts is recognized.
  Mr. KENNEDY. Mr. President, I hope my friend from Iowa will continue 
to reason with us a little bit about this particular provision. I point 
out to him that for a long time in the Senate I have been interested in 
championing the interests of working families and the interests that 
deal not only with the basic issues of education, health, and housing, 
but also retirement programs. That is a key element. The Senator knows, 
as a member of the Finance Committee, how much of the tax expenditures 
go to individuals making over $100,000, what the general taxpayers are 
paying under tax expenditures at the present time that are being 
deducted. Those are the higher income groups. There is very little for 
working families, and he understands that very well as a member of the 
Finance Committee.
  I don't retreat a single step in terms of my desire to make sure we 
are going to have sound retirement programs for working families, 
schoolteachers, and other workers. The illustration that the Senator 
from Iowa gave us about some doctor who had all of these savings is not 
applicable. It doesn't even relate to what we are talking about because 
there is only a $2,000 contribution that one can make to an IRA. Who 
uses the IRAs? Basically, it is the working families. The Senator 
understands that. Who uses the 401(k)? They are basically the more 
affluent individuals in our society. Those are the facts.
  But it is interesting that the bill the Senator has introduced 
protects the 401(k), but not the IRA. So I don't want to have any 
misunderstanding. The Senator's position is protecting the 401(k)--
$10,500 a year can be put in an 401(k), but only $2,000 in IRAs. This 
is a millionaire's loophole? The Senator knows as well as I that you 
haven't even got anybody who qualifies for the cap on IRAs at $2,000 a 
year because the IRAs haven't been around long enough. You have tens of 
thousands, hundreds of thousands of people in 401(k)s. But 401(k)s are 
not going to be touched by the bankruptcy court. Oh, no, just the IRAs, 
which serve whom? Working families--with limits of $2,000.
  The more we get into this, the more difficulty we have in 
understanding what the logic is in terms of defending 401(k)s. The fact 
has been, historically, that it has been the opinion of the Congress--
with the exception of this Congress and this bill--that retirement 
moneys would not be included in terms of the bankruptcy provisions. 
They earned it and set it aside as retirement funds, and it would not 
be included. In the course of our hearings on bankruptcy, there were 
very few that would allege this kind of circumvention in terms of IRAs.
  If the Senator is able to give me examples, or hearings, or testimony 
on where we had all of these abuses in the IRAs--we are talking about a 
schoolteacher making $40,000 a year who puts aside $2,000 in order that 
they can retire and have substantially similar kinds of income when 
they retire. They would have to do it probably for 35 years in order to 
be able to get the kinds of resources allocated so that they are going 
to be able to do it. Those are not the people we are talking about in 
terms of gypping the credit card companies and the banks. The Senator 
knows that.
  The Senator knows that. I do not understand why we treat these 
retirement funds differently: One way for 401(k)s and another for the 
IRAs, which is the appropriate device working families have used and 
with which they are increasingly developing some confidence.
  We are going to be debating, we hope, Social Security. The average 
Social Security is $13,000. That is the average Social Security check. 
Eighty percent of those on Social Security live below $25,000. We have 
to ask: What are we going to do to encourage individuals to save, 
particularly working families? We have not done a very good job of it 
as a matter of public policy. We have done a very poor job.
  We do a very good job with respect to the most affluent members of 
our society. We have all kinds of tax support in the Internal Revenue 
Code, but for working families, we do a very poor job.
  This is one of those small areas, the IRAs, that is open to working 
families and on which we do not mind putting on the additional cap. On 
the other side, we have serious reservations putting a cap on the 
401(k). I do not think that is fair.
  Also, undermining retirement money that has been paid in over a 
lifetime, which may very well be a lifeline for that family, can be 
eliminated, wiped out, in 4 days of catastrophic illness in a hospital. 
That is what we are talking about. Four days of a catastrophic illness 
for themselves, a wife or child, and it is wiped out. That is what the 
current bill will do.
  We encourage people to work hard, play by the rules all their lives, 
and put something aside with which to retire in peace and dignity. I 
caught myself getting choked up when the Senator talked about a 
millionaire's tax loophole because it is not; it is $2,000 a year. One 
has to contribute for an awful long time to use this as a gimmick. 
There are a whole lot of other gimmicks in this bill, such as the 
homestead provision and other provisions that can be used a lot easier 
than this one.
  For these reasons, I hope we prevail.
  The PRESIDING OFFICER (Ms. Collins). The Senator from Iowa.
  Mr. GRASSLEY. Madam President, the Senator from Massachusetts is 
digging a hole for himself. No. 1, he talks about the difference 
between 401(k)s and IRAs. He can mention $2,000, he can mention 
$10,000, but there is a cap of $1 million. That means up to $1 million 
is not subject to bankruptcy.
  Then he mentioned IRAs and 401(k)s. I remind the Senator from 
Massachusetts that 401(k)s are not covered because he objected to their 
being covered, and we took them out. They are not part of it, not 
because that is the way I want it. I think 401(k)s ought to be capped 
at $1 million as well, if there is a cap at all. Madam President, 
401(k)s are different than the individual retirement accounts capped at 
$1 million, because that is what Senator Kennedy requested we do.
  The other thing mentioned was about my being chairman of the Senate 
Finance Committee and tax expenditures. First of all, I do not buy the 
philosophy of tax expenditures because that implies every penny working 
men and women in America earn belongs to the Federal Government and we 
are going to let them keep some of their own money. I start from the 
premise that the hard-working men and women of

[[Page 3384]]

America, every penny they earn is their money, and we tax them for part 
of it.
  Just in case there is some injustice under present pension laws--I 
admit there are injustices in present pension laws. The Senator from 
Florida, Mr. Graham, and I have introduced legislation to correct some 
of those inequities and particularly to correct some of those 
inequities to benefit the very low-income wage earners to whom Senator 
Kennedy is saying we do not give enough credit.
  Before this Congress is done, hopefully even before the first bill 
gets to the President of the United States, we will have passed some 
tax legislation to take care of some of those inequities in the pension 
laws of the United States, plus the fact that we had legislation out of 
our committee last year that increased the $2,000 IRA limit to a $5,000 
IRA limit.
  I want to get back to the reason for having this $1 million cap on 
individual retirement accounts, that anything over that is not 
protected from the creditors.
  Let's get it clear: Below $1 million is protected from the creditors 
in bankruptcy court. I quote from President Clinton's administration in 
their support of the concept of the cap. This is last year's 
legislation as we were discussing this issue then. The Department of 
Justice said:

       A debtor should not be able to shield abundant resources 
     from creditors, including Federal, State, and local 
     governments, in the form of retirement savings.

  I quote from the Securities and Exchange Commission:

       We have seen insider traders do their trading through IRAs 
     and fraud participants stash their profits in their IRAs. The 
     State law exemptions have not defeated our Federal statutory 
     claims to date, but a new Federal exemption could do so. I am 
     concerned about the grave potential abuse that the exemption 
     for all retirement assets from bankruptcy estates poses.

  That is a letter from Judith R. Starr, assistant chief litigation 
counsel, Securities and Exchange Commission, to members of my staff.
  The Department of Labor:

       A fresh start is not meaningful if it requires a debtor to 
     accept an impoverished retirement. However, a debtor should 
     not be able to inappropriately shield resources from 
     creditors, including Federal, State, and local governments in 
     the forms of retirement savings.

  That is a letter from the Secretary of Labor to Senator Hatch, April 
14, 1999.
  On the other hand, there are those among my colleagues across the 
aisle who oppose the $1 million IRA cap that would prevent, to some 
degree, the rich from shielding wealth from creditors in an IRA. In my 
view, a wealthy debtor should not be able to shield large amounts of 
wealth from creditors in an IRA or in a home.
  The compromise provisions in the bill that we worked out with members 
of the other party last year make important improvements over current 
law and should be retained.
  Accordingly, I urge my colleagues to oppose the effort to strip out 
the individual retirement account cap. I yield the floor.
  The PRESIDING OFFICER. The Senator from Massachusetts.
  Mr. KENNEDY. Madam President, there may be others who want to speak 
on other matters. As I mentioned earlier, the IRA was developed as a 
retirement account basically for working families. The majority of 
those who contribute are individuals who earn less than $30,000 a year. 
These are the people who are putting in only a couple thousand dollars. 
They are limited over a lifetime. You put the cap there. The retirement 
program has historically been out of the reach of the credit card 
companies and the bankruptcy courts, the retirement savings.
  Now for the first time we are seeing an intrusion on that. There is a 
cap. It is not being put in for the 401(k), basically the high rollers. 
If you are not going to put it in for the 401(k)'s, you should not put 
it in for the retirements for the working families. We will have a 
commingling of the funding and there is a good chance there will be an 
additional burden and cost in terms of the IRA. It doesn't make a great 
deal of sense.
  I thank my friend from Iowa. As always, he is a friend and I enjoy 
working with him on many different matters. I will study more closely 
his pension legislation this evening and give it a good deal of 
additional thought.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Madam President, I make crystal clear when we talk 
about $2,000 and $10,000 and $30,000, as the Senator from Massachusetts 
has, it sounds as if we are just clamping down on people who should be 
getting a fresh start in chapter 7 instead of being chapter 13 with 
ability to repay.
  I make very clear the first $1 million is exempted. That causes a 
problem for the Senator from Massachusetts. I am embarrassed to present 
a bill to the Senate of the United States that says a millionaire is 
going to be protected from bankruptcy court if he can pay his bills.
  Now the Senator from Massachusetts raises a very legitimate point. 
There could be a catastrophic illness that could eat up a lot of the 
money, even $1 million, presumably. We have even taken that into 
consideration; that is, we have an interest of justice exception that 
would be applicable in this case. So something over $1 million could be 
exempted. I hope the Senator from Massachusetts realizes we have gone 
through this last year. We tried to accommodate the Senator from 
Massachusetts. We had a compromise I was embarrassed to accept in the 
sense that a $1 million exemption is way too high for my background. 
But I did it because I thought it was important we move this 
legislation along. We are talking about just preserving in the bill 
before the Senate a compromise worked out last year that would be law 
today except for a pocket veto by President Clinton. Otherwise, this 
Senator from Massachusetts wants to strike that compromise, and he was 
part of that compromise. I guess I beg him to stick by his compromise.
  I yield the floor.
  Mr. DOMENICI. I ask consent to speak as in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  THE PRESIDING OFFICER. The Senator from New Mexico is recognized.
  Mr. DOMENICI. I thank the Chair.
  (The remarks of Mr. Domenici pertaining to the introduction of S. 515 
are located in today's Record under ``Statements on Introduced Bills 
and Joint Resolutions.'')

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