[Congressional Record (Bound Edition), Volume 149 (2003), Part 11]
[House]
[Pages 14262-14263]
[From the U.S. Government Publishing Office, www.gpo.gov]




             INVOLUNTARY BANKRUPTCY IMPROVEMENT ACT OF 2003

  Mr. SENSENBRENNER. Mr. Speaker, I move to suspend the rules and pass 
the bill (H.R. 1529) to amend title 11 of the United States Code with 
respect to the dismissal of certain involuntary cases.
  The Clerk read as follows:

                               H.R. 1529

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Involuntary Bankruptcy 
     Improvement Act of 2003''.

     SEC. 2. AMENDMENT.

       Section 303 of title 11, United States Code, is amended by 
     adding at the end the following:
       ``(l)(1) If--
       ``(A) the petition under this section is false or contains 
     any materially false, fictitious, or fraudulent statement;
       ``(B) the debtor is an individual; and
       ``(C) the court dismisses such petition;

     the court, upon motion of the debtor, shall expunge from the 
     records of the court such petition, all the records relating 
     to such petition in particular, and all references to such 
     petition.
       ``(2) If the debtor is an individual and the court 
     dismisses a petition under this section, the court may enter 
     an order prohibiting all consumer reporting agencies (as 
     defined in section 603 of the Fair Credit Reporting Act) from 
     making any consumer report (as defined in section 603 of the 
     Fair Credit Reporting Act) that contains any information 
     relating to such petition or to the case commenced by the 
     filing of such petition.''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Wisconsin (Mr. Sensenbrenner) and the gentleman from Virginia (Mr. 
Scott) each will control 20 minutes.
  The Chair recognizes the gentleman from Wisconsin (Mr. 
Sensenbrenner).


                             General Leave

  Mr. SENSENBRENNER. Mr. Speaker, I ask unanimous consent that all 
Members may have 5 legislative days within which to revise and extend 
their remarks and include extraneous material on H.R. 1529.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Wisconsin?
  There was no objection.
  Mr. SENSENBRENNER. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I rise in strong support of H.R. 1529, the Involuntary 
Bankruptcy Improvement Act of 2003, a bill I introduced earlier this 
year that addresses a very serious and possibly growing problem with 
respect to abuse of the judicial process by extremists and others.
  Under current law, a debtor can voluntarily commence a bankruptcy 
case or be involuntarily forced into bankruptcy by one or more 
creditors. Although rarely used, an involuntary bankruptcy petition can 
be a useful creditor collection tool. It can preserve and maximize 
assets for the benefit of creditors and provide for the appointment of 
a bankruptcy trustee to investigate a debtor's financial affairs.
  Unfortunately, tax protesters and other extremists are now resorting 
to filing fraudulent involuntary bankruptcy petitions against public 
officials and private individuals as yet another weapon in their 
arsenal of abusive litigation tactics, such as filing false liens.
  Last year, for instance, a tax protester filed fraudulent involuntary 
bankruptcy petitions against 36 local public officials in my district 
in Wisconsin, including the county sheriff, the circuit judge, and 
nearly every member of the county board of supervisors. Some of these 
individuals only discovered that they were the subject of a pending 
involuntary bankruptcy case after their lines of credit were terminated 
or they were charged higher interest rates. Worse yet, an involuntary 
bankruptcy filing, as with most bankruptcy cases, is a matter of public 
record and can appear on an individual's credit report for up to 10 
years even if the involuntary bankruptcy filing is fraudulent and the 
case is dismissed by the court.
  As a result, innocent individuals continue to experience credit 
problems long after these abusive cases are dismissed. As the Hartford 
Courant reported last month, it sometimes takes years for corrections 
to be made to a person's credit report. As a result, the individual may 
potentially be forced to pay higher interest rates until the proper 
steps can be taken to fix their credit report.
  While abusive bankruptcy filings are not pervasive, they have 
occurred in various districts across the Nation. According to an 
informal survey conducted by the Administrative Office of the United 
States Courts and the National Conference of Bankruptcy Clerks, 
fraudulent involuntary bankruptcy cases have recently been filed in 
California, Ohio, Maine, Nebraska, and North Carolina. Organizations 
such as the Anti-Defamation League and the National District Attorneys 
Association have expressed concern that this litigation tactic may 
become even more widespread.
  H.R. 1529 responds to the serious problems presented by abusive 
involuntary bankruptcy filings in two respects:
  First, it amends the Bankruptcy Code to require the bankruptcy court, 
on motion of the debtor, to expunge all records relating to a 
fraudulent involuntary bankruptcy case from the court's files under 
certain conditions.
  Second, it authorizes the bankruptcy court to prohibit all credit 
reporting agencies from issuing a consumer report containing any 
reference to a fraudulent involuntary bankruptcy case where the debtor 
is an individual and the court has dismissed the petition.
  This bill offers great forward but very much-needed relief to 
innocent victims of abusive involuntary bankruptcy petitions. I urge my 
colleagues to support this legislation.
  Mr. Speaker, I reserve the balance of my time.
  Mr. SCOTT of Virginia. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I rise in support of H.R. 1529, the Involuntary 
Bankruptcy Improvement Act of 2003, a bill which was reported by the 
Committee on the Judiciary with bipartisan support and without dissent.
  I commend the gentleman from Wisconsin (Chairman Sensenbrenner) for 
moving so quickly to deal with a real and pernicious problem. This 
legislation is a good first step in providing bankruptcy courts with 
congressional guidance in dealing with the phenomenon of malicious and 
baseless involuntary bankruptcy petitions. It augments the existing 
powers of the bankruptcy court and makes clear Congress' intent to 
ensure that the targets of this abuse will have available to them 
meaningful protection from the lasting effects of meritless involuntary 
bankruptcy petitions.
  An involuntary bankruptcy petition, even if no order for relief is 
entered,

[[Page 14263]]

and even if dismissed expeditiously by the court, can inflict lasting 
damage. Credit reporting agencies generally list the filing of a 
bankruptcy petition on a person's credit report almost immediately. 
This can destroy the ability of an individual to obtain credit or to 
obtain credit on appropriate terms, even if the petition is wholly 
without merit. For this reason, the dismissal of the case alone does 
not provide adequate relief.
  This problem is a real one. Cases have already been filed for 
malicious and harassing purposes. Congress must make clear that the 
bankruptcy system cannot be used to harass and injure people.
  Mr. Speaker, there are other changes in the Bankruptcy Code that are 
equally pressing and equally noncontroversial. Many of these 
improvements have been unnecessarily held hostage to a larger and far 
more controversial bankruptcy bill, our family farmers and fishermen, 
the stability of our financial markets, and the rights of parties whose 
cases are unnecessarily delayed because of inadequate judicial 
resources deserve better. I hope we will be able to work with the 
chairman of the committee to deal as expeditiously with these problems 
as we have with this one. So I commend the chairman for his efforts, 
and I urge my colleagues to support the motion to suspend the rules and 
pass the bill.
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I rise in support of H.R. 
1529, the ``Involuntary Bankruptcy Improvement Act of 2003.'' I support 
this bill to protect innocent individuals from fraudulently filed 
involuntary petitions for bankruptcy.
  Financial struggles and bankruptcies are a continuing problem for 
many Americans. In January of 2003 alone, there were thousands of 
Chapter 7 and 11 in my home State of Texas. In Dallas there were 3,208 
Chapter 7 bankruptcy filings and 257 Chapter 11 bankruptcy filings. In 
Fort Worth, there were 3,161 Chapter 7 filings and 210 Chapter 11 
filings.
  Bankruptcy petitions are designed to satisfy creditors and also 
provide relief to the debtor. Our bankruptcy laws allow debtors to 
voluntarily file a petition for relief, and also allow creditors to 
file involuntary petitions against debtors. Despite the goal of 
satisfying both debtor and creditor, debtors who go through bankruptcy 
invariably leave the proceedings with a very poor credit history. This 
depleted credit can seriously affect the debtor's ability to buy a home 
or a car, get a loan, or make use of many services we often take for 
granted.
  Unfortunately many have used the involuntary bankruptcy petition, and 
the negative credit impact that results, as a harassment tool. Many 
public officials have been the victims of involuntary bankruptcy 
petitions.
  H.R. 1529 amends the Bankruptcy Code to the benefit of individuals 
who have been the victims of fraudulently filed bankruptcy petitions. 
Under H.R. 1529, a debtor may file a motion with the court to expunge 
from the court records the filing of the involuntary bankruptcy 
petition. The motion will be granted in those bankruptcies where three 
requirements are met: First, the petition if false or contains any 
materially false, fictitious, or fraudulent statements; second, if the 
debtor is an individual; and third, the court dismisses the petition.
  Mr. Speaker, I support H.R. 1529 because it grants needed relief to 
the victims of fraudulently filed bankruptcy petitions. H.R. 1529 
imposes modest requirements on the debtor and allows the debtor to 
easily correct their damaged credit history. I support H.R. 1529 and I 
urge my colleagues to do the same.

  Mr. SCOTT of Virginia. Mr. Speaker, I yield back the balance of my 
time.

                              {time}  1245

  Mr. SENSENBRENNER. Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Walden of Oregon). The question is on 
the motion offered by the gentleman from Wisconsin (Mr. Sensenbrenner) 
that the House suspend the rules and pass the bill, H.R. 1529.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the bill was passed.
  A motion to reconsider was laid on the table.

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