The PRESIDING OFFICER. The time between now and 5:30 is equally divided between the Senator from Utah and the Senator from New Jersey.
Mr. HATCH. Mr. President, this bill is a bipartisan bill, drafted jointly by Senators Grassley and Torricelli. This legislation has been developed in a fair and inclusive manner.
Excerpted from the Congressional Record, 9/21/99
Web posted
September 22, 1999, American Bankruptcy Institute.
U.S. Senate Roll Call Vote
Motion to Invoke Cloture on S.625
September 21, 1999)
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The PRESIDING OFFICER. The time between now and 5:30 is equally
divided between the Senator from Utah and the Senator from New Jersey.
Mr. HATCH. Mr. President, this bill is a bipartisan bill, drafted
jointly by Senators Grassley and
Torricelli. This legislation has been developed in a
fair and inclusive manner.
The reforms proposed in this bill have been carefully studied and
have been deliberated upon at length. Indeed, Congress has been engaged
in the consideration of this issue now for several years. The National
Bankruptcy Review Commission spent two years comprehensively
examining the bankruptcy system. The findings and opinions of
the Commission, which were reported to Congress, have proved helpful in
identifying the problems in the bankruptcy system and in finding
appropriate solutions.
Furthermore, the Subcommittee on Administrative Oversight and the
Courts, which is chaired by Senator Grassley, has held
numerous hearings on the issue of bankruptcy reform. The
subcommittee heard extensive testimony on the subject from dozens of
witnesses. Again, I would like to thank Senators
Grassley and Torricelli for their
leadership in this important consumer bankruptcy reform,
and also last session's ranking member of the Administrative Oversight
and the Courts Subcommittee, Senator Durbin, along with
other members of the Senate, for their hard work on this issue.
Throughout the process of consideration of this bill, at both the
subcommittee and full committee level, changes suggested by the minority
were included in the bill. During this entire process, I have expressed
my willingness to work to address any remaining concerns the minority
has about the bill. It is apparent, however, that efforts are underway
to defeat this important legislation by attaching irrelevant, extraneous
'political agenda' items to it, such as minimum wage, guns, abortion and
tobacco, to name a few.
I am open to full debate on relevant issues. Nevertheless, some of my
friends on the other side of the aisle continue to tie up consideration
of this bill for what appears to be political points.
Despite the efforts of those in opposition, I remain hopeful and
optimistic that we will be able to pass legislation this year that
provides meaningful and much-needed reform to the
bankruptcy system.
The House of Representatives passed a much more stringent
bankruptcy reform bill by an overwhelming bipartisan
majority earlier this spring. The time has come for us to rise above
politics and to do what is right for the American people. It is time for
meaningful and fair bankruptcy reform.
I urge my colleagues to vote for cloture so we may consider the
substance of this important legislation and make our bankruptcy
system better for all Americans.
The Bankruptcy Reform Act of 1999
closes many of the loopholes in our bankruptcy system that allow
unscrupulous individuals to use bankruptcy as a financial
planning tool rather than as a last resort.
Despite the White House's statement of opposition to the House's
bankruptcy reform bill, H.R. 833, the House of
Representatives realized that the time has come to restore personal
responsibility to our nation's bankruptcy system. House
Democrats and Republicans alike recognized that if we do not take the
opportunity to reform our broken system, every family in my own
State of Utah and throughout the country, many of whom struggle to make
ends meet, will continue to bear the financial burden of those who take
advantage of the system. As a result, the House bill passed by an
overwhelming margin of 313 to 108. Half of the House Democratic Caucus
joined with every House Republican to support the bill. And notably, the
House bankruptcy reform bill is more stringent in its
reforms than the Senate bill before us today.
More than three decades ago, the late Albert Gore, Sr., then a
Senator, commented on the moral consequences of a lax bankruptcy
system. He said:
I realize that we cannot legislate morals, but we, as
responsible legislators, must bear the responsibility of writing laws
which discourage immorality and encourage morality; which encourage
honesty and discourage deadbeating; which make the path of the social
malingerer and shirker sufficiently unpleasant to persuade him at least
to investigate the way of the honest man. (Cong. Rec. 905, January 19,
1965.)
I too believe that the complete forgiveness of debt should be
reserved for those who truly cannot repay their debts. S. 625 provides
us with the opportunity to prevent people who can repay their debts from
'gaming the system' by using loopholes that are presently in place.
Mr. President, S. 625 provides a needs-based means test approach to
bankruptcy, under which debtors who can repay some of their debts
are required to do so. It contains new measures to protect against fraud
in bankruptcy, such as a requirement that debtors supply income
tax returns and pay stubs, audits of bankruptcy cases, and
limits on repeat bankruptcy filings. It eliminates a number of
loopholes, such as the one that allows debtors to transfer their
interest in real property to others who then file for bankruptcy
relief and invoke the automatic stay. And, the bill puts some controls
on the ability of debtors to get large cash advances on their credit
cards and to buy luxury goods on the eve of filing for
bankruptcy.
At the same time, the Senate bill provides many unprecedented new
consumer protections. It imposes penalties upon creditors who refuse to
negotiate in good faith with debtors prior to declaring
bankruptcy. Also, it imposes penalties on creditors who willfully
fail to properly credit payments made by the debtor in a chapter 13
plan, and for creditors who threaten to file motions in order to coerce
a reaffirmation without justification. Moreover, the bill imposes new
measures to discourage abusive reaffirmation practices.
Mr. President, S. 625 addresses the problem of bankruptcy
mills, firms that aggressively promote bankruptcy as a financial
planning tool, and often end up hurting unwitting debtors by putting
them in bankruptcy when it may not be in their best interest.
The bill also imposes penalties on bankruptcy petition preparers
who mislead debtors.
Importantly, the bill makes major strides in trying to break the
cycle of indebtedness. It educates debtors with regard to the
alternatives available to them, sets up a financial management education
pilot program for debtors, and requires credit counseling for debtors. I
must commend Senator Sessions for his leadership on
these important credit counseling provisions.
I am proud that the bill also makes extensive reform to the
bankruptcy laws in order to protect our children. I have
authored provisions of the bill to ensure that bankruptcy cannot
be used by deadbeat dads to avoid paying child support and alimony
obligation. Under my provisions, the obligation to pay child support and
alimony is moved to a first priority status, as opposed to its current
place at seventh in line, behind attorneys fees and other special
interests. My measures also ensure the collection of child support and
alimony payments by, among other things, exempting state child support
collection authorities from the 'automatic stay' that otherwise prevents
collection of debts after a debtor files for bankruptcy, and by
exempting from discharge virtually all obligations one ex-spouse owes
another. A new amendment will make changes to a number of provisions in
the bill to clarify that the provisions are not intended, directly or
indirectly, to undermine the collection of child-support or alimony
payments.
The bill includes a provision that I offered, which was accepted in
the Judiciary Committee, which creates new legal protections for a large
class of retirement savings in bankruptcy, a measure which is
supported by groups ranging from the AARP, to the Small Business Council
of America and the National Council on Teacher Retirement.
Rampant bankruptcy filings are a big problem. In 1998, 1.4
million Americans filed for bankruptcy. That was more Americans
than graduated from college, were on active military duty, or worked in
the post office. Indeed, more people filed for bankruptcy in
1998 than lived in the states of Alaska, Delaware, Hawaii, Idaho, Maine,
Montana, New Hampshire, North Dakota, Rhode Island, South Dakota,
Vermont, or Wyoming.
Last year, about $45 billion in consumer debt was erased in personal
bankruptcies. Let me give this number some context. Forty-five billion
dollars is enough to fund the entire U.S. Department of Transportation
for a year. Losses of this magnitude are passed on the American families
at an estimated cost--if we use low estimates--of $400 to every
household in America every year. That $400 could buy every American
family of four: five weeks worth of groceries, 20 tanks of unleaded
gasoline, 10 pairs of shoes for the average grade-school child, or more
than a year's supply of disposable diapers.
Under current law, families who do not file for bankruptcy
are unfairly having to subsidize those who do. Currently, our
bankruptcy system is devoid of personal responsibility and is
spiraling out of control. This is our opportunity to do something about
it.
As noted scholars Todd Zewicky of George Mason Law School and James
White of the University of Michigan Law School recently wrote:
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Current law requires a case-by-case investigation that turns on
little more than the personal predilections of the judge. This chaotic
system mocks the rule of law, and has resulted in unfairness and
inequality for debtors and creditors alike. The arbitrary nature of the
process has also undermined public confidence in the fairness and
efficiency of the consumer bankruptcy system.
I am proud to be proposing several enhancements to the bill that
primarily are designed to protect consumers and further provide
incentives for consumers to take personal responsibility in dealing with
debt management.
In the area of domestic support, as I indicated earlier, Senator
Torricelli and I intend to build upon the new legal
protections we created, as part of the underlying bill, for ex-spouses
and children who are owed child support and alimony payments. The
changes will further strengthen the ability of ex-spouses and children
to collect the payments they are owed, and will make changes to a number
of existing provisions in the bill to clarify that they will not
directly or indirectly undermine the collection of child support or
alimony payments.
In the area of education, Senator Dodd and I, along
with Senator Gregg, have developed an amendment that
will protect from creditors contributions made for education expenses to
education IRAs and qualified state tuition savings programs. This is a
significant protection for those who honestly put money away for the
benefit of their children and grandchildren's educational expenses. The
potential that education savings accounts will be abused in
bankruptcy is addressed by the amendment's requirement that only
contributions made more than a year prior to bankruptcy are
protected. I believe that protecting educational savings accounts is
particularly important because college savings accounts encourage
families to save for college, thereby increasing access to higher
education. Nationwide, there are more than a million educational savings
accounts, meaning there are more than a million children who would
benefit from this amendment. As much as I believe that the
bankruptcy laws need to be reformed to prevent abuse and to
ensure debtors take personal responsibility, the ability to use
dedicated funds to pay the educational costs of children should not be
jeopardized by the bankruptcy of their parents or grandparents.
I have also developed a debt counseling incentive provision, which
builds on the credit counseling provisions currently in S. 625. It
removes any disincentive for debtors to use credit counseling services
by prohibiting credit counseling services from reporting to credit
reporting agencies that an individual has received debt management or
credit counseling, and establishes a penalty for credit counseling
services that do. Debt management education is vital to reducing the
number of Americans who, because of poor financial planning skills, are
forced to declare bankruptcy. Providing crediting
counseling--instruction regarding personal financial management--to
current and potential filers will help curb bankruptcy filing.
In addition, I intend to offer an amendment that is designed to curb
fraud in filing. This amendment puts in place new procedures and
provides new resources to enhance enforcement of bankruptcy
fraud laws. It will require No. 1 that bankruptcy courts develop
procedures for referring suspected fraud to the FBI and the U.S.
attorney's office for investigation and prosecution and No. 2 that the
Attorney General designate one assistant U.S. attorney and one FBI agent
in each judicial district as having primary responsibility for
investigating and prosecuting fraud in bankruptcy.
I also plan to offer an amendment that will allow a victim of a crime
of violence or drug trafficking offense or another party in interest to
petition the bankruptcy court to dismiss a petition voluntarily
filed by a debtor who was convicted of the crime of violence or drug
trafficking offense. In order to protect women and children who may be
owed payments by such a debtor, however, the amendment would still allow
the bankruptcy petition to continue if the debtor can show that
the filing of the petition is necessary to ensure his ability to meet
domestic support obligations. Bankruptcy is not an
entitlement--it is a process by which certain qualifying individuals
with substantial debts may cancel their debts and obtain a 'fresh
start.' Under this amendment, violent criminals and drug
traffickers--individuals who have chosen to engage in serious, criminal
conduct--would be precluded from availing themselves of the benefits of
bankruptcy protection.
Again, I thank Senator Grassley, the distinguished
chairman of the Judiciary Committee's Subcommittee on Administrative
Oversight and the Courts, for his leadership and dedication to this
effort, and look forward to working with him and the subcommittee's
ranking member, Senator Torricelli, in passing this
legislation.
Let's look at a couple of other charts. This one is done by Penn,
Schoen and Bergland Associates, Inc.: 83 percent of the American people
favor an income test in bankruptcy reform. Only 10
percent oppose it and 7 percent don't know. So we should have an income
test in bankruptcy reform.
Americans agree that bankruptcy should be based on need. Ten
percent believe an individual who files for bankruptcy should be
able to wipe out all their debt regardless of their ability to repay
that debt. Only 10 percent of our society believe that, and I am
surprised that many people believe that. If somebody has the ability to
pay a debt, why should they stiff other people with their debts and why
shouldn't they have to live up to paying off their debts?
Four percent refused to answer this. But 87 percent believe an
individual who files for bankruptcy --all of this yellow--should
be required to repay as much of their debt as they are able and then be
allowed to wipe out the rest.
That makes sense. Otherwise, we have people who are using the
bankruptcy laws as an estate planning device. We have people who
every 5 years file for bankruptcy after running up all kinds of
bills and enjoying the life of Riley during those intervening years.
What we want to do is have people realize there are some disincentives
for doing that and that they have to pay some of these bills themselves.
These particular charts show that the American people have their
heads screwed on right, except for about 10 percent of them. If an
individual has the ability to repay some of the debt, they ought to be
able to and they ought to want to, they ought to do what is right, and
87 percent of the American people believe that is the case. Only 10
percent believe they should be able to wipe out any debts at any time by
going into bankruptcy.
I hope we can get people to vote for cloture on this matter so we can
proceed and so we will not have any further delay in passing what really
will be one of the most important bills in this particular session of
Congress.
Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
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Mr. HATCH. 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. HATCH. Mr. President, I suggest the absence of a quorum and ask
that the time be divided equally.
The PRESIDING OFFICER. Time will be charged to both sides. The clerk
will call the roll.
The bill clerk proceeded to call the roll.
Mr. WELLSTONE. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Crapo). Without
objection, it is so ordered.
Mr. WELLSTONE. I thank the Chair.
Mr. President, I will speak briefly in opposition to cutting off
debate on S. 625, the Bankruptcy Reform Act of
1999. I say to my colleagues, the entire concept of the bill is
wrong. It addresses a 'crisis' that appears to be self-correcting. It
rewards the predatory and reckless lending by banks and credit card
companies which fed the crisis in the first place, and it does nothing
to actually prevent bankruptcy by promoting economic security
for working families.
To support, if you will, my case on the floor, I will talk about a
couple of amendments I intended to offer to this bill which I think will
make a huge difference. Let me give a couple of examples.
One amendment will prevent claims in bankruptcy on high-cost
credit transactions in which the annual interest rate exceeds 100
percent, such as pay-day loans and car title pawns. Pay-day loans are
intended to extend small amounts of credit, typically $100 to $500, for
an extremely short period of time, usually 1 week or 2 weeks.
These loans are marketed as giving the borrower a little extra until
pay day, hence the term 'pay-day' 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 gives 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. In any case, the annual interest rate can get as high as 391
percent.
We ought to do something about that, Mr. President. I have an
amendment that will make a difference. I believe I would win if I
offered this amendment to address this problem.
Another amendment I want to offer is about making sure banks offer
low-cost banking services to their customers. For about 12 million
Americans, having a checking account is a simple convenience which they
cannot afford. Why? Because quite often there is a large minimum or you
have fees that are really too high, and therefore people cannot even
have these accounts. I want to make sure these banks are responsive to
low-income citizens as well.
Mr. President, I was on the floor last week for several hours talking
about the crisis in agriculture. I said that those of us from the farm
States want an opportunity to pass legislation that would change the
course of policy and prevent our family farmers from being driven off
the land and prevent, really, what is right now the devastation of our
rural communities.
The minority leader, Senator Daschle, has an
amendment to get the loan rate up, to get prices up, which I support. I
have an amendment--and Senator Dorgan will join
me--which basically says we are going to--for 18 months, until we pass
some antitrust action--put a moratorium on a lot of these mergers and
acquisitions. We want to have some competition in the food industry.
I think I can get a lot of support from Republicans as well as
Democrats. I think there will be a lot of support on the floor of the
Senate for these amendments that try to do something about changing farm
policy so our producers--whether they be in Minnesota, whether they be
in Idaho, whether they be in the Midwest, or whether they be in the
South--are able to make a living and support their families.
In all due respect--I hate to say this--bankruptcy is all too
relevant to what these family farmers are going through. I have an
amendment that says we ought to do some policy evaluation if we are
going to be talking about bankruptcy and we are not going to do
a darn thing to deal with the predatory policies of these credit
companies, that we are not going to do a darn thing about the ways in
which they hook people in who have precious little consumer protection,
that if we are going to talk about low-income citizens, I would like to
see some policy evaluation.
I would like to see us have some understanding about what is going on
in welfare. Where are these mothers and children who are no longer on
the rolls? What are their wage levels? Is there affordable child care?
Do these families have health care coverage or do they not have health
care coverage?
It is also the case that my colleague who sits right next to me,
Senator Kennedy, has an amendment he wants to offer to
raise the minimum wage. I find it interesting that what we have here is
a piece of legislation that does nothing by way of providing consumer
protection, does nothing by way of challenging these credit card
companies, and does absolutely nothing to prevent the bankruptcy
in the first place.
We have the evidence that shows that very few people--maybe 3
percent--have abused the law. And because of that, we are passing a
draconian, harsh piece of legislation which imposes enormous
difficulties on the poorest families, on working-income families. Yet
when some of us say we want to bring some amendments to the floor that
deal with exorbitant interest rates, to make sure that low-income people
have access to banking services, and to make sure we do something about
the economic security for working families--and I include family farmers
who are going bankrupt--we are told by the majority leader we are going
to be shut out from being able to offer amendments, and therefore the
majority leader files cloture.
We will have a cloture vote. I am going to vote against cloture; I am
sure many of my colleagues are going to vote against cloture, and then I
am sure the majority leader is going to pull the bill. If he pulls the
bill, that will be actually a plus for Americans. This is a deeply
flawed piece of legislation--great for the credit companies, terrible
for consumers.
But if he pulls the bill, also that is basically a message to those
of us who for weeks now have been saying we want to come to the floor
with substantive amendments, to fight for the people we represent, to do
something about making sure they have a decent chance--and I am talking
in particular about family farmers. Basically what I am hearing from the
majority leader is: Anytime you say you are going to come to the floor
with these amendments, I am going to pull the legislation. I am not
going to give you a vehicle. We are not going to have an up-or-down vote
on minimum wage.
Apparently, a lot of my colleagues on the other side do not want to
be on record; we are not going to have an up-or-down vote on getting
farm prices up; we are not going to have an up-or-down vote on a
moratorium dealing with these mergers and acquisitions; We are not going
to have an up-or-down vote on amendments that really do deal with these
payday loans, with these exorbitant interest rates, making sure again
that low-income people have access to banking services.
I think there will not be enough votes for cloture. I do not think
there should be enough votes for cloture. I want to say today on the
floor of the Senate, especially to the majority leader--not so much to
my colleague from Utah--if each and every time, as a Senator from an
agricultural State, I am going to be shut out from having any vehicles
whereby I can bring some amendments to the floor to change farm policy
so these producers do not go under in my State, then I am going to have
to look for whatever leverage I have as a Senator to force some
cooperation on the other side so we can have a genuine, substantive
debate
about a lot of issues that are important to people's lives.
Let's talk about raising the minimum wage. Let's talk about what is
happening to family farmers. Let's talk about health care policy. Let's
talk about consumer protection.
This effort on the part of the majority leader--and I guess,
therefore, the majority party--to shut us out from introducing
substantive legislation that would make all the difference in the world
to the people we represent is just simply unacceptable. I do not think
this is any way for us to operate as a Senate. I urge my colleagues to
vote against cloture.
I yield the floor.
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Mr. GRASSLEY addressed the Chair.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. I yield 7 minutes to the Senator from Alabama.
The PRESIDING OFFICER. The Senator from Alabama is recognized for 7
minutes.
Mr. SESSIONS. I thank the Senator from Iowa and appreciate his
steadfast leadership on this issue. I also thank the distinguished
chairman of the Judiciary Committee, Senator Hatch, for
his leadership.
We have worked over the past several years to produce a much needed
piece of legislation, a reform of Federal bankruptcy
law. Bankruptcy is provided for in the U.S. Constitution, and we
have seen some remarkable changes in the last few years that demand that
we reform the system.
Last year there were over 1.4 million bankruptcies filed in America.
That comes out to almost 4,000 filings every day of the year. Since
1990, personal bankruptcies are up 94.7 percent. This dramatic increase
in personal bankruptcies occurred in spite of the fact that over that
same period business bankruptcies fell 31 percent and the country
enjoyed a healthy and expanding economy. These statistics demonstrate
there is need for reform immediately.
Bankruptcy exists to provide relief as a last resort for the
most debt-ridden individuals. It is not a financial planning device.
This bill was needed last year, but it did not pass due to the same
kinds of partisanship and political tactics we have seen here today.
This year, I think Congress will pass this bill. I hope we will
proceed to it today for a final vote. The majority leader of the Senate
and the Members of this Senate have a lot of work to do this year. We
have quite a number of critical appropriations bills, including the
Defense appropriations that may come up later tonight. We have to
consider those bills.
We cannot have a bankruptcy bill like the one that passed
this Senate last year with 97 votes--a very similar bankruptcy
bill which almost every single Senator voted for. That bill turned into
a Christmas tree of amendments on every kind of unrelated issue that any
Senator wanted to bring up, and I am afraid that the same thing might
happen today.
Why is this happening? I will tell you why. Some Senators do not want
this bill to pass, but they are afraid to vote against it straight up,
and so they offer amendment after amendment, and they tell the majority
leader: We won't have any limit. We want to offer as many amendments as
we can on a number of unrelated subjects--international affairs,
economics, whatever they want to bring. This means we could be here for
weeks on a bill that has been debated for the last 2 years with great
intensity. The Senate does not need that. The majority leader cannot
allow that to happen. We will have to not proceed with it, I assume, if
we cannot get cloture today.
A bankruptcy bill similar to this passed the House earlier
this year 313-108. Senator Grassley's bill came out of
the Judiciary Committee 14-4. So I am proud to be a key sponsor of this.
I think it makes the kind of changes we need without changing the
fundamental principles that if a person is over their head in debt,
helplessly unable to pay their debts, they ought to be able to wipe out
those debts and start over. We have no dispute with that principle. That
is a fundamental, historic principle.
I know it makes a lot of people mad to think that somebody does not
have to pay their debts, that they can just go to court and wipe out
their duly signed contract. But this country has always adhered to the
view that if your debts reach a certain level and you cannot pay them,
you can start