[Congressional Record Volume 140, Number 67 (Wednesday, May 25, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: May 25, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
         THE ABOLITION OF BANKRUPTCY HAVENS AMENDMENTS OF 1994

                                 ______


                            HON. DAVID MANN

                                of ohio

                    in the house of representatives

                        Wednesday, May 25, 1994

  Mr. MANN. Mr. Speaker, today I am introducing legislation to address 
an inequity in our bankruptcy laws that allows wealthy individuals to 
wipe away all of their debts and at the same time keep their mansions, 
expensive jewelry, and thoroughbred horse collections.
  The problem with our Bankruptcy Code is that a small number of States 
abuse the power of States to set the value of the homestead exemption 
for individuals who file for bankruptcy. The homestead exemption is the 
value in home equity that a debtor may exclude from bankruptcy 
proceedings. In the State of Florida a person can exclude his or her 
residence including up to 160 acres of realty no matter what the value. 
In Texas up to 200 acres plus a dwelling on the land is placed beyond 
the reach of creditors, again even if the property is worth millions. 
In Ohio, by contrast, the limit is $5,000.
  The unlimited exclusions in Florida and Texas make these two States 
havens for debtors. Debtors can buy million dollar estates and get 
absolution for all their other debts. A favorite trick of wealthy 
debtors is to establish residency in Florida or Texas and then declare 
bankruptcy. Meanwhile, middle-class Americans work hard to pay their 
bills and pay higher prices for merchandise in order to make up for the 
debts not paid by the millionaires living in their mansions in the few 
States that make a mockery of our bankruptcy system.
  In November, the program ``60 Minutes'' reported on three cases in 
Florida. One involved Marvin Warner, a former Cincinnati resident, who 
was convicted and served time in jail because of his involvement in the 
savings and loan debacle in the 1980's. Warner established his 
residency in Florida in 1985, paid $3\1/2\ million in cash for a 400-
acre horse farm and a collection of thoroughbred horses, and then filed 
for bankruptcy in 1987. Because he was in Florida he was able to keep 
his farm and his horses and be absolved from more than $70 million in 
debt.
  The same ``60 Minutes'' episode interviewed a Florida bankruptcy 
attorney who said he gets five calls a week from lawyers around the 
country who are forum shopping for their clients with money they want 
to shelter. And they can shelter the money by pouring it into a 
residence in a State with an absurdly high homestead exemption and 
filing for bankruptcy there.
  Mr. Speaker, the bill I am introducing today adds a fair but 
necessary provision to the Federal Bankruptcy Code. The Abolition of 
Bankruptcy Havens Amendments of 1994 establishes a cap on the State 
homestead exemption. The cap is a reasonable $50,000. This is more than 
is allowable under current law in more than two-thirds of our States. 
This is not a bill meant to benefit creditors alone. This is a bill 
that is meant to provide a fair playing field for all Americans so that 
the machine tool builder in Cincinnati and the executive who gets rich 
on Wall Street and then moves to Florida are both expected to pay their 
bills. This is an anti-deadbeat bill. I encourage your support for the 
legislation.

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