[Congressional Record Volume 145, Number 123 (Tuesday, September 21, 1999)]
[Senate]
[Pages S11088-S11094]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
BANKRUPTCY REFORM ACT OF 1999
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
[[Page S11089]]
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:
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,
[[Page S11090]]
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.
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
[[Page S11091]]
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.
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 afresh.
We do not have debtors' prisons. And I certainly agree with that. But
we do have a growing trend in America in which people making $60,000,
$80,000, $100,000 a year owe a significant--but not great--debt and
just go into court and file straight bankruptcy under chapter 7. If
they make $100,000 a year and they owe $60,000 that they could easily
pay off in a period of years, they can go into bankruptcy court and
wipe out their debt. These individuals can file under Chapter 7 and
just not pay their debts--whether it is the guy next door, the garage
mechanic, the automobile car dealer, the credit card bank note--that
debt can simply be wiped out. There is no way a court can stop this
behavior right now. It is not being stopped. And it is going on
regularly.
What Senator Grassley's legislation does is say to the courts: You
have a duty to look at the debtor's income, to analyze what a person's
income is. If they are able, over a reasonable period of time, to pay
back a significant portion of their debt, they ought to pay it back.
Why? Because it is a moral question. And the moral question is this:
The man making $100,000, who owes $60,000 in debt--$2,000 of that may
be to the mechanic who fixed his car--who ought to be paying that?
Who ought to get the money? The man who did the work for him and
fixed his car or fixed the roof on his house? Should he be paid, or
should this man be able to live in his house bankrupt and not pay his
debt to the people who helped fix it for him? It is just that simple.
It is a question of justice and right and wrong.
One provision that I worked hard to put into this bill that I think
is good and very innovative is a requirement that people at least
consider an approach to credit counseling before they actually file for
bankruptcy. There are a number of excellent credit counseling agencies
in America. They can sit down with people and negotiate with their
creditors and get them to reduce the interest rates. They can help
people make payment plans. They help the family put a budget together.
If somebody is addicted to gambling, these credit counseling agencies
can get them in Gamblers Anonymous. If they have mental health
problems, they can help with that. The agencies can help them decide
which debts ought to be paid first, such as the ones with the highest
interest. They can negotiate on behalf of their clients delays in
certain debt so they can pay others first.
I visited for virtually a full day at a credit counseling agency in
my hometown of Mobile. I was extraordinarily impressed with what they
do and the services they offer. This bill would require that, before
you file for bankruptcy, you ought to at least talk to one of these
credit counseling agencies.
We have seen what is happening today before. Senator Grassley saw
this at just about this time last year. We had a bill that came up and
cleared the committee by an overwhelmingly
[[Page S11092]]
bipartisan vote--a bill that we got through this body with an
overwhelming vote. I believe 97 Senators voted for it. Yet when it came
back up, we had just these kinds of dilatory tactics designed to delay
and put the bill off to avoid a vote. I don't know why that is true.
There is nothing but fairness and justice and improvement in this
bill. It is time for us to respond to this growing rush of people who
are claiming bankruptcy, many of whom don't deserve or need the
protections of the judicial system to address their debts. We want
bankruptcy to be available for those who truly need it but not for
those who view it as an easy way to wipe out debts that they could pay.
I think we have made some real progress with this bill. I hope
politics doesn't enter into the Senate's consideration of these
reforms. If it does, I hope the American people will understand and
look through the political tactics and the manipulation to see right
through this.
Thank you, Mr. President.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, first of all, before the Senator from
Alabama leaves, he needs to be thanked for the outstanding work he has
done to help put this compromise piece of legislation together that
came out of committee by a bipartisan vote of 14-4, and also during the
remarks he just presented for laying out the history of this
legislation last year in which the bill passed 97-1. He very accurately
stated what the situation is.
He also now raises the question, which is a legitimate question: What
has gotten rotten in Denmark, so that all of a sudden a bill that
passed 97-1 about a year ago is being filibustered in the effort to
bring it up, if some people aren't playing some sort of game?
I thank the Senator from Alabama for his work on this bill.
I also thank him for reminding the Senate of what that situation was
a year ago and raising the question of what has changed. Not much has
changed. It is just that some people want to use tactics behind the
scenes to keep a bill from coming out in the open when they wouldn't
express those same views in a vote on the floor of the Senate.
Also, there was a previous speaker on the other side, a friend of
mine, who recently spoke against the cloture motion to bring debate on
this bill to a halt on the motion to proceed and then immediately get
to the bill; he expressed a view that there ought to be opportunity to
offer nongermane amendments on the issue of agriculture.
Normally, I am sympathetic to those opportunities to bring to the
floor of the Senate the complaints and concerns of an economic crisis
such as we are facing in agriculture. But I think there are
opportunities available to do that other than messing up an opportunity
to bring needed reform to the bankruptcy code.
Besides, during my remarks today, I am going to point out to the
Senator from Minnesota how there are opportunities in this very
bankruptcy bill to help the family farmer. They relate directly to the
permanent reauthorization of chapter 12 bankruptcy. If that is not
authorized in this bill--in fact, if this isn't done by the 1st of
October--there is no chapter 12. Then, instead of using a chapter of
the bankruptcy code that is written to the special needs of
agriculture, the farmers are going to have to file for bankruptcy under
chapter 11. That was written for corporate America. That doesn't fit
the needs of agriculture. They are going to find, unlike chapter 12's
existence for reorganization of farmers where 88 percent of them are
still able to farm and maintain the family farming operation, that
there will be a very high percentage of farmers forced to file under
chapter 11, the chapter friendly to corporate structure, and they are
not going to be farming anymore at all. They won't be farming as family
farmers, if they farm.
Mr. President, we are coming soon to a cloture vote on the bankruptcy
bill. If cloture is not invoked, it will be very unfortunate. I've
worked very closely with the minority and with Senator Torricelli, who
is the ranking member on the Subcommittee on Administrative Oversight
and the courts, to fashion a bill which contains many changes and
modifications requested by Democrats. For instance, the means-test is
looser than I would personally prefer. But I have made this change to
respond to concerns raised by the other side of the aisle.
I think we're in this situation because we have Members from the
minority party who want to offer an unlimited number of amendments on
subjects totally unrelated to bankruptcy. This, of course, is a delay
and stalling tactic by imposing these nongermane amendments upon a very
important bill, a bill that will pass this body by an overwhelming
margin, if we get it up for a vote, but a bill that can be stalled by
people who maybe don't want this bill to pass and don't want to face it
head on, because this bill passed by a 97-1 vote in the last Congress.
From my conversations with the Republican leadership, I think it's
fair to say that we are willing to accommodate a few unrelated
amendments from the minority. But, it appears that some Members of the
Minority want to turn the bankrupticy bill into a Christmas tree for
everything you can think of. Obviously, that's not acceptable. So here
we are. At some point, I hope that this situation is resolved. We
Republicans stand ready to be reasonable.
I want to take this opportunity to talk about what is being delayed.
The bankruptcy bill contains some very important provisions that are
vital for family farmers, especially Midwestern family farmers, and
particularly with this economic crisis even in my State of Iowa.
As we all know from recent debate on the emergency agriculture
appropriations bill, which is in conference this very night to iron out
the differences between the House and Senate, many of America's farmers
are facing financial ruin. We have some of the lowest commodity prices
in 30 years. Pork producers have lost billions of dollars--not just in
income but in equity. The price of corn is currently well under the
cost of production. And the cash market for soybeans has reached a 23-
year low. This is all in addition to the poor weather conditions in
parts of the Midwest and the drought in the 10 States of the Eastern
United States.
Just last week, I sent a letter with a number of farm State Senators
from both parties, including the Democratic leader, Senator Daschle,
signing it, to all Senators, discussing the needs for reauthorization
of chapter 12, which is done in this all-encompassing bankruptcy reform
legislation.
As you can imagine, these difficult financial circumstances have sent
many farming operations into a tailspin. Clearly, we need to make sure
that the family farmers continue to have bankruptcy protection
available during this difficult period. But bankruptcy protection won't
be available if this bill is blocked by turning it into a Christmas
tree.
I don't pretend to talk about bankruptcy being needed by the family
farmers as a substitute for anything that can be done here in the
Congress or what can be done through the marketplace to bring
profitability because that is what is absolutely necessary. But under
any circumstances, in good times or bad times, some farmers are going
to need to have the protection of chapter 12, just as corporations in
America have the protection of chapter 11. And farmers are entitled to
a chapter that fits the needs of agriculture, the same way corporate
America is entitled to a chapter that fits the needs of corporate
America.
Title X of this bill makes chapter 12 permanent and makes several
changes to chapter 12 to make it more accessible for farmers and to
give farmers new tools to assist in reorganizing their financial
affairs.
As things stand now, chapter 12 will cease to exist by September 30
unless we get this bill through the Senate, through conference, and on
the President's desk. It would be a supreme act of irresponsibility if
we let chapter 12 die and we leave our farmers without a last ditch
protection against foreclosure and forced auctions.
Make no mistake about it. By delaying this bill, Senators who vote
against cloture will leave family farmers across America exposed to
forced auctions and foreclosures. That is what I urge the Senator from
Minnesota to be cognizant of as he votes against cloture, as he
indicated he would do.
Back in the mid-1980s, when Iowa was in the midst of another
devastating
[[Page S11093]]
farm crisis, I wrote chapter 12 to make sure family farmers would
receive a fair shake in dealing with the banks and the Federal
Government as a lender of last resort. At that time I didn't know if
chapter 12 was going to work or not, so it was only enacted on a
temporary basis. Chapter 12 has been an unmitigated success. As a
result of chapter 12, many farmers in Iowa and across the country are
still farming and contributing to the American economy. With a new
crisis in the farm country, we need to make chapter 12 a permanent part
of Federal law. This bankruptcy bill provides for permanency for
farmers.
Chapter 12 worked in the mid-1980s and it should be made permanent so
family farmers in trouble today or any time in the future can get
breathing room and a fresh start. This statement that chapter 12 works
for farmers is backed up by an Iowa State University study of farmers
who used chapter 12 during the 1980s. Mr. President, 88 percent of
those farmers were successfully farming at the time of the study.
The Bankruptcy Reform Act doesn't just make chapter 12 permanent; the
bill makes improvements to chapter 12 so it will become more accessible
and helpful for farmers. First, the definition of a family farmer is
widened so more farmers can qualify for chapter 12 bankruptcy
protections. Second, and perhaps more importantly, my bankruptcy bill
reduces the priority of capital gains tax liabilities for farm assets
sold as a part of a reorganization plan. This will have the beneficial
effect of allowing cash-strapped farmers to sell livestock, grain, and
other farm assets to generate cash-flow when liquidity is essential to
maintaining a farming operation. Together, all of these suggested
reforms will make chapter 12 more effective in protecting America's
family farms during this difficult period. These reforms will never
happen if the bill is continually blocked by Senators offering
unrelated and nongermane amendments.
It is imperative we keep chapter 12 alive. Before we had chapter 12,
banks held a veto over reorganization plans. They wouldn't negotiate
with farmers and the farmer would be forced to auction off the farm,
even if the farm had been in the family for generations. The fact is
that fire-type sales under these circumstances actually drive down
prices at those auctions so both the creditor and the debtor end up
with less. Now, because of chapter 12, the banks are willing to come to
terms.
We must pass this bankruptcy reform bill to make sure America's
family farms have a fighting chance to reorganize their financial
affairs. Unless things change, this bill may be set aside because of
stalling tactics by some Members on the other side of the aisle.
I ask unanimous consent to have printed in the Record a letter signed
by five Members, including Senator Johnson of South Dakota, Senator
Brownback of Kansas, Senator Bob Kerrey of Nebraska, and Senator Tom
Daschle of South Dakota.
There being no objection, the material was ordered to be printed in
the Record, as follows:
U.S. Senate,
Committee on the Judiciary,
Washington, DC, September 13, 1999.
Support Bankruptcy Protections for Family Farmers
Dear Colleague: As the Senate returns to work for the final
months of the first session of the 106th Congress, we will
likely consider S. 625, ``the Bankruptcy Reform Act.'' We are
writing to ask your support for Title X of S. 625, which
contains vital protections for America's family farmers.
By now, we are sure that you are aware that the
agricultural sector of our economy is experiencing severe
distress. Due to grain, livestock, cotton, rice, and
commodity indexes plunging to record lows this summer, many
family farmers are in the midst of an economic crisis.
Farmers across the nation are suffering some of the lowest
farm commodity prices in 30 years. Pork producers have lost
billions of dollars in equity, the price of corn is currently
well under the cost of production and the cash market for
soybeans has reached a 23 year low. This is all in addition
to the poor weather conditions in parts of the Midwest.
In the midst of desperate times in farm country, we believe
that the important reforms contained the Title X of S. 625
are essential. Title X makes Chapter 12 of the bankruptcy
code permanent. As it stands now, Chapter 12 will expire at
the end of this fiscal year. If that happens, millions of
family farms may face foreclosure and forced auctions. We
believe that Congress has an affirmative responsibility not
to leave financially troubled family farmers without the
protections of Chapter 12.
Title X also alters Chapter 12 to make it more accessible
and helpful for farmers. First, the definition of family
farmer is widened so that more farmers can qualify for
Chapter 12 bankruptcy protections. Second, Title X also
reduces the priority of capital gains tax liabilities for
farm assets sold as a part of a reorganization plan. This
will have the effect of allowing cash-strapped farmers to
sell livestock, grain and other farm assets to generate cash
flow when liquidity is essential to maintaining a farming
operation. Together, we believe that these reforms will make
Chapter 12 even more effective in protecting America's family
farms during this difficult period.
While floor debate may focus on other provisions of S. 625,
we ask that you support Title X.
Chuck Grassley.
Tim Johnson.
Sam Brownback.
Bob Kerrey.
Tom Daschle.
Mr. GRASSLEY. I yield the floor and ask unanimous consent that a
quorum call I suggest be equally charged to both sides.
The PRESIDING OFFICER. Without objection, it is so ordered.
The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. FEINGOLD. 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. FEINGOLD. Mr. President, I will say a few words about the cloture
vote we will have shortly on the bankruptcy bill, S. 625. I understand
many in this body want to pass bankruptcy legislation this year.
Certainly, the credit card industry is eager for the Senate to act. I
want to be able to vote for what I consider a balanced bankruptcy bill.
Hardball tactics of this kind will not move this body closer to that
goal. By filing a cloture motion a few seconds after he brought up the
bill, the majority leader is predetermining the outcome. Cloture, I am
glad to say, will not be achieved this afternoon. Cloture should not be
achieved until Senators have a chance to offer amendments to the bill.
Bankruptcy is, of course, a very complicated area of the law. We have
not had real bankruptcy reform and change since 1978. It has an impact
upon millions of American consumers and businesses. Unfortunately, S.
625 is a very one-sided piece of legislation. I have found an amazing
virtual unanimity among all the experts on bankruptcy. Whether talking
to academics or judges or trustees and even practitioners--of course
you expect to hear this from debtors' attorneys but also from many
creditors' attorneys--they all say this bill as it stands today should
not pass.
The only way to make it work, the only way to improve it, is to amend
it. However, many of the amendments we want to offer--and they are very
much relevant to the bankruptcy issue--could not be offered if we
invoke cloture today.
So I am hopeful and believe Democrats will vote today against
cloture, to protect their right to offer bankruptcy amendments to this
bankruptcy bill.
Let me also take a moment to remind my colleagues that this body
passed a bankruptcy reform bill last year by a vote of 97 to 1. I voted
for it. We had nearly a unanimous vote for a bill. That bill could have
become law if the conference committee had not disregarded the wishes
of the Senate. Let me just be clear, in response to the comments a few
minutes ago of the Senator from Iowa, there is nothing fishy going on
here. It is not as if the same bill that passed 97 to 1 is before us.
It is very much the opposite. This is the hard nosed, one-sided
legislation that in my mind is the fantasy of the other body in this
institution. It is not the bill I was comfortable voting for and was
pleased to vote for last year.
This bill is not the balanced approach that the Senate came up with
last year. So amendments, many amendments, frankly, are needed. The way
to reduce the number of amendments is to accept some of them. Many of
the amendments I and my colleagues are going to offer on this bill are
reasonable, moderate, and widely supported. They will make this a more
fair and balanced piece of legislation.
I urge my colleagues to vote ``no'' on cloture. And even more, I urge
the majority leader and the proponents of this
[[Page S11094]]
bill to simply face the honest policy disagreements that need to be
resolved either through amendments or through negotiations. Strong-arm
tactics like filing for cloture right off the bat on a bill of this
magnitude and complexity are not going to work.
I yield the floor.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative assistant proceeded to call the roll.
Mr. DORGAN. Mr. President, 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. DORGAN. Mr. President, I ask consent to speak for 10 minutes as
in morning business.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
____________________