To clarify the safe harbor with respect to debtors who have serious medical conditions or who have been called or ordered to active duty in the Armed Forces and low income veterans.

BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2005

The PRESIDING OFFICER. The Senator from Hawaii is recognized.

Amendment No. 15

Mr. AKAKA. Mr. President, I rise to speak on amendment No. 15, which
I will offer to S. 256.
I thank Senators Durbin, Leahy, and Sarbanes for working with me on
this legislation, the Credit Card Minimum Payment Warning Act, and for
cosponsoring the amendment.
Mr. President, during all of 1980, only 287,570 consumers filed for
bankruptcy. As consumer debt burdens have ballooned, the number of
bankruptcies have increased significantly. From January through
September of 2004, approximately 1.2 million consumers filed for
bankruptcy, keeping pace with last year's record level. The growth in
use of credit cards can partially explain this surge. Revolving debt,
mostly compromised of credit card debt, has risen from $54 billion in
January 1980 to more than $780 billion in November 2004. A U.S. Public
Interest Research Group and Consumer Federation of America analysis of
Federal Reserve data indicates that the average household with debt
carries approximately $10,000 to $12,000 in total revolving debt.
We must make consumers more aware of the long-term effects of their
financial decisions, particularly in managing their credit card debt,
so that they can avoid financial pitfalls that may lead to bankruptcy.
While it is relatively easy to obtain credit, not enough is done to
ensure that credit is properly managed. Currently, credit card
statements fail to include vital information that would allow
individuals to make fully informed financial decisions. Additional
disclosure is needed to ensure that individuals completely understand
the implications of their credit card use and the costs of only making
the minimum payments as required by credit card companies.
S. 256 includes a requirement that credit card issuers provide
additional information about the consequences of making minimum
payments. However, this provision fails to provide the detailed
information for consumers on their billing statement that our amendment
would provide. Section 1301 of the bankruptcy bill would allow credit
card issuers a choice of disclosures that they must provide on the
monthly billing statement.
The first option included in the bankruptcy bill would require a
``Minimum Payment Warning'' stating that it would take 88 months to pay
off a balance of $1,000 for bank card holders or 24 months to pay off a
balance of $300 for retail card holders. It would require a toll-free
number to be established that would provide an estimate of the time it
would take to pay off the customer's balance. The Federal Reserve Board
would be required to establish a table that would estimate approximate
number of months it would take to pay off a variety of account
balances.
There is a second option that the legislation permits. The credit
card issuer could provide a general minimum payment warning and provide
a toll-free number that consumers could call for the actual number of
months to repay the balance.
Both of these options are inadequate. They do not require the issuers
to provide their customers with the total amount they would pay in
interest and principal if they chose to pay off their balance at the
minimum payment rate. The minimum payment warning included in the first
option underestimates the costs of paying a balance off at the minimum
payment. Since the average household with debt carries a balance has
approximately $10,000 to $12,000 in total revolving debt, a warning
based on a much smaller balance, $1,000 or under in this case, will not
be helpful. If a family has a credit card debt of $10,000, and the
interest rate is a modest 12.4 percent, it would take more than 10\1/2\
years to pay off the balance while making minimum monthly payments of 4
percent.
As we make it more difficult for consumers to discharge their debts
in bankruptcy, we have a responsibility to provide additional
information so that consumers can make better informed decisions. Our
amendment will make it very clear what costs consumers will incur if
they make only the minimum payments on their credit cards. If this
amendment is adopted, the personalized information they will receive
for each of their accounts will help them to make informed choices
about the payments that they choose to make towards reducing their
outstanding debt.
This amendment requires a minimum payment warning notification on
monthly statements stating that making the minimum payment will
increase the amount of interest that will be paid and extend the amount
of time it will take to repay the outstanding balance. The amendment
also requires companies to inform consumers of how many years and
months it will take to repay their entire balance if they make

[[Page S1835]]

only the minimum payments. In addition, the total cost in interest and
principal, if the consumer pays only the minimum payment, would have to
be disclosed. These provisions will make individuals much more aware of
the true costs of their credit card debts. The amendment also requires
that credit card companies provide useful information so that people
can develop strategies to free themselves of credit card debt.
Consumers would have to be provided with the amount they need to pay to
eliminate their outstanding balance within 36 months.
Finally, our amendment would require that creditors establish a toll-
free number so that consumers can access trustworthy credit counselors.
In order to ensure that consumers are referred from the toll-free
number to only trustworthy organizations, the agencies for referral
would have to be approved by the Federal Trade Commission and the
Federal Reserve Board as having met comprehensive quality standards.
These standards are necessary because certain credit counseling
agencies have abused their nonprofit, tax-exempt status and have taken
advantage of people seeking assistance in managing their debts. Many
people believe, sometimes mistakenly, that they can place blind trust
in nonprofit organizations and that their fees will be lower than those
of other credit counseling organizations. Too many individuals may not
realize that the credit counseling industry does not deserve the trust
that consumers often place in it.
Our credit card minimum payment warning legislation has been endorsed
by the Consumer Federation of America, Consumers Union, U.S. Public
Interest Research Group, and Consumer Action.
I urge my colleagues to support this amendment that will empower
consumers by providing them with detailed personalized information to
assist them in making better informed choices about their credit card
use and repayment. This amendment makes clear the adverse consequences
of uninformed choices, such as making only minimum payments, and
provides opportunities to locate assistance to better manage their
credit card debts.
Mr. President, I ask unanimous consent that the pending amendment be
set aside, and I call up amendment No. 15.
The PRESIDING OFFICER. Without objection, it is so ordered.
The clerk will report the amendment.
The assistant legislative clerk read as follows:

The Senator from Hawaii [Mr. Akaka], for himself, Mr.
Durbin, Mr. Leahy, and Mr. Sarbanes, proposes an amendment
numbered 15.

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

(Purpose: To require enhanced disclosure to consumers regarding the
consequences of making only minimum required payments in the repayment
of credit card debt, and for other purposes)

On page 473, strike beginning with line 12 through page
482, line 24, and insert the following:

SEC. 1301. ENHANCED CONSUMER DISCLOSURES REGARDING MINIMUM
PAYMENTS.

(a) Disclosures Regarding Outstanding Balances .--Section
127(b) of the Truth in Lending Act (15 U.S.C. 1637(b)) is
amended by adding at the end the following:
``(11)(A) Information regarding repayment of the
outstanding balance of the consumer under the account,
appearing in conspicuous type on the front of the first page
of each such billing statement, and accompanied by an
appropriate explanation, containing--
``(i) the words `Minimum Payment Warning: Making only the
minimum payment will increase the amount of interest that you
pay and the time it will take to repay your outstanding
balance.';
``(ii) the number of years and months (rounded to the
nearest month) that it would take for the consumer to pay the
entire amount of that balance, if the consumer pays only the
required minimum monthly payments;
``(iii) the total cost to the consumer, shown as the sum of
all principal and interest payments, and a breakdown of the
total costs in interest and principal, of paying that balance
in full if the consumer pays only the required minimum
monthly payments, and if no further advances are made;
``(iv) the monthly payment amount that would be required
for the consumer to eliminate the outstanding balance in 36
months if no further advances are made; and
``(v) a toll-free telephone number at which the consumer
may receive information about accessing credit counseling and
debt management services.
``(B)(i) Subject to clause (ii), in making the disclosures
under subparagraph (A) the creditor shall apply the interest
rate in effect on the date on which the disclosure is made.
``(ii) If the interest rate in effect on the date on which
the disclosure is made is a temporary rate that will change
under a contractual provision specifying a subsequent
interest rate or applying an index or formula for subsequent
interest rate adjustment, the creditor shall apply the
interest rate in effect on the date on which the disclosure
is made for as long as that interest rate will apply under
that contractual provision, and then shall apply the adjusted
interest rate, as specified in the contract. If the contract
applies a formula that uses an index that varies over time,
the value of such index on the date on which the disclosure
is made shall be used in the application of the formula.''.
(b) Access to Credit Counseling and Debt Management
Information.--
(1) Guidelines required.--
(A) In general.--Not later than 1 year after the date of
enactment of this Act, the Board of Governors of the Federal
Reserve System and the Federal Trade Commission (in this
section referred to as the ``Board'' and the ``Commission'',
respectively) shall jointly, by rule, regulation, or order,
issue guidelines for the establishment and maintenance by
creditors of a toll-free telephone number for purposes of the
disclosures required under section 127(b)(11) of the Truth in
Lending Act, as added by this Act.
(B) Approved agencies.--Guidelines issued under this
subsection shall ensure that referrals provided by the toll-
free number include only those agencies approved by the Board
and the Commission as meeting the criteria under this
section.
(2) Criteria.--The Board and the Commission shall only
approve a nonprofit budget and credit counseling agency for
purposes of this section that--
(A) demonstrates that it will provide qualified counselors,
maintain adequate provision for safekeeping and payment of
client funds, provide adequate counseling with respect to
client credit problems, and deal responsibly and effectively
with other matters relating to the quality, effectiveness,
and financial security of the services it provides;
(B) at a minimum--
(i) is registered as a nonprofit entity under section
501(c) of the Internal Revenue Code of 1986;
(ii) has a board of directors, the majority of the members
of which--

(I) are not employed by such agency; and
(II) will not directly or indirectly benefit financially
from the outcome of the counseling services provided by such
agency;

(iii) if a fee is charged for counseling services, charges
a reasonable and fair fee, and provides services without
regard to ability to pay the fee;
(iv) provides for safekeeping and payment of client funds,
including an annual audit of the trust accounts and
appropriate employee bonding;
(v) provides full disclosures to clients, including funding
sources, counselor qualifications, possible impact on credit
reports, any costs of such program that will be paid by the
client, and how such costs will be paid;
(vi) provides adequate counseling with respect to the
credit problems of the client, including an analysis of the
current financial condition of the client, factors that
caused such financial condition, and how such client can
develop a plan to respond to the problems without incurring
negative amortization of debt;
(vii) provides trained counselors who--

(I) receive no commissions or bonuses based on the outcome
of the counseling services provided;
(II) have adequate experience; and
(III) have been adequately trained to provide counseling
services to individuals in financial difficulty, including
the matters described in subparagraph (F);

(viii) demonstrates adequate experience and background in
providing credit counseling;
(ix) has adequate financial resources to provide continuing
support services for budgeting plans over the life of any
repayment plan; and
(x) is accredited by an independent, nationally recognized
accrediting organization.

The PRESIDING OFFICER (Mr. Chambliss). The Senator from
Massachusetts.
Mr. KENNEDY. Mr. President, we have a lot of urgent problems pressing
the Nation and this Congress. We have urgent problems with joblessness.
We have urgent problems with the coverage of health care and the costs
of health care. We have urgent problems with education. We have urgent
problems dealing with poverty. We have problems that go to the heart of
fairness and opportunity in this Nation. These are real problems of
real people, and they test whether our commitment to America's core
values is as important to us as we say it is. But we are not spending
this month on any of those issues. We are spending most of the time
between now and the March recess on a bill that does nothing about any
of these problems, that does nothing for Americans facing job problems,

[[Page S1836]]

health problems, and education challenges. We are spending our time on
a bill that was written by the credit card industry for the benefit of
the credit card industry. We are spending our time on changes in the
bankruptcy law which were opposed by the two distinguished national
commissions which studied those laws during the 1970s and 1990s.
This is a bill which is opposed by a long list of organizations
representing many millions of real people, organizations representing
workers, retired Americans, consumers, women's organizations, civil
rights organizations, a large group of distinguished law professors and
bankruptcy judges, 1,700 prominent doctors around the country, and even
some financial service organizations that are truly responsible lenders
and care about their customers. I am talking about people such as the
CEO of ING Direct, the sixth largest thrift institution in the Nation;
people like the CEO of the second largest credit union in the U.S., the
North Carolina State Employees' Credit Union.
This is what the CEO of ING Direct told the committee about the bill:

The one-sided provisions of this bankruptcy legislation are
bad news for consumers, but they are also bad news for the
financial service industry. Consumers are our customers. By
creating a form of debt imprisonment, this bill will hobble
the most important player in the world economy, the American
consumer.

Jim Blaine, the CEO of the North Carolina State Employees' Credit
Union, had this to say about the bill:

This bird is a turkey.

So why are we here? Why are we spending our time on this supposed
resolution to a nonexistent problem rather than addressing the real
problems the Nation faces? It cannot be because the credit card
industry needs help. The credit card industry is doing just fine, thank
you. The profits of the credit card industry rose from $6.4 billion in
1990 to $20 billion in 2000. By last year, those profits had increased
another 50 percent to over $30 billion. Let me say that again. Credit
card company profits have gone from $6.4 billion in 1990 to $30.2
billion last year. Why are we spending our time on legislation designed
to further enrich what is already one of the most profitable industries
in America at the expense of middle-income Americans in financial
distress, in most cases through no fault of their own?
This is supposed to be a bill about spendthrifts, about people who
abuse the credit system and abuse the bankruptcy system. If that were
really what this bill was about, maybe there would be some reason for
us to be here. If this were a bill that dealt with the truly incredible
abuses of the bankruptcy system that we have seen in the Enron case, in
the WorldCom case, in the Adelphia case, and the Polaroid case in my
own State, then maybe there would be reason to be spending our time
working on this bill.

Look at the Polaroid case in my home State of Massachusetts. Polaroid
filed for bankruptcy in 2001. In the months leading up to the company's
filing, the corporation made $1.7 million in incentive payments to its
chief executive Gary DiCamillo on top of his $840,000 base salary. The
company also received bankruptcy court approval to make $1.5 million in
payments to senior managers to keep them on board. These managers
collectively received an additional $3 million when the company's
assets were sold off.
By contrast, just days before Polaroid filed for bankruptcy, it
canceled health and life insurance for more than 6,000 retirees and
canceled health insurance coverage for workers on long-term disability.
It also stopped certain benefits for thousands of workers who were
recently laid off. Polaroid workers had been required to pay 8 percent
of their pay in the company's employee stock ownership plan, the ESOP
programs. When the company declined, their retirement savings were
virtually wiped out. Now, that is a real abuse of the bankruptcy
system.
But this bill is not about consumers who abuse the system. It is not
about corporate executives who have exploited the system to line their
own pockets. This is a bill for which the credit card industry hopes to
squeeze a few extra dollars a month out of Americans who are out on
their luck, people who have been hit hard by medical disasters,
guardsmen and reservists who have suddenly been called to duty to serve
their Nation, forcing them to leave their families and their businesses
behind, people who were fired after years of hard work because their
employer sent their jobs abroad. This is not what the Senate should be
doing. This legislation is not worthy of the Senate. Our time should be
spent helping, not hurting, the working families most in need.
This bill does nothing to protect those hard-working Americans who
did everything they could to stave off bankruptcy but were left with no
other choice after exhausting their own resources. Yet this Republican
bill actually makes it more difficult for good citizens such as these
to get the fresh start that the bankruptcy laws are intended to offer.
The idea of a fresh start lies at the heart of our bankruptcy law. In
1833, Supreme Court Justice Joseph Storey, one of the great legal
scholars in our history, explained why. He said that bankruptcy laws
were intended to divide debtors' remaining assets among their creditors
when they could not pay all of their debts, but the purpose was also to
relieve unfortunate and honest debtors from perpetual bondage to their
creditors. He said that bankruptcy legislation should relieve the
debtor from a slavery of mind and body which robs his family of the
fruits of his labor.
One hundred years later, the Supreme Court emphasized Justice Story's
views. The Bankruptcy Act, it said, is intended to:

relieve the honest debtor from the weight of oppressive
indebtedness, and permit him to start afresh free from the
obligations and responsibilities consequent upon business
misfortunes.

The power to earn a living, the Court said, is a ``personal
liberty,'' and:

from the viewpoint of the wage-earner there is little
difference between not earning at all and earning wholly for
a creditor.

In short, the same fundamental values which led this Nation to
abolish debtors' prisons, also led us to offer debtors a fresh start.
They would be required to use their available assets to pay as much of
their debt as they could, but no more. They would have full rights to
their own future earnings, so that they would not have to live in
perpetual bondage to their past debtors.
That is the essence of our free enterprise system. We encourage
entrepreneurs. People can borrow money for a car to go to work, for
equipment to start a small business, for a tractor to run a farm, for a
boat to start a fishing business. When decent people run into financial
trouble, we don't write them off forever. We help them get back on
their feet so they can provide for their families and contribute to our
economy once again. Otherwise, few in America take the risks that our
free enterprise depends on. There is a safety net to stop a free fall.
Yet this legislation turns its back on that spirit of American
entrepreneurship. It tells our citizens that they cannot get that fresh
start unless they can maneuver through a maze of procedural obstacles
created by the credit card companies and debt collection agencies. It
imposes paperwork burdens that bankrupt Americans can not afford. It
forces them to pay for credit counselors, who may be predatory
themselves. It forces them to miss work to go to audits of their meager
assets. It requires them to hire a lawyer to mitigate this maze, but
then tells the lawyer that any error will make the lawyer personally
liable.
In short, this bill does everything the mind of the purveyors of
predatory plastic could think up to make their cardholders pay in full,
and prevent them from getting the ``fresh start'' that bankruptcy
offers them. Its purpose is to keep the credit card payments rolling
in, and prevent that money from being used to feed their children or
pay their hospital bills or make their mortgage payments. It labels
them as abusers of the system.
Just listen to the words in the summary of the key standard for the
``means test'' that lies at the heart of this bill. According to this
summary, prepared by the Congressional Research Service, you are
presumed to be an abuser of the system:

if current monthly income, excluding allowed deductions,
secured debt payments, and priority unsecured debt payments,
multiplied by 60, would permit a debtor to pay

[[Page S1837]]

not less than the lesser of (a) 25 percent of nonpriority
unsecured debt or $6000 (or $100 a month), whichever is
greater, or (b) $10,000.

Maybe some people can figure that out--most cannot. But that
convoluted paragraph determines whether your debts can be discharged in
bankruptcy, or not.
This bill is flawed from top to bottom. That is why, since it was
first presented to Congress by the credit card industry, it has been
opposed by bankruptcy judges, legal scholars, consumer advocates, labor
unions, and civil rights groups. They all recognize that its harsh and
excessive provisions will have a devastating effect on working
families.
It allows credit card companies to put their profits ahead of the
well-being of our troops serving in Iraq and Afghanistan. Since 9-11
about half a million reservists arid members of the National Guard have
been called to active duty, half a world away from their homes and
businesses. Many of their families are suddenly facing economic
hardship, and their creditors keep calling. They are serving far away,
and the small businesses they ran are running into trouble. This bill
does nothing to protect the men and women who are fighting for us.
When one reservist left home, his wife had to start leading his
construction company, and the company ran into trouble. Their family
income plummeted by 80 percent. They lost their savings, lost their
credit, and the business is on the rocks--all because a soldier served
his country. The troubles of families like that will be even more
serious under this bill. Instead of helping to ease the burden, it
treats that family like tax evaders or defrauders.
This Republican bill also penalizes innocent victims of today's
economy. We are stil1 recovering from the 2001 recession. Nearly 8
million Americans are still unemployed. One in five of those workers
has been out of work for more than 6 months. The unemployment insurance
safety net they rely on has not been updated to meet today's demands.
Jobs in health care, financial services, and information technology are
being shipped overseas.
Workers who lose their jobs today have great difficulty finding a new
job with comparable wages, benefits, hours, and overall quality. Part-
time jobs don't begin to provide the same financial stability--yet
today's companies are relying more and more on part-time workers to cut
costs. The average part-time worker earns $4 an hour less than a
regular full-time worker. Few part-time workers have a health insurance
plan or a pension plan.
Huge numbers of working families are being squeezed hard by the
current economy. Their ability to live the American dream is
increasingly out of reach with each passing year. They find it harder
and harder to earn a living--to pay the mortgage, pay the rent, pay
their medical bill, pay their food bill, pay their gasoline bill, pay
the college bill. Yet the cost of getting by continues to rise faster
than family income.
Healthcare costs are out of reach. Health insurance premiums have
soared 59 percent in the past 4 years. Drug costs have soared 65
percent.
Housing costs rose 33 percent in the last 4 years. Child care can
often cost up to $10,000 a year for one child--more than the cost of
tuition at a public college. College costs are rising at double-digit
rates. Tuition at public colleges has risen 35 percent in the last 4
years.
Today, hardworking families are balancing on a precarious tower of
bills that keep piling. Inevitably, many topple over. They go into debt
just to get by. The average family now spends 13 percent of its income
to pay debts--the highest percentage since 1986. The average household
now has more than $8,000 in credit card debt. More than half of all
Americans acknowledge they have too much debt. Three-quarters of that
debt is a major reason it's harder to achieve the American dream today.
It is no wonder so many families face bankruptcy.
This year, more people will end up in bankruptcy than suffer a heart
attack. More people will file for bankruptcy than graduate from
college. More children will grow up in families facing bankruptcy than
in families facing divorce.
Many of us feel the Bush administration is bankrupt in more ways than
one. Its reckless policies are bankrupting the economy and literally
bankrupting millions of families. Bankruptcy is up 33 percent since
President Bush took office. An American now goes bankrupt every 19
seconds. In Massachusetts, there is a bankruptcy every half hour.
One of the greatest weaknesses of this bill is its failure to address
the issue of bankruptcies caused by serious illness or injury. Illness
is bankrupting millions of Americans who have done everything right.
They have worked hard, played by the rules, earned a good salary, saved
their money, even purchased health insurance--only to find all that is
not enough.
More than half of all families facing bankruptcy today are facing it
because of overwhelming medical costs. They are not irresponsible
spendthrifts who bought too much at the mall, or were enticed to go in
over their heads in debt by a credit card solicitation they couldn't
say no to. They are facing bankruptcy because of a sudden serious
illness or a severe injury that caused a mountain of debt they couldn't
afford.

The average American facing a serious illness is burdened with more
than $13,000 of out-of-pocket expenses, even though they have health
insurance. If you have cancer, it is $35,000. That is money you have to
pay out of your own pocket for expenses not covered by your health
insurance.
If the bill before us passes, those fellow citizens will be penalized
twice--once by the failure of the health care system and a second time
by the failure of the bankruptcy laws. This bill will only make the
second failure even worse.
We need to make sure that bankruptcy continues to be available as a
safety net for those Americans--men and women who have spent down their
savings on a serious injury or illness, who face huge doctor and
hospital bills their insurance didn't cover, who are unable to go back
to work after suffering serious medical problems.
They are people such as April Wetherell, a 50-year-old woman from
Toms River, NJ, who went back to school after raising her children and
received her master's degree in social work. She was serving as a
visiting nurse 2 years ago, when she suffered a stroke while recovering
from knee surgery. The stroke left her unable to speak, work, or care
for her own needs. At the time, April still owed $25,000 in student
loans. She had been making payments faithfully on her student loans
until her illness left her unable to return to her job. Her health
insurance did not cover all her medical costs, and she was left with
more than $20,000 in unpaid medical bills. At the time of her stroke,
she had about $7,000 in credit card debt, which she had been paying off
on time. Even though she had done all the right things, she was forced
into bankruptcy because of her serious, incapacitating illness.

Walton Pinkney of Frederick, MD, has been an electrician for more
than 10 years. He changed jobs in 2000, and his new employer did not
provide health benefits for the first 90 days of employment. Sadly,
Walton suffered heart failure during his first month on his new job.
His new health plan had not yet taken effect, and he was responsible
for more than $45,000 in medical expenses for his heart condition. He
tried to return to work, but his employer said his health was too
uncertain for him to return. Faced with large medical bills he could
not pay after he lost his job, he had to file for bankruptcy in 2003.
Zoraya Marrero is a single mother with three children from
Woodbridge, VA. Her oldest child suffers from spina bifida. She
received State disability benefits and medical coverage for her child
due to the illness. After moving to another State 5 years ago, she no
longer qualified for new benefits, and she also had to pay back $60,000
for benefits she had already received. She has been fighting the
$60,000 claim and paying her own medical expenses while working in a
doctor's office. She cannot afford private insurance, and cannot afford
to pay for her son's costly medical care. Overwhelmed by debt, she
filed for bankruptcy.
These people had no intention of seeking relief in bankruptcy. They
were not ``gaming'' the system to avoid their responsibilities. They
and millions of other Americans in similar circumstances filed for
bankruptcy, but

[[Page S1838]]

only after they had exhausted all the other options--not because they
wanted to but because they had to.
In fact, before declaring bankruptcy, they had spent at least 2
years, on average, making very real sacrifices in a futile effort to
pay for their health care and make ends meet. One in five went without
food. Almost one-third had their electricity shut off.
I am talking about individuals who went into bankruptcy as a result
of medical expenses, even though about 65 percent of them had health
insurance before they actually went into bankruptcy. That is what they
did, according to the Elizabeth Warren report from the Harvard Law
School.
One in five went without food, almost a third had their electricity
shut off, almost half lost their phone service, many went without
needed medical care, and some even moved their elderly parents to less
comfortable nursing homes.
As this chart indicates, here is what has happened to the lavish
lifestyle of our fellow citizens. These are half of all the
bankruptcies at the present time. How did they live, and what did they
do for 2 years before filing for bankruptcy? They went without needed
medical care, 61 percent; without doctors, 50 percent; utilities turned
off, 30 percent; without food, 22 percent; and 70 percent moved their
elderly parents to cheaper care facilities.
These are our fellow Americans whom we want to punish with this
bankruptcy bill? If you want to go after the spendthrifts, let us do
that. But do you think we are going after corporate America in this
bankruptcy bill? Read today's newspaper. Here it is: Former WorldCom
chief executive, once hailed as one of the most brilliant
telecommunications executives, told the packed courtroom, ``I don't
know about technology; I don't know about finance; also, I don't know
about accounting.''
There it is. The corporate CEOs will be able to escape.
But do you think these hard-working Americans are going to be able to
escape anything with this bill at all to deal with WorldCom, Enron,
Polaroid? There is absolutely nothing in here. Yet there is the result
of what this legislation does.
Generally around here, we have legislation that is reasonably
balanced. Not this piece of legislation. The most profitable industry
in the country, 100-percent profits in the last 5 years, and they are
out there trying to squeeze some additional money ought of these hard-
working Americans. I would have thought at least a majority who were
going to write this legislation here in the Senate would have tried to
do something about corporate bankruptcies. But, no, no. They are
letting those individuals alone, and most of those--we come back a
little later to discuss how they profited--a number of them even
profited after they went into bankruptcy. There is even one individual
who profited after he was convicted of larceny. But we are not dealing
with those particular issues.
We often talk in America about safety nets. Social Security is a
safety net to guarantee financial security for senior citizens. Poverty
programs are safety nets for children and families. Our bankruptcy laws
are a safety net for millions of families, too.
Americans who live responsibly, do everything right, and still
suddenly fall on hard times deserve a second chance, and the bankruptcy
laws give them that chance. They can make a fresh start and pull
themselves back up. They have renewed hope for the future.
Unexpected financial setbacks for families should not mean the end of
their American dream. They should not lose all hope for themselves and
their children. It's the old ``cowboy up'' philosophy--when you fall
off your horse, you pick yourself up, dust yourself off, and start all
over again.
When disaster strikes, when storms buffet a community, Americans
respond. We see the images on television and immediately we send a
donation to help out. That's the American spirit.
But when financial disaster strikes a family--when a business
collapses, when medical bills pile up, when a reservist is called up
for extended active duty, when workers lose their jobs because of a
plant closing or outsourcing--the economic catastrophes can be hidden
from view. That is where our bankruptcy laws come in. We got rid of
debtors' prisons almost two centuries ago for a reason. It is the
American spirit to help these families through financial disasters.
But this bill will destroy that financial safety net for many, many
citizens who deserve help.
This legislation is a bonanza for banks and credit card companies,
and a nightmare for millions of average Americans. It rewrites the
bankruptcy laws in a way that kicks average families while they're
down, in order to pad the already high profits of the credit card
industry and other lenders. It is greed, pure and simple.
Predatory credit card companies are doing all they can to urge
unsuspecting citizens to pile up huge debts on their credit cards. They
especially target the elderly, college students, and the working poor.
They advertise nationwide. They send out billions of solicitations
every year to entice more people to sign up for their cards. The bold
type talks about the minimum monthly payments--but you have to read the
fine print to see the exorbitant interest payments that inevitably
result.
You cannot go to any college campus, any sporting event, or your
mailbox without being solicited for another credit card, no matter how
many you already have. Young students, still in their teens, are
greeted with a deluge of offers from credit card companies. Before they
buy books and find the cafeteria, they see credit card offers with
credit lin1its in the thousands of dollars.
So, in many cases, the very same companies that have been trying to
get a bill like this passed for decades and had their lobbyists write
this bill for them in 1997, are the ones who caused the indebtedness
that they now complain about.
Does this bill do anything abut that? Absolutely not.
A lot has changed since the Senate last looked at this bill 4 years
ago. Health costs are way up, health insurance protection is less
obtainable and less affordable, hundreds of thousands of families have
suffered economically from military callups, unemployment insurance has
not been updated.
The economy is still working its way out of a serious downturn.
Corporate mismanagement and fraud have become a way of life in the
highest echelons of corporate America.
So I say to each of our colleagues, please consider who wrote this
bill and why. Please think about your hard-working constituents who
will be dealt a double whammy by this bill if they fall on hard times.
Please think about what has happened since we last considered the bill.
Please keep an open mind as we discuss the serious problems with this
bill and the need for many substantial revisions and additions before
it is ready to even be considered for adoption by this body.
We do not work for the credit card companies; we work for our
constituents. We can do better than this bill for our constituents, and
we must do better than this bill for those we represent.
Mr. President, I will unanimous consent to have printed in the Record
some of the letters opposing the bill. I will not include all of the
letters, but I am going to quote from some of them at this time.
First of all, I refer to a letter from ING Direct to the American
Bankers Association urging them to reconsider their support for the
bill:

As a member of the American Bankers Association, ING Direct
urges you to reconsider your wholesale support for the
Bankruptcy Reform Bill currently before the United States
Senate. . . . Yet this legislation has not received a
thorough review in the last 4 years. It has simply been
reproposed without careful thought. . . . It actually
encourages further bad lending decisions by removing an
important market discipline--the possibility of a clean
bankruptcy. Without important changes, millions of consumers,
who might otherwise be encouraged into debt by aggressive
credit card companies and other lending. They will be unable
to clear their names, even if they fall into debt because of
an illness or an economic downturn that costs them their
employment.
We at ING Direct believe this country is still willing to
give working Americans--the engine of our economy, a second
chance when debt overwhelms them. This bill seriously limits
that second chance. The one-sided provisions of this
bankruptcy legislation are bad news for most Americans. But
they are also bad news for the financial services industry.
By creating a form of debt imprisonment, this bill will
hobble the most important player in the world economy--the

[[Page S1839]]

American working family. For all these reasons, we ask you to
reconsider the ABA's support of this bill in its current
incarnation.

This is written by Arkadi Kuhlmann who is the president of the
company. It is the sixth largest thrift savings company in the country.
The second letter is from the Consumers Union:

Much evidence suggests that rising consumer bankruptcies
are tied to abusive lending practices by creditors. Yet this
bill does nothing to address this fundamental problem.
Instead, the bill protects predatory lenders who offer
credit, with abusive repayment terms, to high-risk consumers.
It also provides creditors with additional opportunities to
employ strong-arm collection tactics, threatening debtors
with new, costly litigation.

Furthermore, the bill protects credit card companies who fail to
disclose the true cost of credit they provide to college students and
others, who may quickly find themselves trapped in serious debt,
ruining their credit ratings for years to come.
This is what they are pointing out.
Furthermore, the bill protects credit card companies who fail to
disclose the true cost of credit they provide to college students and
others who may quickly find themselves trapped in serious debt, ruining
their credit rating for years to come.
I will include those sections. The list goes on. I have a number of
letters and communications from consumer groups, from women's groups,
children's groups, and from the doctors association that has been
formed to bring focus and attention to the impact of this legislation
and medical bills on families. I will also include in the Record a
letter from one of the largest credit unions in the country from North
Carolina. I ask unanimous consent that several of these letters be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

National Women's Law Center,

Washington, DC, February 23, 2005.
Re: Oppose S. 256, The Bankruptcy Act of 2005

Dear Senator: The National Women's Law Center is writing to
urge you to oppose S. 256, a bankruptcy bill that is harsh on
economically vulnerable women and their families, but that
fails to address serious abuses of the bankruptcy system by
perpetrators of violence against patients and health care
professionals at women's health care clinics.
This bill would inflict additional hardship on over one
million economically vulnerable women and families who are
affected by the bankruptcy system each year: those forced
into bankruptcy because of job loss, medical emergency, or
family breakup--factors which account for nine out of ten
filings--and women who are owed child or spousal support by
men who file for bankruptcy. Contrary to the claims of some
proponents of the bill, low- and moderate-income filers--who
are disproportionately women--are not protected from most of
its harsh provisions, and mothers owed child or spousal
support are not protected from increased competition from
credit card companies and other commercial creditors during
and after bankruptcy that will make it harder for them to
collect support.
The bill would make it more difficult for women facing
financial crises to regain their economic stability through
the bankruptcy process. S. 256 would make it harder for women
to access the bankruptcy system, because the means test
requires additional paperwork of even the poorest filers;
harder for women to save their homes, cars, and essential
household items through the bankruptcy process; and harder
for women to meet their children's needs after bankruptcy
because many more debts would survive.
The bill also would put women owed child or spousal support
who are bankruptcy creditors at a disadvantage. By increasing
the rights of many other creditors, including credit card
companies, finance companies, auto lenders and others, the
bill would set up an intensified competition for scarce
resources between mothers and children owed support and these
commercial creditors during and after bankruptcy. The
domestic support provisions in the bill may have been
intended to protect the interests of mothers and children;
unfortunately, they fail to do so.
Moving child support to first priority among unsecured
creditors in Chapter 7 sounds good, but is virtually
meaningless; even today, with no means test limiting access
to Chapter 7, fewer than four percent of Chapter 7 debtors
have anything to distribute to unsecured creditors. In
Chapter 13, the bill would require that larger payments be
made to many commercial creditors; as a result, payments of
past-due child support would have to be made in smaller
amounts and over a longer period of time, increasing the risk
that child support debts will not be paid in full. And, when
the bankruptcy process is over, women and children owed
support would face increased competition from commercial
creditors. Under current law, child and spousal support are
among the few debts that survive bankruptcy; under this bill,
many additional debts would survive. But once the bankruptcy
process is over, the priorities that apply during bankruptcy
have no meaning or effect. Women and children owed support
would be in direct competition with the sophisticated
collection departments of commercial creditors whose
surviving claims would be increased.
At the same time, the bill fails to address real abuses of
the bankruptcy system. Perpetrators of violence against
patients and health care professionals at women's health
clinics have engaged in concerted efforts to use the
bankruptcy system to evade responsibility for their illegal
actions. This bill does nothing to curb this abuse.
The bill is profoundly unfair and unbalanced. Unless there
are major changes to S. 256, we urge you to oppose it.
Very truly yours,
Nancy Duff Campbell,
Co-President.
Marcia Greenberger,
Co-President.
Joan Entmacher,
Vice President and Director, Family Economic Security.
____

National Consumer Law Center Inc.,

Boston, MA, February 28, 2005.
Dear Senator: The National Consumer Law Center, on behalf
of its low income clients, writes to express our strong
opposition to S. 256, the ``Bankruptcy Abuse and Consumer
Protection Act of 2005.'' This bill would hurt many Americans
who are facing financial problems due to job loss, transition
to lower paying jobs, divorce, child-rearing, lack of medical
insurance, or predatory lending practices. Although the
economy has improved recently for some American families,
there are millions of other families that continue to
struggle. In fact, real incomes have declined since 1989 for
the lowest 60 percent of the American population--including
especially single parent households. S. 256 contains a
shocking number of provisions which would have a severe
impact on families who desperately need to preserve their
homes from foreclosure and their cars from repossession, or
to focus their income on reasonable and necessary support for
dependent children. Here are just a few things the bill's
sponsors have failed to discuss:
The key cause of the increase in bankruptcies is surely
that more families owe more money. The amount of consumer
credit outstanding increased from 789 billion dollars in 1990
to 1.7 trillion dollars in 2001. During this time, there was
a steady increase in the amount of debt payments American
families made as a percentage of their disposable income.
Although the total number of bankruptcies has increased, the
number of bankruptcies in relation to the amount of credit
outstanding has actually gone down.
A big part of the equation is that some segments of the
credit industry, such as credit card companies, make huge
profits from lending to American families who cannot afford
to pay big card balances and who therefore pay interest on
those balances at rates of 29 percent or higher. It is not
surprising that when the credit industry sends three billion
credit card solicitations each year, they reach some
significant portion of American families who will ultimately
have financial problems.
The journal Health Affairs recently published a path-
breaking joint study by researchers at Harvard Law School and
Harvard Medical School that reveals alarming information
about the medical causes of bankruptcy. The researchers found
that illness and medical bills contributed to at least 46.2
percent, and as many as 54.5 percent of all bankruptcy
filings. Families with children were especially hard hit--
about 700,000 children lived in families that declared
bankruptcy in the aftermath of serious medical problems.
Cutting down the number of bankruptcy filings will not
result in savings for the credit industry or for other
consumers. The vast majority of debt discharged in bankruptcy
would not be paid back in any event, since the debtors
involved simply cannot afford to pay. A number of studies
have shown that the ``means test'' will raise little in new
money for creditors.
S. 256 contains a variety of poorly conceived provisions
which are discussed in more detail in our paper entitled,
``What's Wrong with S. 256, Let Us Count the Ways . . .'',
available at:
http://www.nclc.org/
. If enacted, S. 256 would:
Subject debtors to a ``means test'' that fails to screen
for abuse and instead penalizes honest debtors by imposing
additional costs and filing burdens.
Create a ``safe harbor'' from the means test for low-income
debtors, but still subject them to increased costs and filing
requirements.
Require stricter scrutiny of low-income debtors' expenses
in chapter 13 than higher income debtors and make some
debtors too rich for chapter 7 and too poor for chapter 13.
Erode bankruptcy's fresh start by making more debts
nondischargeable in both chapters 7 and 13.
Promote predatory lending by encouraging creditors to take
liens on household goods of nominal value.
Create new creditor opportunities for reaffirmation abuses
by weakening current debtor protections and giving creditors
safe harbor from liability.

[[Page S1840]]

Undermine debtors' ability to save homes and cars in
chapter 13.
Drastically reduce fundamental protections afforded debtors
under the automatic stay.
Provide vast new opportunities for identity theft and other
privacy invasion by making public tax returns and sensitive
financial documents of consumers who file bankruptcy.
As an organization which represents poor people, the
National Consumer Law Center vehemently disputes the credit
industry position that S. 256 will not hurt low-income
debtors. It is precisely those debtors who would be hurt the
most. The myriad new procedural requirements together with
the dozens of provisions which give creditors an opportunity
to pursue new types of litigation against debtors will raise
the cost of bankruptcy for all debtors. Other provisions will
take away important rights under current bankruptcy law to
save homes from foreclosure and evictions, and to challenge
predatory lending practices. Now is not the time to cut back
on the availability of a system which provides a second
chance to the unfortunate in the form of a fresh financial
start.
Sincerely,
Willard P. Ogburn,
Executive Director.
John Rao,
Attorney.
____

A National Health Program, Selected Massachusetts
Physician Co-Signers,
Chicago, IL, February 14, 2005.
Dear Senator Kennedy: We write, as physicians, to urge
rejection of Senate Bill 256, which would make bankruptcy
filing more difficult and punitive for millions of Americans
driven to financial ruin by medical problems. As health costs
spiral upward and insurance coverage shrinks, more and more
of our patients find that illness results in financial
catastrophe and bankruptcy. Only universal, comprehensive
health insurance coverage under a national health insurance
plan can really solve this problem. But pending such
solution, many families' only chance for financial recovery
lies in the limited protections available through the
bankruptcy courts.
Last year one million Americans filed for bankruptcy in a
last-ditch effort to deal with the fallout from a serious
medical problem. Unfortunately, the very week that a Harvard
Medical/Law School study documented this fact, legislation
was re-filed that would greatly reduce the bankruptcy
protections available to the medically bankrupt. S. 256 would
drive up costs for every family filing for bankruptcy,
regardless of whether the reason is too many trips to the
mall or a visit to the emergency room. S. 256 would also
narrow bankruptcy protection for all families, increasing the
ability of creditors to collect from their debtors after
bankruptcy regardless of the reason for bankruptcy, and
causing many more families to lose their homes and their cars
because of medical problems.
We are particularly worried that more punitive bankruptcy
laws will further erode access to care for many families
under financial duress and result in preventable suffering
and even death. Already, families who file for medical
bankruptcy suffer severe privations. According to the Harvard
study: 61 percent of medical bankrupts didn't seek medical
treatments they needed; 50 percent failed to fill a
prescription; 22 percent went without food; 7 percent moved
their elderly parents to cheaper care facilities.
We make a plea for the one million sick and injured people
who turned to the bankruptcy system for relief last year.
Please reject S. 256.
Sincerely,

Julius B. Richmond, M.D.,

Past U.S. Surgeon General and Professor
Emeritus, Harvard Medical School.
____

February 14, 2005.

Harvard Study Shows Legislation a Danger to Millions Bankrupted by
Medical Bills

Physicians Urge Congress to Reject S. 256

On the heels of a major Harvard University study showing
that half of all personal bankruptcies are due to illness or
medical bills, more than 1,700 American physicians signed a
letter released today opposing legislation that would remove
protection from patients financially ruined by medical costs.
Bankruptcy law currently offers some protection to the
millions of Americans affected by medical bankruptcies each
year. If passed, the bill would effectively close bankruptcy
as an option and allow creditors to take the homes, cars and
other assets of families who suffer a serious illness or
injury.
``It's a sad fact that bankruptcy courts have become the
last line of defense for the victims of our broken health
system,'' said Dr. David Himmelstein, an Associate Professor
of Medicine at Harvard Medical School and lead author of the
study. ``For many families affected by a costly illness, the
limited protections of bankruptcy are the only chance to get
back on their feet.''
In the letter to the leaders of the Senate Judiciary
Committee, which is currently considering the bill, the
doctors expressed concern that the new bankruptcy rules would
further restrict the ability of patients suffering from
medical costs to get needed care for themselves and their
families.
``Medical debtors' access to care is already severely
compromised: more than 60 percent go without a needed doctor
visit and half don't fill a prescription because of the
costs,'' said Dr. Steffie Woolhandler, who is also an
Associate Professor of Medicine at Harvard and co-author of
the study. ``For those unable to seek relief from their
debts, the situation will undoubtedly get worse,'' she said.
The epidemic of medical bankruptcies, which affect 2
million Americans (including 700,000 children) every year,
emphasizes the need for comprehensive health insurance
coverage under a national health insurance plan according to
the signers, who include former U.S. Surgeon General Julius
Richmond.
``Current insurance policies offer paltry protection for
the average American,'' said Dr. Quentin Young, National
Coordinator of Physicians for a National Health Program.
``Most of those who are bankrupted by medical bills are
middle class people who had coverage but were mined by the
massive holes in their policies. Rejecting this new
bankruptcy legislation is just the first step we need to take
in healing our sick health system. We need a system of
universal, comprehensive Medicare for all.''
____

February 28, 2005.
Re: Letter from Responsible Lenders in Opposition to S. 256,
The Bankruptcy Abuse Prevention and Consumer Protection
Act

Hon. William Frist,
Majority Leader, U.S. Senate.
Hon. Harry Reid,
Minority Leader, U.S. Senate.

Dear Majority Leader Frist and Senator Reid: The
undersigned financial institutions and associations write in
opposition to S. 256. We believe that S. 256
disproportionately harms vulnerable debtors while rewarding
creditors who provide excess credit or who impose unfair
terms on borrowers. Further, we are concerned that the
changes to the bankruptcy code proposed in S. 256 are likely
to make more homeowners vulnerable to abusive lending and
fraudulent credit counseling practices.
Bankruptcy is first and foremost a means to enable
overburdened families to get a fresh start. Nearly all
families in the bankruptcy system are there not because they
want to evade their obligations, but because they have had a
sudden decline in their economic fortunes. More than 90
percent of debtors file for bankruptcy due to unemployment or
underemployment, an illness or accident, or divorce. The bulk
of the remainder suffered from other legitimate difficulties,
including activation for military service, being a victim of
crime or natural disasters, or a death in the family.
Abusive lending practices, especially by credit card
lenders, are a larger problem than debtor abuse of the
bankruptcy system. Growth in the bankruptcy filing rate tends
to increase with an increase in the ratio of household debt
to household disposable income. Given this fact, the
unfettered increase in available credit likely has
contributed significantly to the rise in bankruptcy filings
in recent years. For example, in 2000 the credit card
industry offered almost $3 trillion in credit--more than
three times the $777 billion of credit offered in 1993.
Excessive credit extension by unscrupulous lenders makes it
more difficult for responsible lenders to monitor their
debtors and preserve healthy lending portfolios.
Some creditors seem to want to have it both ways: keep
interest rates high and underwriting standards loose, while
amending the bankruptcy laws to decrease losses resulting
from questionable extensions of credit. S. 256 unnecessarily
serves the interests of these credit card lenders--who are
experiencing record profits--at the expense of the vast
majority of families who declare bankruptcy for legitimate
reasons. Credit card lenders already cover losses by charging
extremely high interest rates at a time of historically low
rates, and they are able, should they choose, to limit losses
further by tightening underwriting standards. Irresponsible
lenders need to be reined in, not rewarded with
legislation that further harms suffering families.
S. 256 will effectively deny bankruptcy protection to tens
of thousands of innocent lawabiding families who suffer
significant setbacks. Many of these families will lose
everything they own to creditors while remaining indefinitely
subject to their unsecured creditors, unable to ever get back
on their feet. Furthermore, by discouraging those who truly
need bankruptcy relief from seeking it, S. 256 may increase
the number of families that turn instead to unscrupulous
lenders and dubious credit counselors who do more harm than
good.
First, S. 256 inflexibly forces more borrowers to file
under Chapter 13 of the Bankruptcy Code, notwithstanding the
fact that an independent academic study on the subject found
that less than four percent of debtors who filed under
Chapter 7 (where unsecured debt is discharged) couldn't
possibly repay any of their unsecured debt under Chapter 13.
Some families need to file under Chapter 7 because they
cannot afford to meet their housing, car, and student loan
obligations (which they generally have to pay under Chapter
7), pay their short-term unsecured debt, and still have money
left over for basic household needs. Forcing these people to
file under Chapter 13 threatens to exacerbate their suffering
without significantly benefiting creditors; you cannot
extract blood from a stone. Despite the good-faith

[[Page S1841]]

repayment efforts of many debtors, historically nearly two-
thirds of all Chapter 13 debtors fail to complete their
repayment plans even before additional Chapter 7 debtors, who
would be even less likely to complete Chapter 13 plans, are
forced to enter Chapter 13. Adding insult to injury, S. 256
makes it extremely difficult for borrowers to file a Chapter
7 bankruptcy once a Chapter 13 repayment plan fails, leaving
these borrowers entirely unprotected.
Second, S. 256 creates so many disadvantages to filing
bankruptcy that severely strapped borrowers may forego filing
altogether and instead try to solve their problems by
borrowing money on abusive and unfair terms. For instance, S.
256 makes it harder for debtors to save their cars in
bankruptcy, makes it easier for creditors to take basic
household goods from debtors, and requires additional
procedures that delay initiation of a bankruptcy. Desperate
borrowers who should be seeking bankruptcy protection may
attempt to solve their problems by responding to
solicitations from unscrupulous lenders who push abusive home
refinance loans, dishonest credit counselors who bilk debtors
rather than help them, payday lenders who profit from
families caught in a debt trap, or a host of other bad
actors.
While as financial institutions and associations we are
well aware that there are problems with our bankruptcy
system, current judicial discretion is far preferable to the
unbalanced bill before you. We therefore urge you to oppose
S. 256 and to revisit the issue of bankruptcy in a manner
that equitably meets the interests both of lenders and of
vulnerable borrowers.
Sincerely,
Martin Eakes, CEO, Self-Help Credit Union.
Jim Blaine, State Employees' Credit Union, North Carolina.
Terry D. Simonette, President & CEO, NCB Development
Corporation.
Calvin Holmes, Executive Director, Chicago Community Loan
Fund.
Elsie Meeks, Executive Director, First Nations Oweesta
Corporation.
Ceyl Prinster, Executive Director, Colorado Enterprise
Fund.
Bill Edwards, Executive Director, Association of Enterprise
Organizations.
Mark Pinsky, National Community Capital Association.
John Herrera, Board Chair, Latino Community Credit Union.
Fran Grossman, Executive Vice President, ShoreBank
Corporation.
Kerwin Tesdell, CEO, Community Development Venture Capital
Association.

Amendment No. 16

Mr. KENNEDY. Mr. President, I want to speak for a few more moments
about the excellent amendment that has been offered by my friend and
colleague from Illinois, Senator Durbin, which I strongly support.
Yesterday, in Massachusetts, I had an opportunity to have a meeting
with a number of veterans. They actually were disabled veterans. We
have 34 Massachusetts young men who have been killed primarily in Iraq.
I think we had two killed in Afghanistan, but primarily Iraq. And we
have had a number of wounded veterans.
We had a very good meeting about their reentry into the community and
what we can do to help them in terms of education, training, and
employment. A number of the large companies in Massachusetts have made
important commitments to employ veterans, and particularly the disabled
veterans. I will mention one: Home Depot, a national company, employed
10,000 veterans last year. They expect to exceed that number this year.
It is a very impressive record.
These young people are looking for how they are going to be able to
live and have useful, productive, constructive, valuable lives. There
is a lot that has to be done, obviously, by the VA and by the various
organizations in the State and in the private sector, as well as at the
national level, to help them in these ways. We can all be extremely
involved and helpful in that endeavor.
One of the central concerns they mentioned during the course of the
discussion had to do with the times they heard from a number of their
friends and colleagues who were in the Guard and Reserve serving in
Iraq. We have 1,000 at the present time serving from Massachusetts and
many more in the regular services. They are in the Guard and Reserve.
But they told me of the concern their families have in terms of the
dangers of bankruptcy and what would happen to these families. I do not
think it is enough to say, well, we'll defer this to another day, or
the existing laws are going to take care of it. We have a good
opportunity to address that. And if we are serious about addressing it,
we ought to accept the Durbin amendment. We are either going to be
serious about doing this or we are not. The Durbin amendment is a
serious effort to address this issue, and it deserves all of our
support.
Military families struggle financially for a number of reasons.
Often, the low pay for newly enlisted men and women is not enough to
support a family. Service men and women are also prey to predatory
lending schemes that leave their families high and dry. Military
retirees have been victims of pension schemes that destroy their
savings. National Guard and reservists often face a loss of income when
they are activated and deployed, and their families are left in serious
financial distress. Veterans are not getting the federally promised
health care benefits they need to stay healthy.
The most recent data available show that in 2003, 20,000 active-duty
members filed for bankruptcy. They would be considered active duty,
even though they are in the Reserve or Guard because they are on active
duty. That is 20,000 members of the Armed Forces whose service to their
country resulted in financial ruin. Military service should be the
source of pride, growth, and opportunity, not a financial crisis.
That is why Senator Durbin's amendment is so important. It will
ensure fair and strong bankruptcy protections for military families and
veterans.
The typical family who files for bankruptcy is at or near poverty at
the time they file. It is appalling that America's service men and
women, or any veteran, can be plunged into poverty in connection with
their service to the Nation.
The base pay for newly enlisted men and women is often between
$15,000 and $20,000 a year. That is far from enough to support a family
back home. Yet nearly half of all members of the military have
dependents who rely on their income. The most recent data shows that
more than 6,000 military families are forced to rely on food stamps. Do
we hear that? We have 6,000 military families who are forced to rely on
food stamps because of low pay. I pay tribute to our friend from
Arizona, Senator McCain, who did so much to reduce that number. I am
hopeful we can eliminate it during this session of Congress.

In addition, predatory lenders often prey on service men and women.
Payday lenders offer high-interest, short-term loans of usually $500 or
less, and focus on the military, with their financial inexperience and
regular paychecks. These loans result in huge interest rates and often
leave the borrower in significant debt that can lead to bankruptcy. The
Durbin amendment will protect military members against this shameful
practice.
National Guard members and reservists have other types of financial
burdens. Since 9/11, 469,000 National Guard members and reservists from
the Army, Navy, Marines, and Air Force have been called up for combat
tours in Iraq or Afghanistan. That is virtually half a million. Their
tours of duty can last for up to 2 years, and the Pentagon is currently
considering broadening even that time limit. These deployments can
cause extraordinary financial stress for their families.
For example, an Army reservist medic with four teenage kids in Hot
Springs, AR left for Iraq, leaving his family's gas station convenience
store with no one to operate it. One month later, the family fell into
serious financial trouble. They had no choice but to file for
bankruptcy.
After the bankruptcy, they couldn't pay their mortgage and had to
give up their house. They moved in with the soldier's parents. But
because the parents had cosigned on the loan for the store, they were
forced to file for bankruptcy, too, or risk losing their own home. The
grandfather is disabled, so the grandmother had to go back to work to
keep the family financially afloat.
Too many National Guard reservist families face this type of economic
distress. Thirty percent of spouses of active reservists report a loss
of household income after the reservists' mobilization. Forty percent
of all reservists report loss of income. For those who are self-
employed, it's even worse. Half of self-employed reservists lose income
when they are deployed.
Of spouses who reported lost income, half had monthly decreases from
$500 and $2,000 per month, and nearly a quarter lost over $2,000 a
month. That's $24,000 a year in lost income that puts a heavy financial
squeeze on these families.
With other key expenses rising every year in the Bush administration,
it's

[[Page S1842]]

even harder for military families to make ends meet. Since 2001, health
insurance premiums have soared by 59 percent. Prescription drug costs
have risen 65 percent. Housing costs are up 33 percent in the last 4
years.
The last thing Congress should do is make it harder for these
families when they face bankruptcy. I urge my colleagues to support the
Durbin amendment to protect military families.
The PRESIDING OFFICER. The Senator from Utah.
Mr. HATCH. Mr. President, I listened with a great deal of interest to
my colleague's remarks with regard to the bankruptcy. I will have a few
things to say about those remarks in just a few minutes.
Mr. President, I rise in support of the bill, S. 256, the Bankruptcy
Abuse Prevention and Consumer Protection Act of 2005. The essence of
this bill is simple. This legislation is designed to make our
bankruptcy system more fair and efficient. As well, this bill would cut
down on the ability to abuse the current system.
Before I detail some of the abuses of the system that is being
abused, I want to make some other points. First, as I said yesterday,
this bill has been in the making for 8 years. The Senate passed it
three times already. Prior to Senate passage, the Judiciary Committee
held an extensive set of hearings and several markups on this bill.
This bipartisan, bicameral bill is ripe for passage. I am pleased to
report that yesterday the White House released the following statement
of the administration policy on the bill. It is short and to the point
and it says the following:

The administration supports Senate passage of S. 256 as
reported by the Senate Judiciary Committee. These commonsense
reforms to the Nation's bankruptcy laws will help curb abuses
of bankruptcy protections, reduce uncertainty in financial
markets through improved financial contract netting rules,
increase financial education to prevent unnecessary filings
and help avoid future credit problems, promote international
trade through coordination of cross-border insolvency cases,
and provide increased protection for family farmers facing
financial distress.

I am pleased that the administration's SAP stressed some of the pro-
consumer aspects of the bill. While we want to see that those people
who borrow money pay it back and that the value of personal property
and responsibility is observed, we also want to help keep citizens out
of bankruptcy in the first place.
When honest people simply get over their heads financially, we want
to give them a fair chance to have a fresh start. Where there are some
who are clearly gaming the present system, there are many who find
themselves in unfortunate financial circumstances. Given a chance to
begin fresh, they can learn from their experiences and once again
become the prudent, bill-paying consumers all of us are taught to be.
The data tell us there is a problem and it is a growing problem.
Bankruptcy filings are way up, and I mean way up.
We are fortunate to live in a time of unprecedented economic growth.
Stretching all the way back to the Presidency of Ronald Reagan, we have
generally seen a sustained increase in economic activity. Personal
assets and net worth have grown, when compared with individual
liabilities. Yet, precisely at this time, bankruptcy filings have blown
through the roof.
These facts might help to put it in perspective. Bankruptcies doubled
in the 1980s. They doubled again from 1990 to 2003. In 2004 alone,
there were 1.6 million more bankruptcies than during the entire Great
Depression. There will be more bankruptcies filed this year than in the
entire decade of the Great Depression combined.
What explains this dramatic rise in filings? Probably several reasons
are at play. Certainly, one of the critical reasons behind the rising
tide of filings under the Bankruptcy Code, as years of study document,
are the actions of those who flagrantly abuse our generous bankruptcy
laws.
Many of those opposed to the bill suggest that bankruptcy filings
were up because more and more people face economic hardship. To some
extent, this is no doubt true. But we also know, however, that many
bankruptcies stem from old-fashioned, outright fraud and abuse.
This potential for abusing the system was not fully anticipated when
Congress created our current Bankruptcy Code in 1978. A key purpose of
this bill is to help crack down on the abuses of the system. In its
simplest terms, our bankruptcy laws attempt to distinguish between
those who can and those who cannot repay their debts. When a case is
filed under chapter 7 of the Bankruptcy Code, the debtor is required to
surrender his assets to a bankruptcy trustee for liquidation and
distribution to creditors, except for those assets that are exempt
under State or Federal law. Yet under this provision of law, the
debtor's future income is protected from creditors.
By contrast, those who file for bankruptcy under chapter 13 retain
possession of their assets, but pay all or a portion of their debts
through plans approved by the bankruptcy court.
For some contemplating bankruptcy, this makes for a simple strategy:
Do everything you can to get into chapter 7. Chapter 7 protects all of
your future income from creditors. Once you are protected by chapter 7,
you pay off secured creditors--such as your mortgageholder--first.
Only then do unsecured creditors get their chance to get paid back.
Experts tell us about 70 percent of consumer bankruptcy filings are
chapter 7 filings, and 95 percent of those make no distribution at all
to unsecured creditors.
Let me repeat those statistics because they are important. About 70
percent of consumer bankruptcy filings are chapter 7 filings, and 95
percent of those make absolutely no distribution at all to unsecured
creditors.
If you are listening to this debate and you are a creditor, these
statistics mean you have only a small chance to be repaid if you are an
unsecured creditor.
The problem with this is, according to the FBI, about 10 percent of
these chapter 7 filings are fraudulent. So what if only 10 percent of
filers are abusing the system? This represents $3 billion in costs that
can be recovered rather than being passed along to consumers. You and I
and everybody else pay for these abuses of the system. We all end up
paying for it. The problem with this is, according to the FBI, about 10
percent of these chapter 7 filings are fraudulent. One can understand
the financial motive of a debtor running up his or her unsecured credit
card debt to pay down his or her secured mortgage just before filing
chapter 7, even though he or she knows full well the debts will never
be paid back.
The data suggest to many experts that some relatively high-income
debtors truly belong in chapter 13 where they will have to establish a
plan for repayment for at least some debts. In theory, our bankruptcy
courts have the opportunity to defy chapter 7 filing because of
``substantial abuse.'' Yet with so many bankruptcy filings, our courts
are often overwhelmed, and in practice few people are bounced out of
chapter 7, no matter their actual ability to repay their debts. It
should come as no surprise, then, that a few bad apples who could
afford to pay some of their debts actively seek to avoid chapter 13 and
get into the often less onerous treatment of chapter 7. A key component
of S. 256 is a means test that will help prevent such gaming of the
system.
Some have attempted to criticize this commonsense safeguard as
somehow taking away bankruptcy protection. Let me be clear. The means
test does no such thing. All it does is identify those who can repay at
least some of their debts. It makes certain they enter into a chapter
13 reorganization and repayment plan rather than let them simply walk
away from their obligations, no matter how steep or outrageous. Believe
me, there is strong evidence to support this improvement in the law.
The U.S. Trustee Program has been challenging and documenting abuse
now for some time. The following examples show why changes are needed
in the current system. The primary function of the U.S. Trustee Program
is to identify fraud and abuse in the bankruptcy system. In fiscal year
2002, there were 1,470,430 bankruptcy case filings. With such a large
number of filers, there will always be those who will try to game the
system.
Although some opponents of the bill may minimize the problem of
abuse, consider these facts: The U.S. Trustee Program successfully
pursued 5,000

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chapter 7 debtors for ``substantial abuse'' of the bankruptcy system.
The program prevented the discharge of an estimated $59 million of
unsecured debt through fraudulent chapter 7 filings. In addition, the
Trustee Program obtained disgorgement of more than $1.3 million in
attorney's fees in consumer and business cases and imposed almost
$534,000 in sanctions against attorneys. This indicates that bankruptcy
fraud is no small problem and that reforms are in order.
The evidence of fraud is so widespread that many believe it is no
longer sufficient to rely on watchdogs to police these abuses after
they have occurred. We must take proactive steps to prevent them from
happening in the first place. That is what S. 256 does. The means test
contained in the bill will provide a uniform standard to bankruptcy
judges to evaluate the ability of bankruptcy filers to repay debts.
With some people gaming the current system to avoid paying debts they
have taken on, we must make sure that the people who file in chapter 7
actually belong in chapter 7. We should not absolve people of their
debts when they have the means to pay them back. Bankruptcy law has
always meant that.
This is no exaggeration. Just consider these examples, if you will.
I am told one debtor in California sought to discharge $188,000 in
unsecured debt. This person had more than $10,000 a month in expenses.
She paid $4,500 a month on the mortgage for her house in San Juan
Capistrano and then paid another $2,500 a month on rent for an
apartment in Silicon Valley. This woman was spending $7,000 a month for
two homes. The simple fact was, however, if the woman got rid of just
one of the homes, she would likely be able to fund a chapter 13 plan
and repay, rather than ignore her debts. This does not seem to me to be
too much to ask. In fact, it just makes common sense.

In another instance, a woman in Dallas filed for chapter 7 bankruptcy
attempting to discharge $122,527 in credit card debt. But this is not
exactly a hard-luck case, by the way. She was a commercial airline
pilot who earned $11,500 per month and paid $3,100 per month for a
mortgage on a $385,000 home. Some have cast a skeptical eye on her
decision to buy a $50,000 Mercedes just before declaring bankruptcy in
order to replace the recently repossessed $90,000 Mercedes. If that is
what happened, it just plain is not right.
When somebody obtains 36 credit cards, runs up $283,075 in bills, and
then tries to discharge that debt through a chapter 7 filing--as I
understand was the case of one gentleman in California--it is not
enough to sit back and blame aggressive marketing by credit card
companies. We have heard that old saw year after year. Frankly, there
is a lot of abuse out there.
One person in Miami sought to discharge $163,744 in unsecured debt
even though he had the means to purchase $232 in lottery tickets every
month.
Then there is the case of a Tampa couple who had a combined monthly
income of $7,000 and a monthly budget of $6,756. Included in that
budget was a car payment of $965 a month. In addition to their secured
debt, they owed $350,000 in unsecured debt. This consisted of $200,000
in credit card debt and $150,000 in personal loans. They attempted a
chapter 7 filing. This couple was bringing in more than they were
spending, but they wanted to walk away from it all. Yet a review of
their banking records showed that one spouse withdrew hundreds of
dollars every month at ATM machines at local casinos. They had money to
play blackjack but not pay back there debts. Something, it seems to me,
is just not right about that.
We are a compassionate nation, but we should not be fools. A
discharge of debt is serious business, but for sound public policy
reasons, the United States has decided to allow it in certain
circumstances. We want to give our neighbors who get in over their
heads a chance to get out of their financial troubles.
Frankly, I suspect that for a majority of those individuals who file
for bankruptcy, it must be their worst nightmare, but for some, as I
just described, it is a way to avoid responsibility. We do not want to
encourage bankruptcy for anyone. When a person takes on a debt, that
person makes a promise to pay, and they ought to pay it if they have
the capacity to do so.
There is something inherently unfair in denying full restitution to
creditors. That being said, as a matter of longstanding public policy,
we have decided to allow some people a fresh start and the opportunity
to discharge their debts through a chapter 7 liquidation. But many fear
that in some instances, our lax policing of those who attempt a chapter
7 filing actually encourages additional bankruptcies.
As a matter of public policy, we must say that those relatively high-
income debtors, those capable of paying back their substantial debts,
should at least pay something back, and that is all we are requiring
here. From now on, those who are capable of financial reorganization,
rather than outright liquidation, will have to keep their promises or
at least some of their promises.
Some opponents of this legislation minimize these abuses. They deride
the means test we devised to solve this problem. The fact is, 80
percent of people filing for bankruptcy will be automatically removed
from the means test because their incomes fall below the safe harbor of
the median State income. Only 20 percent are asked to answer this
rather reasonable question: After medical expenses, schooling expenses,
health care premiums, living expenses, and a regular budget, do you
have an ability to pay back some of your debt?
That is all. Only 10 percent of the people currently filing for
bankruptcy will be moved into chapter 13 under this test. Contrary to
the image of a crippling lifetime commitment to one's debtors, those
repayment plans are only between 3 and 5 years.
Who passes the means test of this bill? Eighty percent are excluded
for falling below the State median income. Another 10 percent are
excluded after taking into account school, health, and living expenses.
So only 10 percent of bankruptcy filers will ever be moved into
repayment plans. I do not think it is too much to ask that these
relatively high-income debtors, who can afford to pay their debts, pay
back some of what they owe.
To the extent that our current Bankruptcy Code encourages some
bankruptcies, I am hopeful that this reform will discourage some of
them. The experts and data tell us there are some with high salaries,
profligate spending habits, and the ability to pay back their debts.
Our laws should not be to just allow them to walk away.
The fact that this type of misconduct is occasionally prevented does
not undo the need for permanent systemic reform of our laws. For every
one person who is discovered in an abuse of the system, it is likely
there are many others whose abuses never see the light of day. There is
a culture of abuse in our bankruptcy system that should be addressed.
I am told that in Kentucky one debtor filing for chapter 7 protection
failed to mention that he had transferred his one-half interest in a
Florida house to his son approximately 7 years before filing for
bankruptcy. How convenient. He also failed to mention his transfer of
stock to his daughter within 1 year of filing. He was unable to account
for the disappearance of $1.125 million in assets, including $300,000
in personal property and even $400,000 in race horses. His hope was to
discharge almost $1.8 million in unsecured debt and $795,175 in secured
debt.
While this may be an outlier case, the underlying problem of abuse is
too frequent an occurrence. The point is not that this person is an
average filer; the point is that the system is such a mess that someone
would even contemplate making this type of a case.
Unfortunately, this misconduct is all too often encouraged by a
bankruptcy bar that ushers people into chapter 7 without ever fully
considering the client's ability to repay.
The U.S. trustees had to pursue 653 actions seeking disgorgement of
debtors' attorney's fees in fiscal year 2002. At the same time, they
pursued 243 other actions for attorney misconduct that resulted in
$533,813 in sanctions. Over 75 attorneys were referred to State bar
associations or other disciplinary boards.
In the Eastern District of Pennsylvania, a U.S. trustee review
discovered that in bankruptcy filings it was common to have boilerplate
information entered without regard to the individual debtor's
circumstances, internally inconsistent information, and missing
financial information.

[[Page S1844]]

These are bankruptcy factories that appear to attempt to get as many
as possible into chapter 7 without so much as a cursory look at the
filer's ability to repay his or her loans or debts.
For the most part, I am proud of our bankruptcy laws. When a debtor
gets in over his or her head, we do not ask why. We do not cast blame.
Instead, we attempt to help that person pay back the debts. Bankruptcy
protection gives Americans the ability to pause, to reorganize, to
start over. Bankruptcy offers those with unsustainable debts an
opportunity for a fresh start. No one here wants to change this
fundamental guarantee. No one wants to alter this basic framework. Yet
people are taking advantage of this system. Abuses are increasingly
rampant and well documented.
When some people game the system to walk away from debts that they
are perfectly able to repay, an injustice occurs that has ramifications
for our entire economy. And guess who has to pay for their dishonesty.
You and I and everybody else because we pay an average of $400 a year
for this bankruptcy system. This bill will help to bring it into a
forceful, reasonable purpose.

It was estimated that in 1997 alone more than $44 billion of debt was
discharged through bankruptcy. This amounts to a loss of $110 million
per day. Someone has to pay for this. The American people, you and I
and everybody else, end up paying the bill for at least these dishonest
people.
According to one estimate, as I have said, these losses translate
into a $400-a-year tax on every household in the country. That might
not seem like a lot to some, but for many families $400 is a mortgage
or a rent payment.
The cost of bankruptcy to taxpayers: $44 billion in debt discharged
per year, or $110 million every day, a $400 yearly bankruptcy tax on
every household in the country.
For all the reasons I have laid out, I urge my colleagues to support
S. 256. This is a good bill. We have been at this legislation too long
to allow this commonsense reform to fail.
By the way, this very same bill, with the Schumer amendment, passed
with 83 votes. Without the Schumer amendment, the bill that President
Clinton pocket-vetoed was basically the same as this, and it passed
with 70 votes, meaning a bipartisan passage.
I will make a few comments on the Durbin amendment that seeks to
address some potential problems relating to debt carried by members of
our military. We all honor our military for their sacrifices, no
question about it. While I am supportive of the intent of the
underlying Durbin amendment, the fact is, only about 20 percent of
those filing for bankruptcy will ever be subject to a means test. Only
about half of those will end up having to repay some of their
obligations under the means test. That means that only about 10 percent
of those filing for bankruptcy will ever have to actually pay back some
of their past debts with future earnings.
I suspect the 1 in 10 fraction will be smaller, perhaps much smaller,
for those serving in the military. So when my friend from Illinois
calls the means test an onerous test, he is overstating the case.
The purpose of the means test is simple. We are trying to determine
which debtors can afford to pay a portion of their past debts from
their future earnings. The Durbin amendment has several problems, but
its goals are well intentioned and I commend him for his efforts. For
example, it is my understanding that under the definition of ``service
member,'' all of those employed as commissioned officers of the Public
Health Service and the National Oceanic and Atmospheric Administration
will qualify for this special treatment. There are few, if any, greater
supporters of the commission core of the Public Health Service, but I
do not understand why a public health service officer, working side by
side with a career civil servant member at the Department of Health and
Human Services, should receive any special consideration during
bankruptcy proceedings. If a member of the PHS or NOAA is able to pay,
as determined by this new means test, which is estimated to affect only
1 in 10 of those filing for bankruptcy today, he or she should pay like
any other civil servant or member of the public.
They are well paid. They do not have to go off and borrow beyond
their means. They do not have to live beyond their means. They should
not have any breaks any better than the regular citizens.
I think the distinguished minority whip has raised and will continue
to raise very important points, and I look forward to working with him
and the entire Senate to address those points.
If bad actors are preying on our military personnel through nefarious
payday loans or other questionable practices, then I encourage Senators
Shelby and Sarbanes, the head of our Banking Committee in the Senate,
to look into the issue. If there are other social issues that face our
military personnel, then we as Members of Congress have an obligation
to examine those issues indepth and find the right fixes.
The Durbin amendment also has an additional problem. This involves
his creation of a broad exemption to the delicate homestead compromise
already so painstakingly embodied in this bill. We have gone over and
over it and have finally come to this compromise that does not please
everybody, or anybody for that matter, but it is an important
compromise and an important aspect of this bill.
We know the Senators from the States of Florida and Texas have made
it clear that this issue is important to them. This is an area where we
have tried to defer wherever possible to the States, even though other
Senators view some of the States' exemptions with skepticism. We should
all recognize that opening the door on the homestead provision could
work to unravel this bill.
This is also the case with Senator Feingold's amendment on the
homestead exemption. This issue is not new. We have debated it year
after year, and we have come to a plausible compromise that has passed
year after year. This question has been debated over and over again. We
have achieved a compromise on the homestead exemption that has
demonstrated the ability to win overwhelming support in both Chambers.
Both the Durbin amendment and the Feingold amendment tend to upset the
balance that has been achieved on this important issue.
As I look at and examine the Durbin amendment, I have identified a
few additional concerns. For example, under the terms of the amendment
both ``real or personal property that the debtor or dependent of the
debtor uses as a residence,'' what does this language mean? How could
personal property be used as a residence?

The bottom line is this amendment has many ambiguities. In addition,
several of its principal components come into tension with long-settled
provisions of this bill such as the homestead and the means test
As all of my colleagues know, there is a right way and a wrong way of
doing things. Indeed, many Members of the minority and some of the
majority have made that very point with regard to how the USA PATRIOT
Act was put together. Senator Durbin has raised some important issues
we must take the time to explore properly, and I believe Senator
Sessions has appropriately and adequately addressed the central concern
of the Senator from Illinois, which is to allow the facts and
circumstances of military personnel to be considered in bankruptcy
proceedings.
I support S. 256, the bankruptcy bill, and I hope others will as
well. We have come very far with this bill, after 8 tough years of
work, after repeatedly passing it by overwhelming votes, and then
having it shot down because of a killer amendment that gets put on by
our colleagues who claim they are working in support of it. We should
pass this bill. We should pass it in as clean a form as possible.
Let me say with regard to credit card debt, I think it is a nice,
populist appeal here, to blame all the credit card companies for the
problems everybody has in our society today. Look, we have an
intelligent society, a highly educated society, and I think everybody
knows when they take those credit cards and they accrue debt, they are
supposed to repay that debt. Frankly, we have far too many people
taking advantage of credit cards and not paying their debt.
Where there is fraud, we should go after any credit card company that

[[Page S1845]]

commits fraud or abuse against our fellow citizens. But this bill does
not fail to resolve these issues.
Could we improve this bill? Yes, I think we could improve it. But if
we did, some on the other side would say that is too tough of an
improvement. Could others on this side improve it? I suppose so. Could
some on that side improve it? I would hope so, but so far we have
accepted an awful lot of what the other side has wanted. This bill has
been passed by overwhelming votes over the last 8 years, at least four
times, as I recall it. At one time it passed through both Houses of
Congress and was pocket vetoed by President Clinton.
I would like to make one last point. Unfortunately I have to oppose
the Feingold amendment on the homestead matter. I think the purported
purpose of the amendment is well intentioned, but I am concerned that
it may act to upset the delicate balance and painfully negotiated
provisions relating to homestead exemptions. This amendment by Senator
Feingold is, I know, well intentioned. But this amendment confuses an
important and bipartisan issue, namely the care of the elderly, in a
way that could sink this important legislation.
I have worked tirelessly to make sure there are provisions in this
bill to protect the elderly, along with women and children, and I think
every one of my colleagues who has worked with me on this bill
recognizes that fact. The simple truth is this amendment and others
like it could kill this bill. The reason has nothing to do with a
hostility to the elderly or to any other class of persons, but because
the homestead provisions have taken years to negotiate and are the
result of painful choices and compromises. They are not totally
satisfactory to me, either. But the fact of the matter is, it is the
best we can do.
There are many Members of this body who would like to see the
homestead provisions changed in some fashion, but to accommodate them
any further than what presently exists in this bill would force other
Senators who are strong supporters of this legislation to oppose it.

My opposition to this amendment has nothing to do with the elderly
and I would not object if every State in the Nation passes laws that
would put a similar floor or a higher floor under their respective
homestead laws, but that choice belongs to the States and not to the
Federal Government. There is a long history in bankruptcy law of
deference to States on this issue. Nearly every State in the country
has vehemently defended their homestead laws.
I must say I think some States wish to change their laws. If they do,
that is their prerogative. The purpose of this bill and the purpose of
the current homestead provisions is to curb fraud and abuse. The
current provisions impose a 10-year look back for fraud. They impose a
2-year domiciliary requirement that is designed to prevent wealthy
debtors from moving from States with low homestead exemptions to States
with high or unlimited exemptions and then filing for bankruptcy. These
provisions are a compromise, a balance of States rights and Federal
imperatives under bankruptcy law and we must let the provision stand as
written. I oppose the Feingold amendment and I hope my colleagues on
the floor will oppose these amendments as well.
I yield the floor.
The PRESIDING OFFICER (Mr. Martinez). The Senator from Alabama is
recognized.
Mr. SESSIONS. Mr. President, I see the Senator from Illinois is here.
At this point I ask unanimous consent that immediately following this
consent it be in order that I offer a first-degree amendment relating
to the matter in the Durbin amendment, provided further that there be
60 minutes for debate equally divided on both amendments concurrently;
provided further that at the expiration of that debate the Senate
proceed to a vote in relation to the Sessions amendment, to be followed
by a vote in relation to the Durbin amendment, with no second-degree
amendment in order to either amendment prior to the votes.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
Mr. DURBIN. Mr. President, if I could, I ask the Senator from Alabama
if I could make a unanimous consent request. I ask unanimous consent
that Senators Bill Nelson, Edward Kennedy, John Kerry, and Hillary
Rodham Clinton be added as cosponsors to my amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Alabama.

Amendment No. 16

Mr. SESSIONS. Mr. President, the Senator from Illinois has raised
questions concerning the position of military personnel in bankruptcy.
I believe his language is overly broad and I believe the concerns he
has do not justify the language of his amendment. I cannot support it.
I think I will take a minute to discuss his amendment and then discuss
the amendment I will offer, which I believe would be more appropriate
under the circumstances.
The amendment Senator Durbin has proposed would create a gaping hole
in the means test and in the homestead language--it would exempt
certain individuals from those provisions and violate certain
principles that have been part of this bankruptcy legislation. As I
pointed out earlier today, many of the concerns that are raised here
are covered by the Servicemembers Civil Relief Act which we passed in
2003 to modify the Soldiers' and Sailors' Civil Relief Act passed in
1940. The combined acts allow military members to suspend or postpone
civil financial obligations during their period in the military
service.
Specifically, this act provides as follows. There is an interest rate
cap of 6 percent on all debts incurred before the commencement of
active-duty service. In other words, before active duty you have a
certain rate of income and if you sign up for a note that carries a 10-
percent interest, you can have that interest rate reduced to 6 percent
while you are activated, on active duty for the United States of
America.
There are protections from eviction from your home. It provides for a
delay of all civil court proceedings, including bankruptcy and
foreclosures of your home; a prohibition on entering default judgments
against active-duty personnel members, and the ability to reopen a
default judgment if one were to be entered; the ability to terminate
property, residential, and automobile leases at will, if you are
activated; the continuation of life insurance of at least $250,000
without requiring premiums to be paid; and the tolling of statutes of
limitation. In other words, if you are activated and you have a cause
of action against someone and you are interrupted in your ability to
file that and the time may have otherwise run, the statute of
limitations, the time in which you can file a lawsuit, would have run,
then you can extend that while you are on active duty.
There is temporary relief for mortgage payments for people on active
duty, credit rating protection, penalties for landlords and creditors
who violate the act involving fines of up to $100,000 and/or
imprisonment. These are a lot of broad protections that indicate to me
we are at a point where it would not be necessary or wise to frustrate
or undermine or go against the guiding principles that are in this
bankruptcy bill. We hammered it out. And I have not agreed with all of
them that have been set forth. This is not, in my view, a justification
for a very significant carve out to the means test and homestead
provisions for those on active duty.
I would have to oppose this Durbin amendment. I believe, however,
that we can be more explicit in the legislation and make sure that
soldiers, certain persons with medical conditions, and veterans with
low income can qualify under the safe harbor of the bill. I am offering
an amendment which clarifies that these individuals who may fall under
the special circumstances provisions of the bill are explicitly allowed
to be covered under the special circumstances provisions of the bill to
give them certain advantages. It would deal primarily with the concern
that some would be required to pay back a portion of their debt, and
this would deal with that.
My amendment includes protections for the following three categories
of individuals: those called or ordered to active duty in the Armed
Forces, low-income veterans, and individuals with serious medical
conditions. These are all situations that we want to make sure the
bankruptcy bill's special circumstances clause includes. My

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amendment does not create a gaping loophole in our legislation.
Instead, it makes clear that people capable of paying back their debt
should do so, at least in part, but those incapable of paying back
their debt due to military service or a serious medical condition may
not be required to do so. I hope my colleagues can support this
amendment.
I will just say with regard to the homestead exemption included in
the Durbin amendment that this would go against a lot of consensus we
finally reached on homestead. Senator Hatch referred to it earlier. The
fact is we have decided as a Senate and after debate three different
times in passing this legislation on this floor by a overwhelming vote
each time that we were not going to overrule the States' definition of
homestead.
The State of Florida has a high homestead. In my view, it is too
high, but it is in Florida law, and the Senator from Florida may well
believe that he needs to defend that law. Many of our Senators say:
This is our State's law, and I am not going to vote for a bill with an
amendment which overrides my State's law on what the homestead should
be. I have a personal belief that it is a necessary provision for us to
take, but that has been the consensus, so I have to live with it even
though I have been concerned on some of the issues.
We have been consistent in not overruling the State definition of
homestead. I note that any State legislature could change their
homestead any time they want. They can create a separate homestead
rule. If they choose for the military, they could raise it or lower it,
they can cap it or put a floor on it--whatever they choose. We have
decided, as this bill has been through the Congress several times now,
to defer to the States on that issue. I believe it would be
inappropriate for us to now carve out this exemption to it.
I yield the floor and reserve the remainder of the time.
The PRESIDING OFFICER. The Senator from Illinois.
Mr. DURBIN. Mr. President, I thank my colleague from Alabama.
Let me make a couple comments.
First, his amendment, which I will oppose and urge all of my
colleagues to oppose, puts servicemen and servicewomen in the category
in this bill where they are presumed to be abusers in bankruptcy. That
is right. The presumption in his amendment is that if you served in the
military and file for bankruptcy, that you are abusing the bankruptcy
process. He adds language which says that, and, therefore, we want the
judge to take a look at these presumed abusers of the bankruptcy
process and consider the fact that they happen to be in the military.
The Senator's amendment is entirely opposite of what we are trying
achieve with the Durbin amendment. We are trying to presume the
obvious. The men and women serving our country overseas who have been
activated in the Guard and Reserve, taken away from their families and
their businesses, should be presumed not to be abusive of the process
but be presumed to be some of our most important citizens. Why do we
want to throw them into the presumption of abusing the bankruptcy
process? What I want to do is exactly the opposite. If you are serving
our country and you face bankruptcy, we want you to walk into that
courtroom and, frankly, get a better shake under the law than you
currently get.
First, we don't want you to have to go through the hoops that have
been created by the credit card industry and big banks for people who
supposedly abuse bankruptcy. No. You put your life on the line for
America. You were activated to serve in Iraq, and you risk your life
every day for us. You lost your business at home, your family went
bankrupt, and yet we are giving you a break in the bankruptcy court,
unlike the Sessions amendment, which presumes you are an abuser of the
process if a serviceman walks into the bankruptcy court.
The second thing we say is military servicemen don't get to pick the
States they live in; they are transferred by the military to different
places. But while these transfers of their families are going on, they
could go bankrupt. If they go bankrupt, why do you have to make this
some sort of roulette game as to what laws apply?
You are in the military and you file for bankruptcy. Then you ought
to be able to count on several things:
First, the Federal exemptions on personal property. You know you can
always turn to that. That means the things that you can keep in your
family, in your household, even if you go through bankruptcy.
Second, the homestead exemption. If you happen to be in a State that
is tough and doesn't allow you to protect any part of your equity in
your home and you have been transferred there in the military, why use
that against men and women who are serving this country? Why wouldn't
you say, as our bill does, that we will protect up to $75,000 of your
homestead?
Some will say: They may live in a State where it has zero homestead
exception. That is true. I plead guilty to the charge that I am
favoring the men and women in uniform who file for bankruptcy. I am.
Unlike Senator Sessions' amendment, which presumes them to be abusive
of bankruptcy, I presume the opposite, that men and women in the
military don't go into bankruptcy just because it is an interesting
thing to do. I think they have proven that they are responsible people
when they raise their hand and swear an oath to the United States and
are willing to risk their lives for our country. That is the
presumption of responsibility that should be given to the men and women
in uniform--exactly the opposite of the presumption of Senator
Sessions. His presumption is that they are abusing the process and we
will take a second look at it and we will let them come up with more
documentation to prove they are not abusing the process.
The last thing my amendment does is to go after the most abusive
creditors of the military men and women in America today. I showed the
illustrations earlier. Can you imagine that a loan company would
actually say to a sailor, airman, a marine, or soldier, we will loan
you the money, but we want you to pledge as collateral for the loan
your military retirement pay or your disability pay for your injury
overseas serving America? They do it. Maybe they are not supposed to.
They do it. And they charge these men and women in uniform the most
outrageous interest rates in America. It ought to make the credit card
companies blush. These pay day lenders charge 100 percent, 200 percent,
400 percent for these soldiers who are trying to keep their families
together while they are serving America. My bill, quite honestly, says
we are not going to give those creditors a day in court. Those
creditors who charge over 36 percent a year in terms of loans to the
military cannot collect them in bankruptcy.

I think that, frankly, is fair to these families because once you get
into this ``juice loan'' racket that these payday loan companies come
up with, there is no end in sight. You are sunk. Mr. President, $3,000
in debt turns into $20,000 before you can blink an eye.
Let me tell you a difference between what has been offered by Senator
Sessions and what I am offering on this floor. The fact is, these
groups support my amendment: the Military Officers Association of
America, the Air Force Sergeants Association, the National Consumer Law
Center, the National Association for the Uniformed Services, the
Enlisted Association of the National Guard of the United States, and
many other individual leaders in the Guard and Reserve across our
country.
They are not supporting the Sessions amendment. I can understand why.
They do not think our service men and women should be presumed abusive
of the process. Let me tell you why we need this amendment.
In 1999, 16,000 members of the military in America filed for
bankruptcy. Since then, there has been a massive activation of troops,
Guard and Reserve, across America. Now we have men and women serving
for long periods of time they did not anticipate, with dramatic losses
in pay. This cutback in income for these individuals is creating a
great hardship.
Thirty percent of all military families report a loss of family
income when the spouse is deployed. But listen to the numbers for the
National Guard and Reserve. Mr. President, 41 percent of Guard and
Reserve families lost income when a spouse was deployed. How do they
keep it together? Some of them

[[Page S1847]]

rely on relatives. Mom and dad step in. They are proud of their son or
daughter serving in the military, they say: We will try to keep the
wife, for example, who stayed home, and the children, together, while
you are overseas. Do not worry about us. Just come home safely.
They make great sacrifices. Some of them walk away from a business.
Those are the ones who get hit especially hard, such as reservists who
own their own business and who are activated.
Fifty-five percent of self-employed reservists lost money when they
were activated. And the average loss was $6,500. For some people,
$6,500 may not mean much. But for these families, it may tip them over
the edge. You find them making sacrifices for America, and all I am
asking is, if the worst outcome occurs, if service to our country leads
to an economic catastrophe for a family, and they have nowhere to turn
but to bankruptcy court, for goodness' sake, should not this Senate say
to these men and women in bankruptcy, We are going to give you a
helping hand; you reached out your hand to help America; we are going
to help you in the bankruptcy court?
But, no, not with the Sessions amendment. The Sessions amendment does
not give them the helping hand. The Sessions amendment presumes that
they abuse bankruptcy and says to the judge: Take that into
consideration if you want to let them off the hook and want to let them
try again to file for bankruptcy. That is cold comfort, cold comfort to
the men and women in uniform, risking their lives for America, who
know, back home, the terrible economic circumstances their families are
facing.
Some people think I am making this up, but I am not. The anecdotal
evidence that we received from all over the United States, as well as
the reports that we have had from the military groups that are
supporting my amendment, tell me a lot of families are right on the
edge. They may not be able to survive this situation. I talked about
this gentleman, Mr. Korizon, from Schaumberg, IL, activated for the
Persian Gulf war, who left behind a construction company with 26
people. After he had been activated for 6 months, he had to file
bankruptcy. He served his country. He kept his word. He kept his
promise. He risked his life for America. He lost his business. He filed
for bankruptcy. Does he deserve any special consideration in court? The
other side of the aisle says no. Get in line. Just another one of those
bankruptcies. I think he does.
You take a look at SGT Patrick Kuberry, who owned a restaurant in
Denver. His partner in the restaurant was also in the military. They
were both activated. Before it was over--both of them activated--they
lost their restaurant and filed for bankruptcy. They served our country
after 9/11. They protected us, the Members of the Senate, and our
families. And they paid a heavy price. They lost the only business they
had. Should they get a break in bankruptcy court? Of course they
should. I think most Americans would agree they should.
The list goes on and on. I think the list tells the story. We have to
be sensitive to the fact that this amendment, which I have proposed, is
an amendment which addresses the most basic and fundamental need here.
Let me tell you something else. Senator Hatch of Utah came to the
floor earlier. Do you know what he said? He said: I can't understand
why so many more people are filing bankruptcy today. Well, he is
unlikely to read this book, but I wish he would. It is called ``The
Two-Income Trap,'' by Elizabeth Warren and her daughter Amelia Warren
Tyagi. She analyzes why people are filing bankruptcy. And it is not
because they are immoral. People are filing bankruptcy because: Since
the 1970s, the number of involuntary job losses is up 150 percent.
Since the 1970s, wage earners missing work due to illness or disability
are up 100 percent, divorce is up 40 percent, people losing health
insurance is up 49 percent, wage earners missing work to care for a
sick child or elderly family member is up 1,000 percent-plus.
Now, add to these circumstances the possibility that you just
received notice that your Guard unit has been activated, and you have a
sick parent at home and you wonder: How in the heck am I going to keep
this together? I was here working my job, trying to be a good son, a
good daughter, trying to take care of my parent. What is going to
happen? How am I going to meet this need?

These are real family circumstances of people who serve in the
military. All I am asking is to make sure that if the worst thing
happens, if they have to go to bankruptcy court, not that they get off
the hook--they are not asking for that--but only that they get fair
treatment. I knew the credit industry would oppose this amendment. I
knew they would oppose it because I went after the payday loans and
these ``juice loan'' rackets that are taking advantage of the military.
They all gather together when you go after one of their own. The
predators are treated just like those who are supposed to be
respectable. And that is a shame.
I think the credit industry should sit down and have a balanced bill.
And I think they ought to sit down at night and thank their lucky stars
that men and women in this country step forward every single day and
volunteer to keep us safe, to protect our homes and protect our Nation.
Is it too much to ask the credit card industry and this big bank lobby
that is behind this bill to give them a break in bankruptcy court if
the bottom falls out while they are serving America? I cannot imagine
it is.
Mr. President, I yield the floor and reserve the remainder of my
time.
The PRESIDING OFFICER. The Senator from Alabama.
Mr. SESSIONS. Mr. President, I just want to say how strongly I value
the contribution of our men and women in uniform. When I was in the
Army Reserve I had the opportunity and the honor to call employers of
service men and women whom we believed may have been discriminated
against because they were fulfilling a military obligation. When I was
a U.S. attorney, I filed a lawsuit against a business that terminated
someone I believed, and the jury agreed, had been terminated at least
in part because of them being a member of the Guard and Reserve.
We need to make sure our military men and women are protected and
that they cannot be taken advantage of. I was in Iraq in January, and I
met with soldiers there. One told me about his house. He was not able
to keep up the payments. I asked him if he knew about the Soldiers and
Sailors Relief Act, and he said yes, that was protecting him. Under
that act his house could not be foreclosed on. And JAG officers, back
there, helped him deal with that. But he was sharing with me one of his
frustrations. He also told me he planned to re-enlist.
But I must react adversely to my colleague's statement that the
amendment I offer, which expands protections and guarantees certain
protections for military personnel over the present language in the
statute, presumes military people who file bankruptcy to be abusers.
Now, that is not so.
Look. This is the deal. Let's be real frank about it. What he is
raising fundamentally is simply whether a person ought to be handled
under chapter 13 or under chapter 7. If a military person's income
falls below that of the median income in America, he can file chapter 7
and wipe out every debt he has--zilch, zero, walk away free--just like
any other American can. And that has not been changed. And as Senator
Hatch has indicated, probably close to 90 percent of American
individuals who file for bankruptcy relief will be falling in that
category.
Mr. DURBIN. Will the Senator from Alabama yield for a question on my
time?
Mr. SESSIONS. All right.
Mr. DURBIN. I just want to ask the Senator a question.
Is it not true that you have amended page 12, section (B)(I) of S.
256, which reads in part: ``In any proceeding brought under this
subsection, the presumption of abuse may only be rebutted by
demonstrating special circumstances'' such as being called to active
duty in the Armed Forces?
So when I say you are presuming that they are abusing bankruptcy,
these are the exact words of your amendment.
Mr. SESSIONS. Well, look, this is the deal. My amendment does not
presume abuse. The bill already does that if you file for Chapter 7 and
you have above median income. My amendment only

[[Page S1848]]

adds language to give examples of what a ``special circumstance'' could
be.
This is what we are saying here. The way this statute is written,
what it says is if you make above median income in America and you can
pay back a portion of your debts, you should not be allowed to go under
chapter 7 and wipe them all out. I don't think most military people
want to be treated differently from that. If they have come back from
active duty and are making $200,000 a year or $75,000 or $100,000 and
they have a small amount of debt that they can pay back--it may be
substantial--but an amount they can pay back, they will be able to go
under chapter 13 and during that period of time the court would decide
how much of the debt they should pay back based on their income. And if
they have extraordinary circumstances, special circumstances as a
result of their military duty, the court can exempt them from going
into chapter 13, if it feels that is appropriate.
But fundamentally, this bill says if you are making a higher income
and you can pay back part of it, why should you not? Not all of it. It
is over 5 years. And the way they do it, the money goes to the court.
Certain debts on a percentage basis are paid. And at the end of a
maximum of 5 years you are wiped out. They don't make you pay for any
more than 5 years. So you pay back a portion of what you owe over a
period of 5 years.
This is not abusing people. These are people who have incurred debts,
and they can pay some of it back. And they pay it. Most people under
this legislation will fall in the other category as exists today, and
they will wipe out all of their debts. So this is not abusive
legislation. That is important to state.
It also specifically protects veterans who are defined by statute
today as low-income veterans. They would be covered by this. There are
people with medical expenses. That was defined explicitly as a special
circumstance, and active-duty personnel.
As one businessman and fellow Senator indicated, we also have to be
careful that if we provide too many special protections for service
personnel, we could actually drive up their interest rates when they go
out to borrow money because a lender may feel they are a greater risk
than otherwise would be the case.
I believe we need to give our servicemen special protections. The
Servicemember Civil Relief Act does that. It provides that you cannot
foreclose your home while you are on active duty. It provides that your
interest rate is reduced if you incurred debts before you go on active
duty. You can't exceed 6 percent. They can't take a default judgment
against you while you are away. Your statute of limitation is tolled so
you can file any action you have that might otherwise be fileable while
you are away. You can come back and still have time to do it.
I think we ought to continue to look at it. If there are additional
things such as loans and other matters that are important for
protection of our military, we need to look at it. But credit card,
bank interest rates, those matters are not to be dealt with on a
bankruptcy court reform bill. Those pieces of legislation are more
appropriately and properly under the jurisdiction of the Banking
Committee. That is where they need to be decided and debated.
Mr. BIDEN. Mr. President, I appreciate the sentiment behind Senator
Durbin's amendment, but the fact of the matter is that it is not
needed. In the first instance, it is simply not the case that the means
test in this bill will prevent our men and women in uniform from
receiving the full protection of our bankruptcy laws.
The means test will not apply to any one in military service under
the median income in their State. The median income in Delaware for a
family of four is $72,680. If a staff sergeant at Dover Air Force Base
in Delaware had to file for bankruptcy, he would automatically be
exempt, at his pay scale of $34,319. So there is no way, under the
means test in this bill today, that he would be denied the full
protection of chapter 7. That is precisely why I insisted on that safe
harbor in the means test two Congresses ago.
So the very assumption behind the amendment, that we need to exempt
service men and women from the means test, is wrong. And if a pilot at
Dover, who might well fall above the median income, were to file, he
would only be subject to movement to chapter 13 if, and only if, he had
enough income after deducting all of his normal expenses, to continue
to pay some of his bills. And under chapter 13, he could keep his house
and other assets, something filers under chapter 7 cannot do.
As Senator Hatch pointed out earlier, and Senator Sessions, too,
special protections exist in current law--the Soldiers and Sailors
Relief Act--that prevent foreclosure on a house, that cap interest
payments. The extra protections sought by the Durbin amendment are
already in place.
On the point of the payday loans, I agree that is an abuse that
should be halted. Truly unscrupulous lenders that take advantage of
anyone, in uniform or not, should be put out of business. But that is
in fact a matter for banking regulations, not bankruptcy law. This
amendment is closing the barn door after the horse is already gone.
Under the bankruptcy reform bill before us, the test to determine a
filer's ability to pay specifically allows for the ``special
circumstances'' that could reduce their ability to pay. The Sessions
amendment, that we just passed, makes it crystal clear that those
special circumstances include service in the armed forces--if that
service puts you into a situation where you are unable to pay your
legal debts. That can happen to someone called up in the reserves, and
it is precisely why that category of special circumstances was put into
the bill in the first place.
I could not support this bill if I did not belief that it is already
fundamentally fair. This is a bill that received 82 votes the last time
the Senate voted on it. I would never call those Senators callous or
indifferent to the difficult circumstances our servicemen and women
face. They are not. The Durbin amendment assumes all 82 of us got it
wrong last time. I do not agree.
With the additional clarification of the Sessions amendment, I am
convinced that the concerns raised by Senator Durbin are fully
addressed.
Mr. LEAHY. Mr. President, I stand to voice my support for the
amendment offered by my friend and colleague, Senator Durbin, which
will protect our military servicemembers from attempts to penalize them
by making it tougher for them to file for bankruptcy, even when the
reason they lost all their income is because they answered the call of
duty to serve America. I am proud to join my colleague as a cosponsor
of this amendment.
We cannot have a thorough debate on bankruptcy reform without
considering the economic hardships faced by servicemembers and their
families. Calls to serve their country in Iraq, Afghanistan, or
elsewhere can cause loss of family income, the closing of a family
business, or unexpected expenses. Unfortunately, it is not uncommon for
servicemembers and their families to be forced into filing for
bankruptcy relief. We need to protect those who are fighting for us.
I support Senator Durbin's efforts to protect our soldiers,
particularly young recruits and junior officers, from sales of
inappropriate insurance and investment products on military bases. It
is crucial that servicemen and women who sacrifice for their country
not be exploited or taken advantage of through dishonest business
practices. It is our duty to ensure that America's military personnel
are offered first-rate financial products so they can provide for their
families and invest in their futures.
I commend Senator Durbin for his leadership on this issue, and I urge
my colleagues to accept his amendment so we can remedy the financial
hardships faced by servicemembers who serve our nation and their
families.

Amendment No. 23

Mr. SESSIONS. Mr. President, I send an amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:

The Senator from Alabama [Mr. Sessions] proposes an
amendment numbered 23.

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

[[Page S1849]]

(Purpose: To clarify the safe harbor with respect to debtors who have
serious medical conditions or who have been called or ordered to active
duty in the Armed Forces and low income veterans)

On page 12, line 10, insert after ``special
circumstances'' the following: ``, such as a serious medical
condition or a call or order to active duty in the Armed
Forces, to the extent such special circumstances''.
On page 18, line 4, insert after ``debtor'' the following:
``, including a veteran (as that term is defined in section
101 of title 38),''.

Mr. SESSIONS. Mr. President, how much time remains?
The PRESIDING OFFICER. The Senator from Alabama has 15 minutes.
(Disturbance in the Visitors' Galleries.)
The PRESIDING OFFICER. The Sergeant at Arms will restore order in the
gallery.
The Senator from Alabama.
Mr. SESSIONS. I thank the Chair.
I do not believe our service men and women should be insulted or are
being insulted by the amendment I offered to ensure that they have
certain special categories of protection under this act. I think they
will welcome the amendment. I do not believe, however, that we need to
change the overall idea and concept of the legislation, that homestead
should be decided by the States and not by this Federal legislation.
And if a serviceman is unable to pay his debts, he will be able to file
bankruptcy against those. He will be able to wipe out all those debts.
If he is able to pay back a portion, like any other citizen, he would
be required to pay back that portion under this legislation. I think
that is fair.
We need to be careful that they are not in any way adversely impacted
by being overseas defending the interests of this country. I do not
believe they are under this legislation.
I reserve the remainder of my time.
The PRESIDING OFFICER. The Senator from Illinois.
Mr. DURBIN. Mr. President, I thank the Senator from Alabama. This
exchange is a rare and a good occurrence. As I said before, it is
dangerously close to debate which we occasionally have in the Senate. I
thank the Senator from Alabama for being here, even though we are on
polar opposite sides of the debate. There should be more conversation
and dialog on the floor such as this, a competition of ideas.
Nothing I said about his amendment reflects on him or his respect for
the military. He has served in the military. I have not. I have great
respect for him for having done that. But what I am trying to do with
this amendment is to show what I think is appropriate respect to the
men and women serving in uniform.
The point I made earlier was that the section of the underlying bill
where people are presumed to have abused bankruptcy--in other words,
they can pay their debts, but they try to get discharged from
bankruptcy from their debt--that section is what the Senator from
Alabama amended. So he puts into that section the requirement that the
court take a look at the fact that the person filing bankruptcy may be
in the military. That is all. That is the only point I am trying to
make. I do not question his respect for the military in any way at all.
His amendment misses the point completely. Instead of presuming that
the men and women who serve our country are abusing the bankruptcy laws
when they go to file bankruptcy, I say stick to the current law. The
current law allows a bankruptcy judge to make this determination. The
new proposal by Senator Sessions, the one we are about to vote on,
would require the service man or woman to file copious documents, incur
additional legal costs, and then, if they are presumed to be abusing
bankruptcy, to go through it all over again. What I am trying to do is
spare them from that, and maybe it is soft on my part. Maybe I am not
tough enough. I am trying to spare them because they are sparing me the
worry about the safety of this country. They are serving this country
in uniform. They are risking their lives. Yes, maybe I am going a
little further than some would. I don't think it is an unreasonable
leap. We understand the economic hardships that activation in the
military can lead to.
Let me say a word about what used to be known as the Soldiers and
Sailors Relief Act, now the Servicemembers Civil Relief Act.
The Senator from Alabama continues to return to it, saying this is
their protection. Well, there is some protection in this law as it
currently exists, but not nearly enough. This law, as currently
written, does not apply to debts incurred after military service
begins. So if you are in the military service and have debts that are
incurred because you are overseas--your family debts that could lead
you into bankruptcy--there is no protection from the Servicemembers
Civil Relief Act. The protections are not automatic. You have to go to
court and fight for them, too. Imagine that, fighting for your country
overseas and being worried about fighting legal battles back home for
lien enforcement on autos and other personal property being taken by
self-help repossession. It doesn't fully protect servicemembers'
spouses or dependents. These protections are not absolute.
If the creditor can show that the proceedings he instituted do not
materially affect the serviceman, they can go forward. This bill, as
written, doesn't stop debt collection harassment. This bill, as
written, is providing protection that is only temporary at best and not
long-term solutions to financial problems.
A member of my staff is active military and he is on detail to my
office. I always go to him and ask him about these ideas, because he
sees it from the eyes of a serviceman. He sent me a little note about
Senator Sessions' amendment. He says it keeps the troops subject to the
means test, but would allow a call or order to active duty in the armed
services, to the extent that such special circumstances justify
additional expenses or adjustments of current monthly income. This puts
the service member at the mercy of someone else's opinion as to what
was justified, what was reasonable. He gives an example, and a good
one:

Suppose a soldier decides to keep his family in their home
rather than move them in with his parents while he is
deployed. You can understand why he might--the comfort of
their home, schools the kids are used to. Instead of picking
them up and saying I am going overseas and you are moving in
with mom and dad, he says stay in the home. Senator Sessions'
amendment would force that soldier to justify his decision to
keep the family in their home, made under circumstances that
few outside the military can appreciate. What may seem like a
reasonable alternative--picking up the wife and kids and
sending them to mom's and dad's house to live in the
basement, or in an extra bedroom, may not be reasonable in
that soldier's eyes.

What I am asking my colleagues in the Senate is, when you look at
this Bankruptcy Code, join me in saying if we are going to give special
consideration and help to the men and women in uniform--I don't think
that is an unreasonable thing to do; I think we owe it to them--they
ought to have a chance to go to court and be spared from this harsh
means test and everything included in this bill to prove up where you
stand. The judge, the trustee in bankruptcy, and others are going to
make the ultimate decision as to whether you receive your bankruptcy.
Secondly, moving these soldiers all around the United States--at
least if they file for bankruptcy, give them an option to choose an
exemption under Federal law for personal protections and a $75,000
homestead exemption.
Finally, let me say this to these predatory lenders, the payday loan
companies. The argument is if you treat them harshly in bankruptcy
court, they may not be able to offer these 100-percent, 200-percent,
400-percent interest loans. I hope they go out of business tomorrow, to
be honest. A lot of them are snaring these unsuspecting soldiers and
marines and sailors into debt they can never get out from under. I
think it is horrendous that men and women who serve our country should
be subjected to that. I don't think a 36-percent a year annual interest
rate, which we allow in the Durbin amendment, is unreasonably low. I
think it is a reasonable return for a loan in most circumstances. It is
far more than people pay for cars or homes today. They may pay that
much on credit cards, if they are not careful. But to say the payday
loan lenders are not going to have their day in court to exploit the
men and women in uniform, I think, is a reasonable conclusion. It is a
conclusion, frankly, that was joined in by a number of military groups
that have endorsed this amendment.

[[Page S1850]]

For those colleagues following this debate, let me say that, to my
knowledge, the Sessions amendment has no support from military families
and support groups. It may have the support of the payday loan
companies and some of the credit card companies and banks. But
supporting my legislation are the Military Officers Association of
America, Air Force Sergeants Association, National Association for the
Uniformed Services, and the Enlisted Association of the National Guard
of the United States. I will stand with my supporters and ask my
colleagues to join me in that effort.
Mr. President, at this time I will yield the floor and reserve the
remainder of my time. We are under a unanimous consent request, and I
note that Senator Leahy of Vermont has come to lay down an amendment.
If I may get the attention of the Senator from Alabama for a moment.
Senator Leahy is here to lay down an amendment. I would appreciate it
if we can amend our unanimous consent request to give the Senator 7
minutes and protect and preserve the time we have remaining in debate.
Mr. SESSIONS. That is acceptable to me.
Mr. DURBIN. Mr. President, I ask unanimous consent that Senator Leahy
be allowed to lay down his amendment and to speak for 7 minutes, and
that we return to debate and the previous unanimous consent request.
The PRESIDING OFFICER (Mr. Thune). Without objection, it is so
ordered.

Amendment No. 26

Mr. LEAHY. Mr. President, I thank the Senator from Illinois and the
Senator from Alabama for their usual courtesies. I ask unanimous
consent that it be in order to set aside, under our understanding, the
pending amendment so I might introduce an appropriately referred
amendment for myself, Senator Snowe, and Senator Cantwell.
The PRESIDING OFFICER. Without objection, it is so ordered.
The clerk will report.
The assistant legislative clerk read as follows:

The Senator from Vermont [Mr. Leahy], for himself, Ms.
Snowe, and Ms. Cantwell, proposes an amendment numbered 26.

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

(Purpose: To restrict access to certain personal information in
bankruptcy documents)

On page 132, between lines 5 and 6, insert the following:

SEC. 234. PROTECTION OF PERSONAL INFORMATION.

(a) Restriction of Public Access to Certain Information
Contained in Bankruptcy Case Files.--Section 107 of title 11,
United States Code, is amended by striking subsection (b),
and inserting the following:
``(b) On request of a party in interest, the bankruptcy
court shall, and on the bankruptcy court's own motion, may,
protect a person with respect to a trade secret or
confidential research, development, or commercial
information.
``(c) The bankruptcy court, for cause, may protect an
individual, with respect to--
``(1) any means of identification (as defined in section
1028(d) of title 18) contained in a paper filed, or to be
filed, in a case under this title; or
``(2) information contained in a paper described in
paragraph (1) that could cause undue annoyance,
embarrassment, oppression, or risk of injury to person or
property.''.
(b) Security of Social Security Account Number of Debtor in
Notice to Creditor.--Section 342(c) of title 11, United
States Code, is amended--
(1) by inserting ``last 4 digits of the'' before ``taxpayer
identification number''; and
(2) by adding at the end the following: ``If the notice
concerns an amendment that adds a creditor to the schedules
of assets and liabilities, the debtor shall include the full
taxpayer identification number in the notice sent to that
creditor, but the debtor shall include only the last 4 digits
of the taxpayer identification number in the copy of the
notice filed with the court.''.

Mr. LEAHY. Mr. President, the reason for this amendment--and I
realize we will not vote on it today and we may vote on it tomorrow,
although it may well be accepted--is one of the facts we have today.
The bankruptcy process requires the submission of many documents
containing highly personal information. But we must be careful that our
efforts to require documentation for accuracy and accountability do not
inadvertently create problems for privacy and security.
We are in an age where personal information can be easily digitized
and shared, and when it falls into the wrong hands, easily abused.
Identity theft is one danger. We have only to look to the recent
debacle of Choicepoint selling the personal data of 145,000 individuals
to scam artists. Many of these individuals have already become victims
of identity theft, and they are not alone. Last year alone, 9.3 million
people were victimized by identity theft. Another danger is tracking or
harassing a former battered spouse. We need to minimize these
possibilities, while still allowing for accountability.
We took an important first step by ensuring privacy protections for
databases of personal information that become assets in bankruptcy. I
was pleased to work closely with my colleagues in providing this
protection.
But our responsibilities didn't end there. We also need to ensure
reasonable privacy protection for personal information that is
submitted by the debtors. I am submitting an amendment that will do
just that by enhancing the court's discretion to protect personal
information, and by requiring truncation of social security numbers in
publicly filed documents. The Judicial Conference supports this
amendment and I will ask unanimous consent that the Judicial Conference
letter supporting the amendment be printed in the Record.
I am pleased that my colleagues Senator Snowe and Senator Cantwell
have agreed to co-sponsor this amendment. They have been leaders on
privacy issues, and I appreciate their support.
First, the amendment addresses court discretion in several ways. It
allows the court, for cause, to protect personal identifiers, including
the debtor's or other person's name, social security account number,
date of birth, driver's license number, passport number, employee or
taxpayer identification number, and unique biometric data. The personal
identifiers protected under this provision are the same ones defined as
``means of identification'' under the Identity Theft Assumption
Deterrence Act of 1998. This definition is codified as Section 1028(d)
of Title 18 of the criminal code.
The amendment also allows the court, for cause, to seal or redact
``information that could cause undue annoyance, embarrassment,
oppression or risk of injury to person or property.'' This standard is
drawn from the current civil procedure discovery rules--Fed. Rule of
Civ. Procedure 26--and would replace the existing standard in
bankruptcy court, which only protects individuals against ``scandalous
or defamatory matter.'' This change would allow the court to protect
information, such as the home or employment address of a debtor,
because of a personal security risk, including fear of injury by a
former spouse or stalker. It would also allow the court to protect
other information normally considered private, such as medical
information.
The amendment would also provide persons the opportunity to request
protection of sensitive information not only after it is filed with the
court, but prior to filing as well. This protection is particularly
important in an electronic filing environment, where information once
filed is immediately available to the public.
In addition to enhancing court discretion, the amendment also
protects social security numbers. Currently, the bankruptcy code
requires debtors to include their tax payer identification numbers,
which for individuals is almost uniformly his or her social security
number, on any notice the debtor gives to creditors.
Because these notices are also filed with the court, the court's
files routinely include unredacted social security numbers, creating
the potential for abuse by those accessing public court records.
The amendment would simply allow debtors to limit disclosure to only
a part of his or her social security number in notices that it files
with the court. Specifically the notice to the court would include only
the last four digits. The amendment still protects creditors where
necessary, and specifies that creditors who are on the

[[Page S1851]]

schedule of assets and liabilities should receive the full tax payer
identification number in the notices sent specifically to the creditor.
The idea of truncation isn't new. Just last year, we passed the Fair
and Accurate Credit Transactions Act of 2003, and that Act required
truncation of credit card and debit card numbers on receipts given to
cardholders. Under that law, only the last 5 digits of credit card and
debit card numbers can be printed.
Requiring truncation for social security numbers is similarly
reasonable. It provides protection against abuse, but still allows for
important information sharing to take place.
The bankruptcy process requires submission of many documents
containing highly personal information. I spoke about this on the floor
yesterday. We must be careful that our efforts to require documentation
for accuracy and accountability do not inadvertently create problems
for privacy and security.
We are in an age where personal information can be easily digitized
and shared, and when it falls into the wrong hands, easily abused. We
know what happens with identity theft. Look at the totally
irresponsible, outrageous, unbelievable debacle of Choicepoint, selling
the personal data of 145,000 individuals to scam artists. It is hard to
think of anything being done more irresponsibly than the executives at
Choicepoint, unless it is the executives of Bank of America, who ship
the data of their customers by commercial airplane--the same kind of
flight we have all taken, and all of us have lost luggage. I said
yesterday maybe their executives fly by private planes and they don't
know what it is like to fly commercial. The point is their
irresponsibility.
Many of the individuals who have had data stolen become victims of
identity theft. There were 145,000 individuals whose data was
compromised with Choicepoint that we know of now. Some have already
become victims of identity theft. Last year alone, 9.3 million people
were victimized by identity theft. Another danger is tracking or
harassing a former battered spouse. I want to make sure we keep
accurate information and that people have to say who they are, but we
don't want to allow somebody to go into electronic court files and get
Social Security numbers and names and addresses and everything else,
and then use that information for identity theft or worse. We need to
minimize these possibilities, while still allowing for accountability.
We took an important first step by ensuring privacy protections for
databases of personal information that become assets in bankruptcy. I
was please to work with my colleagues in providing this protection. But
our responsibilities did not end there. We also need to ensure
reasonable privacy protection for personal information submitted by the
debtors. This amendment will do that by enhancing the court's
discretion to protect personal information, and by requiring truncation
of social security numbers in publicly filed documents.
I have a letter from the Judicial Conference of the United States,
Chief Justice Rehnquist presiding, in which they support this
amendment. They strongly support this amendment. These are the courts
that are going to have to enforce this.
I ask unanimous consent that the Judicial Conference letter
supporting the amendment be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Judicial Conference

of the United States,

Washington, DC, February 25, 2005.
Hon. Patrick J. Leahy,
Ranking Democrat, Committee on the Judiciary,
U.S. Senate, Washington, DC.
Dear Senator Leahy: I am writing today to express the
Judicial Conference's support of two proposed amendments to
the ``Bankruptcy Abuse Prevention and Consumer Protection Act
of 2005'' (S. 256). Both amendments to the bill would amend
the Bankruptcy Code to effect the Judicial Conference's
privacy policy and protect confidential or sensitive
information from public disclosure. Your support of these
amendments to pending bankruptcy reform legislation would be
greatly appreciated.

Section 107 of the Bankruptcy Code

This amendment would implement Judicial Conference policy
regarding protection of certain information contained in
bankruptcy case files from public disclosure by means of four
revisions to section 107 of the Bankruptcy Code. First, the
amendment would transform former subsection (b)(1) regarding
protection of trade secret or confidential research,
development, or commercial information into a new subsection
(b). No substantive change would be made to this provision.
Second, the amendment would create a new subsection (c) to
allow the court for cause to authorize the redaction of
personal identifiers to protect a debtor, creditor, or other
person from identity theft or other harm. The amendment
incorporates by reference section 1028(d)(7) of title 18,
United States Code, a provision of the ``Identity Theft and
Assumption Deterrence Act of 1998,'' with regard to the types
of personal identifiers that may be redacted. These include
the debtor's or other person's name, social security account
number, date of birth, driver's license number, alien
registration number, government passport number, employee or
taxpayer identification number, unique biometric data, unique
electronic identification number, electronic address or
routing code, and telecommunication identifying information
or access device. The amendment would also permit the court
to exercise its discretion to protect personal identifiers by
means other than redaction where appropriate in the
circumstances of the case.
Third, this provision would allow the protection of
information under subsection ( c) ``contained in a paper
filed, or to be filed,'' in a bankruptcy case. This provision
is intended to provide persons the opportunity to request
protection of the information not only after it is filed with
the court, but prior to filing as well. This authority would
be especially useful in an electronic filing environment,
where information once filed is immediately available to the
public.
Finally, this new subsection (c) would have the effect of
striking from the current provision ``scandalous or
defamatory matter'' as a basis for protection of a person and
instead allow the court for cause to seal or redact
``information that could cause undue annoyance,
embarrassment, oppression or risk of injury to person or
property.'' This language is drawn from Federal Rule of Civil
Procedure 26 regarding the issuance of protective orders in
the course of discovery. This new provision would expand the
authority of the bankruptcy court to allow the court to
protect information, such as the home or employment address
of a debtor, because of a personal security risk, including
fear of injury by a former spouse or stalker. It would also
allow the court to protect other information normally
considered private, such as medical information which, if
publicly) disclosed, could result in untoward consequences to
the debtor or others.

Section 342(c) of the Bankruptcy Code

This amendment to the bill would amend section 342(c) of
the Bankruptcy Code to implement Judicial Conference policy
that social security account numbers be protected from public
disclosure in court documents.
Section 342(c) of title 11, United States Code, currently
requires a debtor to include his or her taxpayer
identification number, which for an individual is almost
uniformly his or her social security account number, on any
notice the debtor gives to his or her creditors. Debtors are
required to give such notice in various contexts, including
the filing of adversary proceedings, such as a complaint to
determine the dischargeability of a debt, or contested
matters, such as a motion to avoid a lien impairing an
exemption.
As a copy of such notice is required to be filed with the
court, court files routine include unredacted social security
account numbers of debtors. By requiring only the last four
digits of a taxpayer identification number to appear an the
notice, the debtor's fun social security account number will
no longer appear in the court file and thus be protected from
public disclosure.
The amendment also adds a provision to section 342(c) to
require that adequate notice of the bankruptcy filing is
given to a creditor who is added to the case after the
initial notice of the case has been sent. The taxpayer
identification number would be treated in the same manner in
the notice to a newly added creditor as the number was
treated in the initial notice to the original creditors. The
debtor is directed to send to the newly added creditors a
notice of the bankruptcy filing containing the debtor's full
taxpayer identification number, but to include only the last
four digits of the number in the copy of the notice filed
with the court.
Thank you far your consideration of these proposed
amendments. If you have any questions or concerns, please
have your staff contact Michael W. Blommer, Assistant
Director, at (202) 502-1700.
Leonidas Ralph Mecham,
Secretary.

Mr. LEAHY. Mr. President, I am pleased my colleague from Maine,
Senator Snowe, and my colleague from Washington State, Senator
Cantwell, have agreed to cosponsor this amendment. They both have been
leaders of privacy issues. I appreciate their support.
Here is what the amendment does: It addresses court discretion in
several ways. It allows the court for cause to protect personal
identifiers, including the debtor's or other person's name,

[[Page S1852]]

Social Security account number, date of birth, driver's license number,
passport number, employee or tax identification number, and unique
biometric data. The personal identifiers protected under this provision
are the same ones defined as ``means of identification'' under the
Identity Theft Deterrence Act of 1998. This definition is codified in
Section 1028(d) of Title 18 of the criminal code.
The amendment also allows the court, for cause, to seal or redact
``information that could cause undue annoyance, embarrassment,
oppression or risk of injury to person or property.'' This standard is
drawn from the current civil procedure discovery rules. This change
would allow the court to protect information, such as the home or
employment address of a debtor because of a personal security risk.
Unfortunately, many times that risk is from a former spouse or a
stalker. It would also allow the court to protect other information
normally considered private, such as medical information.
The amendment would provide persons the opportunity to request
protection of sensitive information not only after it is filed with the
court, but prior to filing as well. This protection is particularly
important in an electronic filing environment, where information once
filed is immediately available to the public.
In addition to enhancing court discretion, the amendment also
protects Social Security numbers. Currently, the bankruptcy code
requires debtors to include their tax payer identification numbers
(which for individuals is almost uniformly his or her social security
number) on any notice the debtor gives to creditors. Because these
notices are also filed with the court, the court's files routinely
include unredacted social security numbers, creating the potential for
abuse by those accessing public court records.
This amendment would simply allow debtors to limit disclosure to only
a part of his or her social security number in notices filed with the
court. Specifically the notice to the court would include only the last
four digits.
This amendment still protects creditors where necessary, and
specifies that creditors who are on the schedule of assets and
liabilities should receive the full tax payer identification number in
the notices sent specifically to the creditor. What it means is
somebody cannot get on line, get all this information, sell it, or do
whatever they want to.
The idea of truncation isn't new. Just last year, we passed the Fair
and Accurate Credit Transactions Act of 2003, and the Act required
truncation of credit card and debit card numbers on receipts given to
cardholders. Under that law, only the last 5 digits of credit card and
debit card numbers can be printed. Requiring truncation for social
security numbers is similarly reasonable. It provides protection
against abuse, but still allows for important information sharing to
take place.
I yield the floor.
The PRESIDING OFFICER. Who yields time? The Senator from Alabama.
Mr. SESSIONS. Mr. President, I note that with regard to, I believe
the new name for it is the Servicemembers Civil Relief Act, which is
the updated Soldiers and Sailors Relief Act, is a good piece of
legislation. It provides tremendous protection for our men and women
who have been called to active duty and sent around the world to defend
our interest. It is very important legislation. We updated it not too
long ago, in 2003. Maybe it needs to be updated again.
A bill structuring the rules of procedure for a bankruptcy in America
is not the place to enter into debate about the refined procedures that
might be necessary to give greater protection than we give today to our
service men and women.
I suggest very strongly that to those who disagree there are enough
protections, let's consider that. Let's look at that and see if we can
do a better job of providing relief. The danger we get into is this: If
we start amending what homestead is and having a Federal law dominate
state homestead laws, which has not been done in our history, is not
the current law, and we have rejected time and again in many different
ways, I think we jeopardize the bipartisan consensus we had that led to
a vote that passed this legislation last time without the Sessions
amendment, which I think provides additional benefits for servicemen.
We passed it 83 to 15. I think one time it passed with 97 to 1 votes;
another time 78 votes. This is legislation that has had four markups in
the Judiciary Committee. We debated it there. We have had long debates
on the floor. As a matter of fact, as I recall, we spent 2 weeks on it
every time it has been before the Senate, and it is projected we might
go 2 weeks again on this legislation.
I know my friend from Illinois is concerned about soldiers. I also
know he does not support the bill, or at least has not been a supporter
of it. I expect it would not hurt his feelings if this amendment, which
would upset the agreements we reached on homestead, led to the defeat
of the bill. It would not hurt him at all. We had a Schumer amendment
last time on a very discrete issue, a very controversial issue that
ended up blocking final passage of the bill. We do not need to do that
this time.
I believe there are strong protections for our service men and women.
I do not think, as a matter of principle, that a serviceman should be
exempt from the means test. The means test is not harsh. It does not
mean ``mean;'' it means ``means,'' income, how much is your income, and
if your income is above the median income in America and you can pay
back some of those debts, I think anybody ought to do that, if they
can. That is the principle of the bill.
We proceed at some risk when we start carving out exceptions. Senator
Feingold wants to change the homestead exemption for those over 62. I
see the Chair, a distinguished new Senator with a young family. There
are a lot of young people out here who bought a house. If we change the
homestead law, why just do it for seniors? Why not for everybody? Maybe
a family with two or three kids needs protection more than somebody who
is 62. I don't know. I am saying, we have dealt with those issues. We
have decided we would allow the States to set the homestead limit. That
was a good decision, a defensible decision. That is one as a Senate,
each time it has come forward, that we have reached that agreement, and
I believe we ought to stay with it.
I do not think it reflects any diminishment or lack of respect for
the men and women in uniform. I respect them. I care about them. We
have done many things for them and I want to do more. I was proud to
sponsor the legislation that increased the death benefits from $12,000
to $100,000 and increased the servicemen group life from $250,000 to
$400,000. The President has submitted that as part of the supplemental.
I hope we get that done. We need to do a lot of things for our
military, but altering the bankruptcy bill under the guise of helping
our military in a way that could actually jeopardize a bipartisan
consensus would be the wrong approach.
I am concerned about it. For that reason I have to object to the
Durbin amendment and suggest the amendment I have offered will do the
things he wants to see done or needs to be done without jeopardizing
our consensus.
I yield the floor and reserve the remainder of my time.
Mr. DURBIN. Mr. President, how much time is remaining in the debate?
The PRESIDING OFFICER. There is 2 minutes 34 seconds remaining in
debate.
Mr. DURBIN. On which side?
The PRESIDING OFFICER. On the Senator's side, and 7\1/2\ minutes for
the Senator from Alabama.
Mr. DURBIN. If only 2\1/2\ minutes remain on our side, if I can get
the attention of the Senator from Alabama, if he is prepared to close
the debate--I ask the Senator from Alabama, it is my understanding he
has 7\1/2\ minutes remaining; I have 2\1/2\ minutes remaining, and 2\1/
2\ minutes is all I need to close. I do not know if the Senator from
Alabama wants to use up more of his time and even it out.
Mr. SESSIONS. In my litigation experience, the plaintiff gets the
final word. So the Senator should use his time and I will finish. I may
yield back some of that time.
Mr. DURBIN. Fine. Let me do that, then. I ask unanimous consent that
before we vote on the Durbin amendment, we have 4 minutes equally
divided to explain our positions on the Durbin amendment.

[[Page S1853]]

The PRESIDING OFFICER. Is there objection?
Mr. SESSIONS. I do not have any objection.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DURBIN. The first vote for my Senate colleagues will be on the
Sessions amendment. The Sessions amendment changes S. 256, the
bankruptcy bill, in the section where the bill establishes a
presumption that people are abusing bankruptcy. In other words, they
are not entitled to bankruptcy. The Sessions amendment says that the
judge should consider whether the person who has filed for bankruptcy
is in the active military service and is therefore a special
circumstance. So Senator Sessions leaves the military men and women in
the section of this bill where one presumes to be abusing the law. I do
not approach it in that way at all, and that is the reason why the
military groups and families are supporting my amendment and not the
Sessions amendment.
As I said earlier, Senator Sessions certainly respects the military,
but we can show our respect for the military by saying if they are
activated to serve this country, if they are removed from their family,
removed from their job, removed from their business, and terrible
things happen and the business fails or their family goes into
bankruptcy and they have to go back to America with their life and
limbs intact and file in bankruptcy court, we are going to give them
special consideration. They did something special for America; we are
going to do something special for them. We are not going to make them
jump through all the hoops that have been created by this new
bankruptcy law that are expensive, time consuming, and loaded with
documents that need to be filed. We are going to protect their home for
$75,000 worth at least, wherever they happen to be assigned in the
military. We are going to protect their basic possessions that they can
have after the bankruptcy is over, and we are not going to protect
those creditors and lenders which abused them by charging interest
rates which were sky high. We will not give them their day in court.
The PRESIDING OFFICER. The time of the Senator from Illinois has
expired.
Mr. DURBIN. I urge my colleagues to oppose the Sessions amendment and
support the Durbin amendment, which has the endorsement of the military
groups and families.
The PRESIDING OFFICER. The Senator from Alabama.
Mr. SESSIONS. Mr. President, I will make a few general points. This
is not a harsh bill. People who make below median income can use the
same bankruptcy procedures they always have. Spouses and children are
going to have a tremendously better position in this bankruptcy bill
vis-a-vis their alimony and child support payments than we have ever
given them before. There are a lot of good things in this bill.
I reject the suggestion that this is a bill written by credit card
companies to meet their special interests. What we have is a bankruptcy
court system that is not working well. It is being abused in a lot of
different ways.
I do not know how we came up with the idea to use the language--and
the Senator is correct, it does say abusing the system. It could just
as well as have said people who make above median income will not be
guaranteed not to pay back some of their debts because, as a matter of
policy, the Congress has decided that if they make above median income
and can pay some of their debts back over a period of up to 5 years, if
the Court so declares, then they ought to pay some of that back. I do
not think that is harsh or mean. And all other debts are being wiped
out. People cannot sue you, creditors cannot call on you. Your phones
cannot be stopped. People can be fined if they harass you for the
collection of those debts. That is not a harsh thing.

The way it was written, it uses that word ``abusive,'' that we
consider it an abuse if you file to wipe out all of your debts when you
have a higher income. It might have been better to have said we just do
not think you ought to not pay something back if you make above median
income. That is the way lawyers write language and that is the way we
stuck with it, but it should not be taken in any personal way. It is
just a statement of policy of the Congress about who ought to pay back
their debts.
There is talk like it is a credit card company's fault that someone
takes their card and goes out and runs up $3,000 or more in debts on
that card, and it is their fault if someone does not pay it back, that
they deserve what they get and they gave away $3,000. Who pays for
that? It is the consumers in the long run who pay for that.
It has been said that they send credit cards to children. Under
American law, if a young person receives a credit card and actually
goes out and uses it and it is in his or her name, they do not ever
have to pay a dime back. A minor is not bound by such a contract as
that. The credit card company would be the total loser in that
arrangement.
They are bringing all these issues up about credit cards. They bring
the issues up about health care and insurance and people who do not
have insurance or do have insurance. They raise the question of the
military. They raise the question of old people. But I just point out
that we have considered all of that. We have considered that for 8
years now in great detail, and we have hammered out a bill that I
believe is fair and just and has received 83 votes in this body last
time for final passage. I believe we will see another big vote this
time.
The amendment I have offered is a fair solution to the concern of our
military men and women. If it is not, we ought to look at the Soldiers
and Sailors Relief Act and see if we can make it stronger if that is
the right step. Let us keep the bankruptcy law, the court procedures of
the Federal bankruptcy system, consistent and harmonious with the
philosophy we started with and have carried on with this bill.
The PRESIDING OFFICER. The Senator from Illinois.
Mr. DURBIN. Mr. President, I ask unanimous consent that Senator
Mikulski be added as a cosponsor to my amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. SESSIONS. Mr. President, I believe the Sessions amendment is
before the body. I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There appears to be a sufficient second.
Does the Senator from Alabama yield back his remaining time?
Mr. SESSIONS. I yield back the remainder of my time.
The PRESIDING OFFICER. All time is yielded back.
The question is on agreeing to amendment No. 23.
The yeas and nays have been ordered. The clerk will call the roll.
The legislative clerk called the roll.
Mr. McCONNELL. The following Senators were necessarily absent: the
Senator from Minnesota (Mr. Coleman), the Senator from Texas (Mr.
Cornyn) and the Senator from Virginia (Mr. Warner).
Further, if present and voting, the Senator from Minnesota (Mr.
Coleman) and the Senator from Texas (Mr. Cornyn) would have voted
``yea.''
Mr. DURBIN. I announce that the Senator from Minnesota (Mr. Dayton)
and the Senator from Hawaii (Mr. Inouye) are necessarily absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 63, nays 32, as follows:

[Rollcall Vote No. 12 Leg.]

YEAS--63

Alexander
Allard
Allen
Baucus
Bennett
Biden
Bond
Brownback
Bunning
Burns
Burr
Byrd
Carper
Chafee
Chambliss
Coburn
Cochran
Collins
Conrad
Craig
Crapo
DeMint
DeWine
Dole
Domenici
Ensign
Enzi
Feinstein
Frist
Graham
Grassley
Gregg
Hagel
Hatch
Hutchison
Inhofe
Isakson
Johnson
Kohl
Kyl
Lincoln
Lott
Lugar
Martinez
McCain
McConnell
Murkowski
Nelson (FL)
Nelson (NE)
Roberts
Santorum
Sessions
Shelby
Smith
Snowe
Specter
Stevens
Sununu
Talent
Thomas
Thune
Vitter
Voinovich

NAYS--32

Akaka
Bayh
Bingaman
Boxer
Cantwell
Clinton
Corzine
Dodd
Dorgan
Durbin
Feingold
Harkin
Jeffords
Kennedy
Kerry
Landrieu
Lautenberg
Leahy

[[Page S1854]]

Levin
Lieberman
Mikulski
Murray
Obama
Pryor
Reed
Reid
Rockefeller
Salazar
Sarbanes
Schumer
Stabenow
Wyden

NOT VOTING--5

Coleman
Cornyn
Dayton
Inouye
Warner
The amendment (No. 23) was agreed to.
The PRESIDING OFFICER. The Democratic leader.
Mr. REID. Mr. President, would the suggestion of an absence of a
quorum be in order?
The PRESIDING OFFICER. It would.
Mr. REID. I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. FRIST. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Chambliss). Without objection, it is so
ordered.
Mr. FRIST. Mr. President, for the information of Senators, this will
be the last rollcall vote tonight. We will be coming in tomorrow at
9:15. We will have 1 hour of morning business. After that morning
business, we will have two rollcall votes in all likelihood. So we need
people back early in the morning. After that, another amendment will be
introduced, and we may well have another vote prior to lunch tomorrow.
I have talked to the Democratic leader and the managers on both sides,
and that is agreeable. This will be the last rollcall vote tonight.

Amendment No. 16, As Modified

The PRESIDING OFFICER. There are 4 minutes evenly divided. Who yields
time?
The Senator from Alabama.
Mr. SESSIONS. Mr. President, the Senator from Illinois has suggested
that I go first on his amendment. I know he would like to do the
closing argument. He is very good at that.
The Senator from Illinois suggests that we are accusing military
persons who file for bankruptcy as abusers if they qualify for the
means test. That is an incorrect statement of what we are about with
the amendment we just passed and what the bankruptcy bill is about.
This legislation provides that if a bankruptcy filer makes above median
income--this explains a lot about the bill--then absent special
circumstances, a filer can be required to pay back at least a part of
the debts they owe, only if they make above median income. It also
provides that if their income falls below median income, they can stay
in chapter 7 and wipe out all their debts just as they always have. If
a debtor's income is above median income and special circumstances
apply, they still may be eligible to avoid chapter 13, wipe out all
their debts under chapter 7.
The amendment I just offered and just passed explicitly states that
when one is called to active military duty in the Armed Forces, that
can be a special circumstance that could protect them and provide an
additional opportunity to not go into chapter 13.
An expert testified at the committee last week that about 80 percent
of the people who file are below median income and that about 7 percent
in addition will qualify under the special circumstances. The amendment
we just passed protects our servicemen and guarantees they will be
considered under special circumstances.
We should vote down this amendment because it also sets a homestead
limit in violation of State law and contrary to the philosophy of this
bill.
The PRESIDING OFFICER. The Senator from Illinois.
Mr. DURBIN. Mr. President, I ask unanimous consent that Senator
Corzine be added as a cosponsor of the Durbin amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DURBIN. I yield 30 seconds to the Senator from Massachusetts, Mr.
Kennedy.
The PRESIDING OFFICER. The Senator from Massachusetts.
Mr. KENNEDY. Mr. President, we are having a difficult time enough now
in meeting our goals for the Reserve and the Guard. Unless we pass the
Durbin amendment, we are going to have a much more difficult time. If
you support the Guard and the Reserve and support our troops, you will
support the Durbin amendment.
Mr. DURBIN. Mr. President, I thank the Senator from Massachusetts.
How many of us have seen men and women going off to serve our country
to risk their lives knowing that they are leaving behind families and
their businesses and knowing the economic hardship they will face? Some
of them are going to be forced into bankruptcy. We have case after case
where it has happened. All the Durbin amendment says is, if you have to
file bankruptcy after this new bankruptcy reform bill were to become
law, the bankruptcy system will consider the fact that you have served
our Nation by exempting you from certain aspects of this new bill. We
will not push you into a means test, but we will consider your
individual circumstances.
We will give you a homestead exemption of $75,000 regardless of where
you have been assigned for military duty. We will protect your personal
assets with the Federal personal exemption regardless of where you have
been assigned to duty and where you have to file bankruptcy.
There are those who say this is a special favor for the armed
services. It is, and I believe it should be. They risk their lives for
us. They should not risk their home and their finances as well. We
ought to stand behind them. Yes, you can vote for the Sessions
amendment and for the Durbin amendment as well. They are not
inconsistent.
The PRESIDING OFFICER. The question is on agreeing to the Durbin
amendment No. 16, as modified.
Mr. DURBIN. I ask for the yeas and nays.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The clerk will call the roll.
The assistant legislative clerk called the roll.
Mr. McCONNELL. The following Senators were necessarily absent: the
Senator from Minnesota (Mr. Coleman) and the Senator from Texas (Mr.
Cornyn).
Further, if present and voting, the senator from Minnesota (Mr.
Coleman) and the senator from Texas (Mr. Cornyn) would have voted
``nay.''
Mr. DURBIN. I announce that the Senator from Minnesota (Mr. Dayton)
and the Senator from Hawaii (Mr. Inouye) are necessarily absent.
The PRESIDING OFFICER. Are there any other Senators in the Chamber
desiring to vote?
The result was announced--yeas 38, nays 58, as follows:

[Rollcall Vote No. 13 Leg.]

YEAS--38

Akaka
Bayh
Bingaman
Boxer
Cantwell
Clinton
Conrad
Corzine
Dodd
Dorgan
Durbin
Feingold
Feinstein
Harkin
Jeffords
Kennedy
Kerry
Kohl
Landrieu
Lautenberg
Leahy
Levin
Lieberman
Lincoln
Mikulski
Murray
Nelson (FL)
Obama
Pryor
Reed
Reid
Rockefeller
Salazar
Sarbanes
Schumer
Specter
Stabenow
Wyden

NAYS--58

Alexander
Allard
Allen
Baucus
Bennett
Biden
Bond
Brownback
Bunning
Burns
Burr
Byrd
Carper
Chafee
Chambliss
Coburn
Cochran
Collins
Craig
Crapo
DeMint
DeWine
Dole
Domenici
Ensign
Enzi
Frist
Graham
Grassley
Gregg
Hagel
Hatch
Hutchison
Inhofe
Isakson
Johnson
Kyl
Lott
Lugar
Martinez
McCain
McConnell
Murkowski
Nelson (NE)
Roberts
Santorum
Sessions
Shelby
Smith
Snowe
Stevens
Sununu
Talent
Thomas
Thune
Vitter
Voinovich
Warner

NOT VOTING--4

Coleman
Cornyn
Dayton
Inouye
The amendment (No. 16) was rejected.
Mr. SESSIONS. I move to reconsider the vote.
Mr. GRASSLEY. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Mr. President, I am glad we are now finally considering
S. 256, the Bankruptcy Reform Act of 2005. Although a few amendments
were accepted during the Judiciary Committee markup a couple weeks ago,
and we did that to accommodate Democratic Members, this bill is
practically identical to the conference report that both the House and
Senate conferees signed

[[Page S1855]]

in the 107th Congress, minus the poison pill abortion amendment.
Many of my colleagues know I have been working on this bill for quite
some time now and that there has always been strong bipartisan support
for passing bankruptcy reform. I started working on bankruptcy issues
in the mid-1990s, and I did that with my colleague, then-former Senator
Heflin of Alabama. We served together as either chairman or ranking
member of the Administrative Oversight Subcommittee for a period of, I
believe, 12 years.
During this period of time, we created what became known as the
National Bankruptcy Review Commission. We held numerous hearings in the
subcommittee on various topics dealing with the subject of bankruptcy
reform.
In the 105th Congress, Senator Durbin and I passed out of the Senate
a bankruptcy bill by a vote of 98 to 1, but it never got to conference.
In the 106th Congress, Senator Torricelli and I worked closely and
negotiated many compromises. We were able to vote out of the Senate a
Grassley-Torricelli bill by a vote of 83 to 14. The Senate then
approved the bankruptcy conference report by a vote of 70 to 28. Mr.
President, 53 Republican Senators and 17 Democratic Senators voted for
that conference report, but President Clinton pocket-vetoed the bill,
and although we had the votes to override it, we were, unfortunately,
not to have that opportunity. That is what a pocket veto is all about.
In the 107th Congress, I introduced, with Senator Biden, the same
language of the conference report agreed to by both the House and
Senate in the previous 106th Congress.
We passed the bankruptcy bill by a strong bipartisan vote of 85 to
13, with further changes made to address concerns of Democratic Party
members. We went to conference with the House and reached an agreement
on a conference report. During that conference committee, numerous
amendments were negotiated with Democrats who opposed the bill. We
negotiated in good faith, but the inclusion of what has become known as
the Schumer abortion language ultimately proved to be unacceptable to
the House and we were not able to get to the finish line.
The Senate tried to address the bankruptcy bill in the 108th
Congress. The House passed the conference report language without the
abortion provisions, but the Senate never took it up. In addition, the
House amended a Senate bill with a bankruptcy bill and requested a
conference, but Senate Democrats denied us the ability to have a
conference on that bill.
So after three Congresses, we are here again in the 109th Congress
trying to pass bankruptcy reform. My Democratic colleagues, Senator
Carper and Ben Nelson, have joined me, as well as Senators Hatch,
Sessions, and others, on this bill, S. 256, the Bankruptcy Reform Act
of 2005. The bill continues in the tried and true spirit and tradition
of this bill being bipartisan, so we do have that bipartisan support on
its introduction, and from the votes we have had on amendments today,
it looks like that bipartisanship is still going to hold. So I hope my
colleagues will not be fooled when longstanding opponents to this bill,
even though they may never number more than 15, vociferously claim that
the bankruptcy bill is really controversial and really unnecessary
because those statements, made by the very small number of people in
this body who do not think we need to do anything on bankruptcy reform,
everything they are saying is far from the truth.
I note that throughout the years, we really bent over backward in
trying to accommodate Democratic Senators' concerns with the bill's
process, even in this Congress. I do not think that it is any surprise
to anyone that my position is that the bankruptcy bill is still very
much simply unfinished business after all of these compromises
throughout now the fourth Congress. This bill has passed both the House
and the Senate a total of 11 times between these two Houses of
Congress. It is about time that we get the job done now. Hence, simply
unfinished business, even though some of my colleagues will try to make
this be a totally brand-new debate, just like we were starting over
with the purest bill that I would prefer, but because purest bills
never get through the Senate, it takes bipartisanship.
We are where we are because of compromise and unfinished business,
and hopefully we will move this bill to the House and to the President,
somewhat I hope a repeat of what we did 3 weeks ago with the class
action tort reform bill. That is why at the beginning of this Congress
I reintroduced the bipartisan conference report that was arrived at in
the 107th Congress with only one change, and that change is to leave
the poison pill of the Schumer abortion language out of it.
Remember that this compromise that I introduced in this year, the
107th Congress, minus the Schumer amendment, otherwise is exactly the
same language negotiated when the Democrats had a majority. It was two
Congresses ago when Senator Jeffords changed from being a Republican to
an Independent, sitting with the Democrats. They took over the
Congress, and it is that Democratic Senate that negotiated this
agreement for the Senate. That is the bill we are working on now as the
underlying provision.
The Schumer abortion language that tanked the bill in the House, in
the 107th Congress, is left out. Other than that, the bill was
basically the exact same language that Senate Members, both Republican
and Democrats, have supported.
The reason I did this is because we had reached many carefully
crafted compromises and had a good bipartisan product. I did not think
that we had to go through committee this time because this bill had
been done so many times before, but Majority Leader Frist insisted that
it go through regular order. The Judiciary Committee held a hearing and
markup on this bill.
So my colleagues are clear, the committee accepted five amendments to
further accommodate Democratic members. The committee also defeated a
number of other amendments that were clearly offered to open issues and
weaken the bill.
I would like to make my position crystal clear. We have all
cooperated and compromised at great length in order to enact this
legislation that fixes an unfair bankruptcy regime, provides new
consumer protections, helps children in need of child support, and
makes other necessary reforms to a system that is often open to abuse.
I do not believe there is any need to reopen this bill and to disrupt
those many compromises we have already reached with our Democratic
colleagues, and more importantly with the House of Representatives.
I hope this clarification on the history and procedural process of
the bill will show that, one, the bill is a bipartisan effort; two,
that we have been working on bankruptcy reform for too long and have
gone over all the fine points of the bill in great detail; and, three,
that we have bent over backward to allow a fair process to move forward
with this bill.

I discussed the merits of this bankruptcy reform bill. There is broad
public support for reforming our bankruptcy system. The vast majority
of people believe that individuals who file for bankruptcy protection
should be required to pay back some of their debt if they have the
ability to do so, and that is precisely what this bankruptcy bill
attempts to do.
Most people think it should be more difficult for individuals to file
for bankruptcy. Most Americans are tired of paying for high rollers who
game the current bankruptcy system and its loopholes to get out of
paying their fair share. Most people recognize that too many people are
filing for bankruptcy. Too many people are gaming the system, and the
numbers are up in historically high proportions in recent years that
prove that. Bankruptcy filings were at an alltime high even during the
boom years of our economy. Opponents to the bill act as if there is
nothing to worry about, but the fact is we have a bankruptcy crisis on
our hands.
I want to visit with my colleagues about how this bill will change
the way bankruptcy is being treated. Simply put, bankruptcy is a court
proceeding where people get their debts wiped away. Every time a debt
is wiped away through bankruptcy, somebody loses money. Of course, that
is common sense, and when somebody who extends credit has their
obligations wiped away in bankruptcy, they are forced to make a
decision. Should this loss simply be

[[Page S1856]]

swallowed as the cost of doing business or are prices raised for other
customers to make up for another's losses?
Presently, when individuals file for bankruptcy under chapter 7, a
court proceeding takes place and their debts are simply erased. But
every time a debt is wiped away through bankruptcy, someone loses
money. When someone loses money in this way, he or she has to decide to
either assume that loss as a cost of business or raise the price for
other customers to make up for that loss.
When bankruptcy losses are infrequent, lenders maybe are able to
swallow that loss. But when they are frequent, lenders need to raise
prices for other consumers to offset their losses. These higher prices
translate into higher interest rates for future borrowers. The result
of the bankruptcy crisis is that hard-working, law-abiding Americans
have to pay higher prices for goods and services because somebody else
did not make good on their obligations to pay. This bill would make it
harder for individuals who can repay their debt to file for bankruptcy
under chapter 7. This would lessen, then, the upward pressure on
interest rates and prices. It is only fair to require people who can
repay their debts to pull their own weight. But under current
bankruptcy law, an individual can get full debt cancellation in chapter
7 with no questions asked.
The Bankruptcy Reform Act of 2005 asks the very fundamental question
of whether repayment is possible by an individual. It is this simple:
If repayment is possible, then he or she will be channeled into chapter
13 of the Bankruptcy Code which requires people to repay a portion of
their debt as a precondition for limited debt cancellation. In other
words, people who have the ability to pay will not get off scot-free
anymore.
This bill does this by providing for a means-tested way of steering
people who are filers, who can repay a portion of their debts, away
from chapter 7 bankruptcy. This test employs a legal presumption that
chapter 7 proceedings should be dismissed or converted into chapter 13
whenever the filers earn more than the State median income and can
repay at least $6,000 of his or her unsecured debt over a 5-year period
of time.
In calculating a debtor's income, living expenses are deducted as
permitted under IRS standards for the State and locality where the
debtor lives. Legitimate expenses such as food, clothing, medical,
transportation, attorney's fees, and charitable contributions are taken
into account in this analysis, as provided under Internal Revenue
Service guidelines.
Moreover, a debtor may rebut the presumption by demonstrating special
circumstances. So the means test takes into account a debtor's income,
a debtor's expenses, and allows a debtor to, even beyond that, show
special circumstances which would justify adjustments to the means
test.
In this way, the bankruptcy reform bill preserves the principle of a
fresh start for people who have been overwhelmed by medical debts or
sudden, unforeseen emergencies. As stated by the Government Accounting
Office, the bill allows for the 100-percent deductibility of medical
expenses before examining repayment ability. The bill preserves fair
access, then, to bankruptcy for those people who are truly in need.
So that I am crystal clear, people who do not have the ability to
repay their debt can still use the bankruptcy system as they would have
before. This bill clearly provides that people of limited income can
still file under chapter 7 and get that fresh start. There is a
specific safe harbor built in for these individuals, so their debts can
be wiped away, as is done right now.
I point this out because so often during this debate it is going to
be pointed out to you, inaccurately, that somehow poor people are not
getting that opportunity for a fresh start. So I want to repeat: There
is a safe harbor for poor people. But the free ride is over for people
who have higher incomes, and who can repay their debt.

Personal responsibility has been one of the main themes of the
bankruptcy reform bill, going back to my first introduction. But even
before that, since 1993, the number of Americans who declared
bankruptcy has increased, would you believe it, over 100 percent. While
no one knows all the reasons underlying the bankruptcy crisis, the data
shows that bankruptcies increased dramatically during the same
timeframe when unemployment was low and real wages were at an all-time
high.
I believe the bankruptcy crisis is, in fact, a moral crisis. People
have to stop looking at bankruptcy as a conventional financial planning
tool, where honest Americans have to foot the bill for those who do not
pay their honest debt. It is clear to me that our lax bankruptcy system
must bear some of the blame for the bankruptcy crisis. A system where
people are not even asked whether they can pay off their debts
obviously contributes to the fraying of the moral fiber of America. Why
should people pay their bills when the system allows them to walk away
with no questions asked? Why should people honor their obligations when
they can take the easy way out through bankruptcy?
I think the system needs to be reformed because it is fundamentally
unfair. This bill will promote personal responsibility among borrowers
and create a deterrence for those hoping to cheat the system. This bill
does more than provide for a flexible means test that gives judges
discretion to consider the individual circumstances of each debtor in
order to determine whether they truly belong in chapter 7. It also
contains tough new consumer protections. But the opponents of this bill
do not seem to realize that. So I want them to pay attention as I
describe new procedures to prevent companies from using threats to
coerce debtors into paying debts which could be wiped away once they
are in bankruptcy.
The bill requires the Justice Department to concentrate law
enforcement resources on enforcing consumer protection laws against
abusive debt collection practices. It contains significant new
disclosures for consumers, mandating that credit card companies provide
key information about how much they owe and how long it will take to
pay off their credit card debts by only making the minimum payment.
That is a very important consumer education for every one of us.
Consumers will also be given a toll-free number to call where they
can get information about how long it will take to pay off their own
credit card balances if they only pay the minimum payment. This will
educate consumers and improve consumers' understanding of what their
financial situation is.
Credit card companies that offer credit cards over the Internet will
be required for the first time ever to fully comply with the Truth In
Lending Act, so claims that this bill is unbalanced are off base.
Moreover, the bill makes changes which will help particularly
vulnerable segments of our society. Child support claimants are given a
higher priority status when the assets of a bankruptcy estate are
distributed to creditors.
Here again, I make crystal clear that the bankruptcy bill makes
significant improvements for child support claimants. This bankruptcy
bill does not hurt them, as opponents of the bill are trying to claim.
In fact, the organization, the very organization that specializes in
tracking down deadbeat dads, feels this bill will be a tremendous help
in collecting child support.
The people on the front lines say the bankruptcy bill is good for
collecting child support. An example: The bill provides that parents
and State child support enforcement collection agencies are given
notice when a debtor who owes child support or alimony files for
bankruptcy. Bankruptcy trustees are required to notify child support
creditors of their right to use child support enforcement agencies to
collect outstanding amounts due.
In addition, the bill requires creditors to provide the last known
address of debtors owing support obligations upon the request of the
custodial parent.
The bill goes further--requiring that the identity of minor children
be protected in bankruptcy proceedings.
Concerns expressed by opponents to the bill about this being a flawed
part of it just don't hold water.
The bill also makes great strides in cracking down on very wealthy
individuals who abuse the bankruptcy system. If you listen to our
critics, you might get the impression that the homestead exemption is a
giant loophole that this bill does not deal with, and that we are busy
protecting the rich.

[[Page S1857]]

The GAO looked at the question of how frequently the homestead
exemption is abused by wealthy people in bankruptcy. The GAO found that
less than 1 percent of bankruptcies filed in States where there are
unlimited homestead exemptions involve homesteads over $100,000. That
means 99 percent of bankruptcy filings were not abusive.
This is not a loophole at all. In fact, the provision in this bill
with respect to homestead is a significant improvement from current
law. There is a Federal cap on homestead exemptions in current law.
Under the current bankruptcy law, the debtors living in certain
States can shield from their creditors virtually all of the equity in
their home. Consequently, some debtors relocate to these States to take
advantage of the mansion loophole provisions that are, in most cases,
in their constitution. This bill would take a strong stand against this
abuse by requiring that a person be a resident in a State for 2 years
before he can claim the State's homestead exemption. Current
requirements can be as little as 91 days.
The bill further reduces the intent for abuse by requiring a debtor
to own the homestead for at least 40 months before he can use State
exemption law. Current law doesn't have any such requirement.
Furthermore, the bill would prevent individuals who have violated
security laws or individuals who have engaged in criminal conduct from
shielding their homestead assets from those whom they have defrauded or
injured. Specifically, if a debtor was convicted of a felony, violated
a security law, or committed a criminal act intentionally, or engaged
in reckless misconduct that caused serious physical injury or debt, the
bill overrides State homestead exemption laws and caps the debtor's
homestead at $125,000 as the amount that would be protected.
To the extent that the debtor's homestead exemption was obtained
through the fraudulent conversion of nonexempt assets during the 10-
year period preceding the filings of the bankruptcy case, this bill
requires such exemption to be reduced by the amount attributable to the
fraud.
These homestead provisions were delicately compromised between those
who believe that the homestead should be capped through Federal law--I
am one of those--or others who are uncomfortable with a uniform Federal
cap which may violate their own State constitution.
So, please, tomorrow when this debate is conducted on changing this
provision that has been so carefully worked out over a period of at
least two Congresses, don't believe it when people say we have a gaping
loophole. The homestead provisions in the bankruptcy bill will
substantially cut down on the abuses that might be referred to.
I would like to talk about another thing this bankruptcy bill does
which is so important for those of us who represent agricultural
States. This bill makes chapter 12 of the Bankruptcy Code, which gives
essential protections to family farmers, a permanent chapter in the
Bankruptcy Code. The bill enhances these protections. It makes more
farmers eligible for chapter 12. The bill lets farmers in bankruptcy
avoid capital gains tax. This is very important because it will free up
resources to be invested in farming operations that otherwise would go
down the black hole of the Internal Revenue Service. Farmers need this
chapter 12 safety net.
In addition, the bankruptcy bill will for the first time create badly
needed protections for patients in bankruptcy hospitals and nursing
homes. Let me provide an example of what could happen right now without
the patient protections contained in this bill.
At a hearing I held on nursing home bankruptcies, I learned about a
situation in California where a bankruptcy trustee just showed up at a
nursing home on a Friday evening and evicted the residents of that
nursing home. The bankruptcy trustee didn't provide any notice
whatsoever that this was going to happen. There was absolutely no
chance for the nursing home residents to be relocated. The bankruptcy
trustee literally put these elderly people out on the street and
changed the locks on the doors so that they couldn't get back into the
nursing home. The bankruptcy bill will prevent this from ever happening
again. These are protections that we will be giving these deserving
senior citizens for the first time.
The truth is that bankruptcies hurt real people. It isn't fair to
permit people who can repay to skip out on their debts. Yes, we must
preserve fair access to bankruptcy for those who truly need a fresh
start. This bill does not in any way compromise that century-old
principle of our Bankruptcy Code.

This bankruptcy reform act does that--it guarantees a fresh start. It
lets those people who can pay their debts live up to their
responsibilities as well.
Let us restore the balance. Let us pass this bill. This bill is a
product of much negotiation and compromise over three Congresses. It is
fair, it is balanced, but, more importantly, it is a bill that once got
to President Clinton and he pocket-vetoed it. This bill that passed by
overwhelming majorities of both Houses of Congress is long overdue
legislation.
I urge my colleagues to support this legislation but, more
importantly, help us defeat amendments that are opening all of the
carefully crafted compromises that we worked on over the last 3 to 4
years.
I yield the floor. I suggest the absence of a quorum.
The PRESIDING OFFICER (Mr. Thune). The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. McCONNELL. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.

____________________