Medical Devices Technical Corrections Act

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, the amendment in the nature of a substitute to S. 1920 made in order by the rule replaces the text of that bill with the text of H.R. 975, the bankruptcy bill passed by the House by an overwhelming bipartisan vote of 315-113 on March 19, 2003.

The administration has without qualification endorsed this legislation. Nevertheless, this bill has languished in the other body now for almost a year. The question that has been asked is, why are we engaged in what admittedly may appear to be a redundant undertaking? While the other body is often described as the saucer in which the coffee cools, H.R. 975 has become nearly frozen in that proverbial saucer.

Today I seek to reignite congressional consideration of bankruptcy reform.

Some of my colleagues may also ask, ``Why now? What's the rush?'' There are many answers. A major reason is that the current bankruptcy system is broken, and it gets worse every day that we fail to act. Bankruptcy filings continue to break record after record, straining the system's resources. The proliferation of bankruptcy filings is not just a temporary event, but part of a consistent upward trend. In 4 years, the number of bankruptcy filings has jumped by 150 percent to nearly 1.7 million cases as of fiscal year 2003.

Another reason has to do with the growing extent of fraud and abuse in the current bankruptcy system. Bankruptcy relief should be available to honest debtors, but current law allows, if not encourages, dishonest debtors to file abusive bankruptcies that overburden the system. According to the Justice Department, bankruptcy fraud and abuse is ``serious and far-reaching.''

While some debtors fraudulently conceal assets, others try to discharge debt despite their ability to repay their obligations. The current system is overburdened and ill equipped to aggressively detect and deter identity theft and other basic forms of bankruptcy fraud, let alone more creative schemes such as the so-called ``credit card bust- outs.'' The Justice Department reports that debtors are obtaining credit cards despite having little or no income, incurring huge debts, paying those debts with worthless checks, and then filing for bankruptcy relief to discharge their massive liabilities. We need to give our law enforcement agencies and the judiciary the tools necessary to fight fraud and abuse in the bankruptcy system.

A third reason, I admit, has to do with money. According to some analyses, the increase in consumer bankruptcy filings has significant adverse financial consequences for our Nation's economy and the economic well-being of our citizens. For instance, it has been estimated that in 1997 alone, more than $40 billion of debt was discharged as a result of bankruptcy cases. These losses, according to one estimate, translate into a $400 annual ``tax'' on every household in our Nation in the form of higher prices and higher interest rates. For the sake of our family farmers, we ought to relieve them of this $400 tax so that they can do a better job in producing food and fiber for our Nation's tables as well as for export.

More importantly, there are moral reasons for supporting the need for bankruptcy reform. The current system allows deadbeat parents to use bankruptcy to avoid their child support obligations. Likewise, it permits corporate criminals to use bankruptcy to shield their mansions from the claims of those whom they have defrauded.

Let me be perfectly clear. If this bill is voted down in the substitute amendment that has been made in order by the Committee on Rules, deadbeat parents will have a better opportunity to use bankruptcy to escape their court-ordered child support enforcement obligations. That means that the people who are opposing this move are giving these deadbeat parents a get-out-of-obligation-free card so that they can stiff their custodial former spouses. We plug that loophole.

Furthermore, this bill plugs the so-called ``homestead exemption'' that has allowed corporate criminals to be able to use bankruptcy to shield their assets and huge mansions in the States that have unlimited homestead exemptions from bankruptcy and leave employees in the lurch, employees that could use those assets to be able to allow them to find new jobs as a result of a corporation going bankrupt as a result of executive and management abuse.

Perhaps among the most important reasons to support bankruptcy reform is that it will help some of the most needy and deserving members of our society. As the title of the bill indicates, these reforms are not just about preventing abuse, but they also provide long overdue consumer protections. For example, domestic support claimants will receive very much-needed, special protections under this legislation. These reforms will ensure that families with pensions and education IRAs will not have to use these assets to pay creditors. Those protections will not be there if this bill is voted down.

As part of their monthly credit card billing statements, consumers will be given more meaningful disclosures about the consequences of making minimum monthly payments. It will require the appointment of an ombudsman to serve as a watchdog for patients in health care facilities in bankruptcy. It more than doubles employee priority wage claims.

If this bill is voted down, those that vote ``no'' turn their back on all of these improvements. These are just a few examples of the many benefits that consumers will finally be able to enjoy once bankruptcy reforms are enacted.

I urge my colleagues to move forward with bankruptcy reform. This is a comprehensive bill. It is a good bill. It does not hurt the ability of somebody who is truly down and out to be able to file for bankruptcy and get their discharge and start anew. But what it will do is plug the loophole of those who wish to use the Bankruptcy Code as a financial planning tool, a financial planning tool that ends up stiffing every family that pays their bills on time and, as agreed upon, $400 a year in a hidden tax. That is a hidden tax that the lack of bankruptcy reform has stuck on all of our constituents who ought to be our special interest.

I urge my colleagues to support the enactment of the amendment in the nature of a substitute to S. 1920.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield myself such time as I may consume.

There have been times when I have been the chairman of the committee where we have given the other body a choice. I seem to recall that in the last Congress the House passed two versions of the visa and border security bill. One contained provisions extending section 245(i) of the Immigration and Nationality Act and one did not, and the Senate chose to take up the bill that did not contain section 245(i) and passed it. Both bills, I believe, were supported both by the gentleman from North Carolina and myself. So sometimes giving the other body a choice speeds things along, and that is what this bill proposes to do.

Mr. Chairman, I yield 1 minute to the gentlewoman from Tennessee (Mrs. Blackburn).

Mr. Chairman, I yield 5 minutes to the gentleman from Alabama (Mr. Bachus).

Mr. Chairman, I yield 2 minutes to the gentlewoman from Pennsylvania (Ms. Hart).

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, the gentleman from Michigan (Mr. Conyers) is very right in saying that there were extensive negotiations relative to the so- called Hatch-Schumer abortion protestors' amendment during the conference in the last Congress. Those negotiations lasted the better part of a year. There were both public and private meetings with the principals involved.

At the end of the process, the gentleman from Illinois (Mr. Hyde) and the Senator from New York, Mr. Schumer, reached an agreement on compromise language that was put into the conference report on H.R. 333, which was the bankruptcy bill in the last Congress.

The gentleman from Illinois (Mr. Hyde) lived up to his word. He supported the rule that made that conference report in order. Unfortunately, that rule was rejected on November 14, 2002, by a roll call vote of 172 ``yes'' to 243 ``no.'' I notice my friend from Michigan was one of the 243 that voted ``no.'' If he wanted to get that language enacted into law, he could have supported bringing up the conference report on H.R. 333. For whatever reason, he chose not to do so.

But to answer the arguments that he made on the merits, it is that fines and forfeitures from offenses, both criminal and civil, have never been dischargeable in bankruptcy, irrespective of the offense that gave rise to the fine and forfeiture being imposed. So to say that the omission of language relating to abortion clinic protestors is a way of shielding criminal activity is a complete red herring. Fines and forfeitures that are imposed on abortion clinic protestors in a court of law are not dischargeable in bankruptcy today under the existing law nor, should this bill be enacted, under the provisions of this bill.

Now, having said that, I feel very strongly that abortion really should not become an issue in the debate on a bankruptcy bill. The position of this House has always been that abortion is not a part of the bankruptcy debate. There is a time and place to debate issues relating to abortion, but this is not it.

The other body has always disagreed. At some times in the last Congress we had a provision in the conference report that did reach a compromise on this issue. The House refused to consider it. There are other times when the conference in previous Congresses omitted the Schumer language that was passed by the Senate, and the conference report was passed by the Senate by a vote of 70-to-28 on December 7,

2000. That bill would have become law without the abortion clinic protestor language, except that President Clinton pocket-vetoed the bill.

So I just do not like to see the entire issue of abortion being mixed into it. But I think that the arguments that are made that the omission of the Hyde-Schumer language is an issue of bad faith is a complete red herring. We were not able to pass the bill with it in; we were able to pass it without it.

Mr. Chairman, I yield 1\1/2\ minutes to the gentleman from Michigan (Mr. Smith).

Mr. Chairman, I yield myself such time as I may consume.

The gentleman from North Carolina (Mr. Watt) seemed to imply that because this bill does not contain the so-

called Schumer language as compromised, people who protested abortion clinics will end up being able to stiff the owners and operators and the folks who work at that clinic of any judgment that might be obtained.

Now, the current law, Bankruptcy Code section 523(a)(6) makes nondischargeable debts incurred by willful or malicious injury by the debtor to another entity or to the property of another entity. That law is not changed in this bill. So if somebody trashes an abortion clinic for whatever reason and gets a civil judgment against them, that civil judgment is nondischargeable because the actions were willful and malicious.

Mr. Chairman, again, I looked at this roll call when the rule was voted down to bring up the legislation that did what the gentleman wanted to do, and that was the compromise Schumer-Hyde language in last Congress's bankruptcy bill. We did what my colleague asked, and he still voted ``no.''

So I think that the arguments that have been made are really a red herring to try to defeat an overall bankruptcy reform that the House has supported overwhelmingly on many occasions since this issue first came up at least 7 years ago.

Mr. Chairman, I yield 2 minutes to the gentleman from Utah (Mr. Cannon).

Mr. Chairman, I am prepared to close the general debate.

Mr. Chairman, I yield myself the balance of my time.

Mr. Chairman, the bill that is in the substitute made in order by the Committee on Rules, which is the version of the bill that passed the House last March by about a three to one margin, is better for family farmers than what the Senate sent over to us. But the Senate sent over to us what is merely a 6-month extension of chapter 12 of the bankruptcy code.

The substitute amendment made in order at the Committee on Rules makes chapter 12 permanent. So you have a choice of saying that the other body's bill should be on the President's desk tonight, which means we will go through this entire debate again in 6 months, the end of June, when the Senate bill's provisions expire, or we will be able to pass this bill and take care of the chapter 12 problem permanently.

To protect our family farmers and to give them certainty in the law, let us do the permanent extension, pass the substitute amendment, and then pass the bill with its other provisions because that will protect everybody from being stiffed by the $400 per household that is passed down in the cost of higher goods and services and interest rates as a result of the current bankruptcy system.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I offer an amendment.

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, this amendment is very straightforward. It simply makes several minor corrections to the text of H.R. 975 that was passed by the House, which according to the rule has been substituted as the text of Senate 1920.

The technical revisions consist of the following:

The short title of the bill is revised to reflect the current year. Section 1001 of the bill is amended to clarify that the reenactment of Chapter 12 is made retroactively; this ensures that cases filed by family farmers during the lapsed period can simply be converted to Chapter 12 once it is reenacted. Titles XIV and XV of the bill are renumbered as titles XV and XIV, respectively, to clarify the bill's overall effective date. An erroneous drafting instruction in section 1201 of the bill is corrected. And a new provision is added to correct statutory cross-references in current law.

This is technical and noncontroversial, and I urge my colleagues to support the amendment.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, with all due respect to my colleague from Wisconsin (Ms. Baldwin), she had an opportunity to advance the bankruptcy bill on November 14, 2002, but voted against the rule to bring up the conference report that contained the compromise language relative to the abortion clinic protestors judgment discharge, and that vote was rejected, 172 to 243. Had that rule passed, obviously the conference report would have passed, the President would have signed the bill at the end of 2002, and we would not be here talking about any of these issues here today.

But I rise in opposition to this amendment because as we begin this debate, I want to make it perfectly clear that by opposing this amendment we are not in any respect jeopardizing the financial well- being of family farmers, or as proponents of this amendment have tried to construe the issue, holding farmers hostage. Nothing could be further from the truth.

The reality is that Senate 1920, as it will be voted on today, already accomplishes everything this amendment does and, indeed, much more. Since its enactment, Chapter 12 has lapsed on six occasions. The shortest lapse periods was 20 days; the longest was approximately 10 months. As with prior measures reenacting Chapter 12, the bill before us is retroactive, which will protect family farmers.

Mr. Chairman, you should know that the amendments simply extract one series of reforms from pending bankruptcy legislation. But what opponents of the amendment fail to include, however, are literally hundreds of other reforms in Senate 1920 that would benefit farmers in many other ways and nearly all Americans as well.

Although my colleague on the other side of the aisle essentially asserts that farmers are being held hostage to bankruptcy reform, the reality is that bankruptcy reform is being held hostage. Just look at the roll calls and who voted which way in the eight or nine votes that the House has had since 1998.

Here are just a small sample of the reforms being held up by opponents of overall reforms: First, reforms giving the Justice Department and the courts the tools they need to deal with fraud and abuse in the current bankruptcy system. Voting for this amendment and against the bill means that the Justice Department and the courts will not have those tools to deal with fraud and abuse.

Second, remedies addressing the so-called ``mansion loophole'' by which corporate criminals and other wrongdoers can shield their million dollar homes from the just claims of their creditors. And that includes employees of major corporations that had their 401(k)s looted as a result of stock prices tanking and they could not diversify what was in the 401(k)s.

So try telling that to an Enron or WorldCom employee that we are going to allow future corporate wrongdoers to be able to stiff their employees as well. The amendment offered by the gentlewoman from Wisconsin (Ms. Baldwin) would allow that to happen. The base bill does not.

Third, reforms representing deadbeat parents from using bankruptcy as a means of avoiding their child support obligation. This bill increases the priority of child support obligations in bankruptcy. The Baldwin amendment does not do that. The National Child Support Enforcement Association states that these reforms are crucial to the collection of child support during bankruptcy. Do not turn your back on custodial parents who have to file bankruptcy because they cannot collect their support.

Fourth, authorization for the appointment of additional bankruptcy judges in districts where there is a huge backlog of bankruptcy cases. Voting for the Baldwin amendment will mean justice delayed being justice denied. Voting against it and passing the bill will allow more judges to prosecute these cases to a conclusion.

Fifth, protections for victims of crimes of violence from being further victimized by criminals who file for bankruptcy relief.

Sixth, reforms requiring consumers to receive important information about the alternatives to, and consequences of, bankruptcy before they file for relief. Is it not better that people not file for bankruptcy because they can get better information and counseling to prevent them from having a scarlet letter being attached to their name because they had to go through bankruptcy?

There are also provisions waiving the filing of bankruptcy fees for the indigent. If my colleagues vote for the Baldwin amendment and against the bill, those provisions are not there.

There are reforms requiring millions of consumers to receive a monthly credit card billing statement that would include specific disclosures about the increased interest and repayment time associated with making minimum payments. A lot of people end up having to file for bankruptcy because they get themselves further and further in the hole with revolving credit card payments. If there is a warning on that and some information on that on the statements maybe not as many people will end up getting in that hole.

Also, the enactment of long-overdue reforms intended to reduce systemic risk in the banking and financial marketplace by minimizing the risk of disruption when parties to certain financial transactions become bankrupt or insolvent, the so-called netting provision. Federal Reserve Board Chairman Alan Greenspan has said these reforms are extremely important. They are extremely important for economic stability. The authors and supporters of the Baldwin amendment turn their backs on these reforms.

Also, protections against the disclosure of the name of a debtor's minor children in public bankruptcy files. Apparently, the people who want to strip these reforms out want anybody to go into a courthouse and see the names of minor children in a parent's bankruptcy file and let that become a matter of public discussion. There are also provisions preventing debtors from selling their customers' personally identifiable information.

The bill has reforms requiring the appointment of an ombudsman to safeguard the interests of patients in health care facilities that are in bankruptcy. Support the amendment and vote down the bill; there is no ombudsman to help out those patients in the bankrupt health care facility.

In light of the disastrous impact that bankruptcy cases like WorldCom and Enron have had on their employees, reforms that more than double the current monetary cap on wage and employee benefit claims entitled to priority under the bankruptcy code are included in my bill, but not the amendment that is before the House.

Other provisions would protect retirees in cases where chapter 11 debtors unilaterally modify their benefits, such as health insurance. We protect as best as possible retirees of a bankrupt company in forcing the company to try to uphold their health insurance obligation to those retirees.

Vote for the Baldwin amendment; those are not in there. My bill has got them.

These reforms would make it easier to recover excessive pre-petition compensation such as bonuses paid to insiders of a debtor that can be used to pay unpaid employee wage claims. My bill has got that. The amendment does not.

I should also point out that chapter 12 is rarely utilized by family farmers. Last year, less than 700 chapter 12 cases were filed out of the nearly 1.7 million bankruptcy cases filed during the same period. When chapter 12 lapses, as it has in the past, farmers can still seek bankruptcy relief under other chapters of the bankruptcy code; so we do not leave farmers that need to file for bankruptcy out in the cold. Merely what we do is enact chapter 12 on a permanent basis, and because of the provision in retroactivity and the amendment that was just adopted, their cases can be converted to chapter 12 once that chapter is reenacted.

While we obviously care about family farmers, we also care about the indigent, the patient, the single moms with unpaid support claims, retired employees who have lost their health benefits and the financial well-being of millions of consumers. Accordingly, Mr. Chairman, I urge my colleagues to vote against this amendment.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, how much time remains on each side?

Mr. Chairman, I yield 3 minutes to the gentleman from Utah (Mr. Cannon).

Mr. Chairman, I yield 2 minutes to the gentleman from Virginia (Mr. Goodlatte), the chairman of the Committee on Agriculture.

Mr. Chairman, I yield myself the balance of my time.

Mr. Chairman, I do not think that Chapter 12 is controversial. It is also not utilized very much in bankruptcy filings. The statistical report of the Administrative Office of the U.S. Courts, for example, show that in the fiscal year that ended last September 30, there were only 19 Chapter 12 filings for the entire State of Wisconsin. So we are dealing with 19 family farmers, which is important, but there are still thousands of family farmers in my State and elsewhere that end up having to pay this $400 per household hidden tax and higher cost of goods and services and higher interest on the money that they have to borrow because of the abuses of the bankruptcy system that my amendment seeks to plug.

Now, the major reform of all of those that we have talked about in the bankruptcy bill, that this House has voted to approve eight times in various forms and motions, is that someone who is able to repay all or part of their debts through future earning cannot get a Chapter 7 liquidation and have all those debts discharged.

So this so-called ``means test'' means that someone who is really down and out and does not have the prospect of future earnings being able to repay a significant part of their debts, my bill does not impact on what their legal options are. They will still be able to file for Chapter 7, get a discharge, and be able to try to put their lives together and start anew. But somebody who does have the potential of future earnings, and, yes, a lot of these people use the bankruptcy system as a financial planning tool, my bill will allow a court to order a repayment of all or part of those debts.

Remember, every penny that is recovered this way is one less penny that has to be passed on to the 98 percent of the people of this country who pay their bills on time or as agreed to. The abuses of the bankruptcy system amount to about a $40 billion cost shift from people who do not pay their bills to people who do pay their bills.

I ask the Members to vote down the Baldwin amendment to give us another shot at getting a conference report passed and on the President's desk, because that is the vote in the interest of saving as much money as possible for the people who do pay their bills rather than allowing continued abuses of the bankruptcy system.

Vote ``no'' on the Baldwin amendment, pass the underlying bill, the substitute amendment, as authorized by the Committee on Rules.

Mr. Chairman, I yield back the balance of my time.

Mr. Speaker, I rise in opposition to the motion to recommit.

Mr. Speaker, let us be clear. The means-based test only applies to people with incomes above the State median income average. Anybody who is below the State median income does not qualify under the means-based test, and their bankruptcy petition cannot be thrown out.

Secondly, what the motion of the gentlewoman from Illinois proposes to do is to provide an exemption for active-duty servicemembers from the means-based test. That has been taken care of in most part since 1940 under the Soldiers and Sailors Relief Act, which allows for the staying of legal proceedings against anybody who is on active duty.

And I submit to the gentlewoman from Illinois and others that next year join us in voting for a defense authorization bill that gives our servicepeople a pay raise because that is the way to prevent bankruptcies to begin with.

But I would also like to point out that this motion to recommit applies to anybody who is a veteran. There are a lot of veterans that would fall under this exemption that have a lot of income. Take, for example, the junior Senator from Massachusetts, Mr. Kerry. He gets the same salary that we do, and it is reported that his wife has significant assets on her own. Under the gentlewoman's motion to recommit, should Mr. Kerry end up in hard times and have to file for bankruptcy, he would not allow his creditors to be able to ask for a means-based bankruptcy to apply at least some of the Senate salary that he received to apply to his debts. That is wrong. Vote ``no'' on the motion to recommit and vote to pass the bill.

announcement by the speaker pro tempore

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

Mr. Speaker, on that I demand the yeas and nays.

Mr. Speaker, pursuant to House Resolution 503, I offer a motion.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, section 414 does allow an investment banker that previously represented a business to continue to represent the business after it files for bankruptcy. Under current law, that investment banker would be prohibited from representing the debtor on a per se basis.

Let me say that this issue was debated in the Committee on the Judiciary. There was an amendment that was offered, and it was rejected by a vote of 12 to 17 when H.R. 975 was marked up in the committee. This issue was not brought up during the conference committee on H.R. 333 in the previous Congress. And to my knowledge, there was no motion to instruct on this issue that was ever made by anyone.

Let me say I am as sensitive to conflicts of interest as anybody else. But if you have this absolute bar, an investment banker that knows something about the business would be disqualified and then the business if it was trying to reorganize under chapter 11 would have to hire a new investment banker, and the new investment banker would end up having to be paid for all the time to get himself or that institution's self up to speed on the issues of the business.

So section 414 was designed to provide the professional advice that investment bankers give in a way that would be able to reduce the cost to the estate of the bankrupt business. And that is why I think that at least section 414 should not be stricken in its entirety and would urge a ``no'' vote on the motion to instruct.

Mr. Speaker, I yield 3 minutes to the gentleman from New York (Mr. Weiner).

Mr. Chairman, I rise to plead for our Nation's family farmers and family fishing operations. And some people may ask why the representative from Manhattan and Brooklyn is rising to plead for family farmers. When I was a child, we had a family farm which we lost to foreclosure because of policies similar to what the majority party is urging on us today. This is the 11th time we have been here to debate a temporary extension of chapter 12. To string farmers along, especially in these very hard times, is simply unconscionable; but this is even worse. Instead of passing this bill last year, the chapter 12 extension bill, when we could have sent it directly to the President, the majority refused to act and allow chapter 12 to sunset. Even now they refuse to act and instead are using family farmers again to try to pass an overall bankruptcy bill that is not going to pass again because the Senate will not go along with it; so they are just using it as a charade and putting at risk all the farmers. But a bill that should not pass anyway. A bill whose main and essentially only effect is to enable the big banks and the credit card companies to reach their hands into the pockets of low- and middle-income people who, because usually of either a divorce or being laid off from their jobs or health emergency, are in bankruptcy and at that time to enable the big banks and the credit card companies to put their hands into these low- and middle- income pockets and take more money out of it for the big banks and the credit card companies in 60 or 70 different ways. That is what this bill does. And this bill is a lot more important, the majority would have us believe, than extending chapter 12 for the benefits of family farmers and family fishing operators.

Even if we pass this bill as amended by putting on the entire bankruptcy reform bill, so-called, on the back of the chapter 12 extension, and even if the Senate agrees to allow the House to circumvent them entirely, family farmers would still have to sit and wait while Congress fiddles.

We do have another choice. We could reject this maneuver entirely and send the 6-month extension to the President today. We could adopt the gentlewoman from Wisconsin's (Ms. Baldwin) substitute and enact a part of this bill that is both uncontroversial and necessary immediately to make chapter 12 permanent and update it to provide needed relief. But the Republican leadership appears unwilling to do either. They appear intent on using the plight of family farmers yet again to advance the agenda of the credit industry and to do so by threatening and hurting the family farmers by engaging in a legislative maneuver that has already resulted in chapter 12's expiring and that they know will now result in its being allowed to lapse further.

This is simply wrong. I urge my colleagues to reject this outrageous stunt. This bill has been on the verge of passing ``any minute'' since 1997. How much longer must our farmers and fishermen and women wait? They have waited long enough. I urge my colleagues to support the gentlewoman from Wisconsin and save our family farms and stop using the plight of the family farmers to try to put the entire agenda of the banks and the credit card companies on the backs of the family farmers. Pass a family farm bill; then bring in a bankruptcy bill. We will debate it on the merits or demerits of that, I would say the demerits; but stop trying to put that entire burden on the family farmers' backs because their backs are already broken.

Mr. Chairman, I think the gentleman from Utah (Mr. Cannon) misunderstands the question of the gentleman from Virginia (Mr. Scott). The question as I understand it was not if someone owes $2 million and can pay $10,000 should be then forced to pay $10,000. Yes. The question was, is it not true that under this bill if he owes $2 million, can afford to pay only $10,000, he can never get relief even if he pays the $10,000 he can afford to.

I yield to the gentleman from Utah.

Mr. Speaker, I offer a motion to instruct.

Mr. Speaker, I yield myself such time as I may consume. I anticipate that this debate on this motion to instruct will take only a small fraction of the time allotted to it.

Mr. Speaker, this motion would instruct the conferees to strike section 414 of the bill. Section 414 would repeal important protections in the Bankruptcy Code against conflicts of interest on the part of investment bankers involved in the reorganization of a bankrupt company.

Section 414 would relieve investment bankers of the duty of being disinterested persons before they can be retained as professionals by the bankruptcy trustee. This disinterestedness standard has been in the code since 1938. It protects the estate from conflicts of interest by professionals in the case.

Mr. Speaker, many, many people who support this bill, which I do not, are opposed to this provision and support this motion to instruct. Judge Edith Jones of the U.S. Court of Appeals for the Fifth Circuit, a very conservative judge who is a member of the Bankruptcy Reform Commission and supports the bill, has written: ``Such a standard can alone protect integrity in the bankruptcy process. If professionals who have previously been associated with a debtor continue to work for the debtor during a bankruptcy case, they will often be subject to conflicting loyalties that undermine their foremost fiduciary duty to the creditors. Strict disinterestedness required by current law eliminates such conflicts or potential conflicts. Section 414, in removing the rigorous standard of disinterestedness, is out of character with the rest of this important legislation, however, and it should be eliminated.''

Mr. Speaker, that letter is as follows:

United States Court of Appeals,

Fifth Circuit,

Houston, TX, March 11, 2003.

Hon. F. James Sensenbrenner, Jr.,

Chairman, House Committee on the Judiciary, Rayburn House

Office Building, Washington, DC.

Dear Mr. Chairman: I understand that the House Committee on

the Judiciary will consider H.R. 975, bankruptcy reform

legislation, on the morning of March 11, 2003. I also

understand that the Committee may consider whether or not to

retain Section 414 of the bill, which would amend the

``disinterested person'' standard codified at 11 U.S.C.

Sec. 101(14). As a former member of the National Bankruptcy

Review Commission and, in that capacity, a consistent

advocate of maintaining strict disinterestedness standards

for bankruptcy professionals, I urge the Committee not to

change existing law. I support Congressman Bachus's effort to

remove Section 414.

The National Bankruptcy Review Commission was asked to

recommend a modification of the disinterestedness standard in

order to accommodate, as I recall, the geographic growth and

increasing sophistication of professional firms of all kinds

involved in Chapter 11 bankruptcvy practice. Despite fervent

lobbying by prominent bankruptcy professionals and scholars,

the Commission resisted making such a recommendation. We

voted (by a lopsided majority, I believe) to retain the

standard as it has existed since the 1930's.

The Commission report cites two reasons for retaining a

strict prophylactic standard for all bankruptcy

professionals. These are worth brief restatement. First, such

a standard can alone protect integrity in the bankruptcy

process. If professionals who have previously been associated

with the debtor continue to work for the debtor during a

bankruptcy case, they will often be subject to conflicting

loyalties that undermine their foremost fiduciary duty to

the creditors. Strict disinterestedness, required by

current law, eliminates such conflicts or potential

conflicts.

Second, enforcing a strict standard of disinterestedness is

necessary to maintain public confidence in the integrity of

the bankruptcy system. A bankruptcy case should not be

subject to the criticism that professional fees are generated

to no purpose or for a bad purpose such as delay. The courts'

efforts to ensure that fees remain reasonable are enhanced

when, because of the complete disinterestedness of

participating professionals, no hidden motives may be imputed

to the actors in the case.

One need not focus solely on today's high-profile

bankruptcy cases to realize that the challenge of maintaining

disinterested professional services has permeated modern

corporate reorganization law. The Commission, for instance,

voted to retain the original standard in the wake of the

criminal conviction of a prominent bankruptcy lawyer and

several well-known instances in which law firms were required

to disgorge part of their fees--all for violating

disinterestedness standards. Given the ongoing nature of the

problem, I do not see how any professional group can

advocate, consistent with the public interest, eliminating

the statutory requirement of disinterestedness. Moreover, as

it appears likely that many future complex bankruptcy cases

will arise in which the role of investment bankers will have

to be explored, it seems particularly unwise to grant that

group--alone among bankruptcy professionals--a status

insulated from the strict disinterestedness requirement.

Since the close of the Commission's work in October 1997, I

have been a proponent of the bankruptcy reform legislation

that has been repeatedly passed by Congress. I still believe

the bankruptcy reform legislation is essential to restoring

integrity to personal and business bankruptcies, redressing

the imbalances and opportunities for manipulation that plague

current law, and encouraging individual responsibility in

financial affairs. Section 414, in removing investment

bankers from a rigorous standard of disinterestedness, is out

of character with the rest of this important legislation,

however, and it should be eliminated.

Very truly yours,

Edith H. Jones.

Mr. Speaker, why are we voting on this technical issue? Because, Mr. Speaker, it has significant real-world consequences for employees, retirees, shareholders, and creditors of a bankrupt company. Current law prevents an investment banker who had been part of the financial affairs, and perhaps of the problems, of a bankrupt company from being responsible during the bankruptcy for advising, organizing, and overseeing the reorganization.

Anyone who has read a newspaper in the last few years cannot fail to understand the importance of this motion. This deals with conflicts of interest. Conflicts of interest among investment bankers, accountants, management, and other insiders have been at the heart of the most outrageous corporate scandals that have ended up in bankruptcy court, which have been in the headlines in our front pages in the last few years.

Perhaps when this provision was first proposed several years ago, some Members may have thought it was a minor technical change. No one any longer can believe for a moment after everything that has happened that this is just a small benign change.

The chairman of the Securities and Exchange Commission, William Donaldson, has written to Senators Leahy and Sarbanes in opposition to this provision. The former chairman of the Securities and Exchange Commission, Arthur Levin, has written to us in opposition to this provision.

Mr. Speaker, that letter is as follows:

U.S. Securities and

Exchange Commission,

Washington, DC, May 22, 2003.

Hon. Patrick J. Leahy,

U.S. Senate, Russell Senate Office Building, Washington, DC.

Hon. Paul S. Sarbanes,

U.S. Senate, Hart Senate Office Building, Washington, DC.

Dear Senators Leahy and Sarbanes: Thank you for requesting

the Commission's views on Section 414 of H.R. 975, which

would amend the ``disinterested person'' definition in the

conflict of interest standards of the Bankruptcy Code to

remove the specific provisions covering investment bankers.

On May 7, in response to a question from Senator Sarbanes at

a hearing of the Senate Committee on Banking Housing and

Urban Affairs on the Impact of the Global Settlement, I

expressed my personal views about this amendment. Now I am

pleased to convey the view of the Commission, which is that,

while it may be possible to draft language that would address

some of the concerns of the proponents of the amendment,

Congress should proceed very cautiously before loosening any

conflicts of interest restriction. While we recognize that

this one-size-fits-all statutory exclusion is controversial,

we believe that it would be a mistake to eliminate the

exclusion in a similar one-size-fits-all manner at a time

when investor confidence is fragile.

The current ``disinterested person'' requirement was

adopted at least in part in response to a 1938 study by the

Securities and Exchange Commission that provided extensive

documentation and analysis of abuses in corporate

reorganization. The study concluded that a firm that served

as underwriter for a company's securities should not advise

the company about distributions to those security holders in

a reorganization plan. It further found that such a firm

should not advise the company about potential claims against

those involved with the company prior to the bankruptcy since

this often would involve an assessment of transaction in

which the firm participated. However, we should note that in

the 65 years since the 1938 study was issued, bankruptcy

practices and procedures have improved significantly with the

addition of a dedicated bankruptcy judicial system, the

establishment of the U.S. Trustee's office, and the

strengthening of active creditors' committees.

We are aware of the arguments of proponents of the

amendment that the current statutory exclusion is too broad

because it covers firms that participated in any underwriting

of the debtor, even if it was years ago and the firm has had

no further involvement with the debtor. However, if the

exclusion is eliminated entirely, we are concerned that the

general protection in the statute--which relies on the judge,

at the outset of the proceedings, to forbid those with

materially adverse interests to the estate, its creditors, or

its equity security holders from advising a company in

bankruptcy--may well be insufficient.

We appreciate the opportunity to comment on this proposed

amendment. If you or your staff need any further information,

please contact my office.

Sincerely,

William H. Donaldson,

Chairman.

Mr. Speaker, I yield myself such time as I may consume.

I have two basic comments. First, in response to the comments of my distinguished colleague from New York, it is not the case that anyone who worked as an investment banker for the banker company 50 years ago is affected by this provision.

If you actually read the provision in the statute book, a disinterested person is defined as a number of things, but it says the following: ``Was not an investment banker for any outstanding security of the debtor.'' If it is still outstanding, then he has still got a relationship and he still has an interest in that. ``Has not been, within 3 years before the date of the finding of the petition, an investment banker,'' et cetera. So in other words, it is a 3-year bar for outstanding securities. So the situation we were told about a moment ago does not apply.

Let me say that this is not a question of discretion; it is a question of protection. And, again, all the professionals in the field, everyone to whom we ought to be looking for guidance in this comes to the same conclusion. I do not claim to be an expert in investment banking or bankruptcy law, but everyone who is basically says the same thing.

I am going to read three quotes and that will be that. This is from the senior professor at Harvard Law School, an expert on bankruptcy, Elizabeth Warren: ``There is a reason why the professionals who have worked for a business that collapses into bankruptcy are not permitted to stay on.

``The company must go back after bankruptcy and examine its old transactions. Having the same professionals review their own work is not likely to yield the most searching inquiry.''

Arthur Levitt, former Chairman of the Securities and Exchange Commission: ``I haven't read a single argument made by the investment banks that would persuade me that that prohibition should be changed. What we are talking about is a significant potential conflict of interest, and I think it is outrageous that investment banks would even try to go down that road.''

William Donaldson, the current Chairman of the Securities and Exchange Commission: ``We are aware of the arguments of proponents of the amendment that the current statutory exclusion is too broad because it covers firms that participated in any underwriting by the debtor, even if it was years ago, and the firm has had no further involvement with the debtor. However, if the exclusion is eliminated entirely,'' which is what this provision does, ``we are concerned that the general protection in the statute, which relies on the judge at the outset of the proceedings to forbid those with materially adverse interest to the estate, its creditors or its equity and security holders from advising a company in bankruptcy may well be insufficient.''

So there is a unanimity of judgment among the people involved in protecting shareholders and stakeholders and 401(k)s and employees and everybody else with a stake in this matter. We should not do this. And just one further observation. This has been the law since 1938. We have had no problems with it. We have no great hordes of people coming to our offices saying, Get rid of this. It has caused all kind of problems. Leave it alone.

Vote for the motion to recommit.

Mr. Chairman, I yield back the balance of my time.

Mr. SPEAKER pro tempore (Mr. Simpson). Without objection, the previous question is ordered on the motion to instruct.

Mr. Speaker, on that I demand the yeas and nays.

Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, let me begin by offering my unequivocal support for S. 1920 that would provide for an extension of chapter 12 of the Bankruptcy Code which expired last December. That piece of legislation is noncontroversial and necessary to ensure that the farmers in our country have access to the bankruptcy protections they so earnestly deserve as they struggle to keep our food supply thriving and to maintain their farms.

As ranking member of the Subcommittee on Commercial and Administrative Law and a former conferee on H.R. 975, I continue to oppose the substance of H.R. 975 and further believe that the current maneuver to force the hand of the Senate is irresponsible and will only result in further delay in extending the family farmer protections everyone agrees should be extended.

The gentleman from Wisconsin's amendment tacks on to this otherwise noncontroversial bill H.R. 975, the product of a conference on which I served last term minus the negotiated provision that would prevent those who commit acts of violence against women and abortion clinics from avoiding penalties by declaring bankruptcy. This bill did not pass last year, and I believe it will meet the same fate this year. Therefore, the only result will be that the family farmer will be held hostage to efforts to leverage support for the larger bankruptcy reform.

My opposition to H.R. 975 has not changed. I believe that the omnibus bankruptcy reform bill is an unfortunate convergence of expedience and politics. There obviously is abuse in the bankruptcy system and reform is necessary, but I continue to believe that H.R. 975 is not a rational way to respond to abuse to set up a separate set of rules for what is, in effect, a pauper's bankruptcy court system and a different set of rules for a higher income bankruptcy court system.

Mr. Chairman, I believe that we should stop playing games with the family farmer. Like the National Farmers Union, and I quote from their letter to the House leadership, I ``reject this legislative strategy as an insensitive, cruel and malicious effort that will only serve to increase the level of distress of farm families who are already experiencing severe financial difficulties.'' I urge my colleagues to vote against this bill and for a process that will respect the plight of the farmers of this country.

In response to the comments of the gentleman from Wisconsin, let me submit to this body that the primary reason we have an increasing number of bankruptcies, although there may be some abuse and I do not argue with that, but the primary reason we are having an increase in the number of bankruptcies in this country is job loss and economics which is being driven by this administration.

Second, I want to know how many times the House has to beat itself on the chest on this issue and try to force this issue. We have got a bill that is already in conference, I thought, in the other body; and this bill, if the Senate wanted to take it up, would take it up. So what are we doing beating our chests again this year saying we support bankruptcy reform?

And finally, I would just submit that this is an effort to find someone to blame for the failure to pass the bankruptcy reform legislation. The last time I checked, the Republicans were in control of the House, the Republicans were in control of the Senate, the Republicans were in control of the Presidency. It would seem to me, if you are in control of this process and you want to pass the bankruptcy reform bill, you would pass the bankruptcy reform bill and we would not be here going through this charade, blaming it on somebody else for failure to pass this bill. It is a convenient way to blame others, but it is a terrible way to do business.

National Farmers Union,

January 23, 2004.

Hon. Dennis J. Hastert,

Speaker, House of Representatives, Washington, DC.

Hon. Nancy Pelosi,

Democratic Leader, House of Representatives, Washington, DC.

Dear Speaker Hastert and Democratic Leader Pelosi: On

behalf of the family farmer and rancher members of the

National Farmers Union I write to encourage the House of

Representatives to immediately adopt the language contained

in S. 1920 which passed the Senate late last year and

extended the chapter 12 provisions of title 11 of the United

States Code for an additional six months retroactive to

January 1, 2004.

The Chapter 12 provisions, which allow the development of

alternative financial reorganization plans for farmers and

ranchers within the bankruptcy code, expired at the end of

2003 when the House failed to take action on the Senate bill

even though these provisions have been considered non-

controversial by both parties over the course of several

years. Any delay in approving an extension of Chapter 12

places agricultural producers and their families who are

faced with bankruptcy in a serious and untenable position.

We understand there are some in Congress who wish to

utilize the extension of the agriculture provisions as a

means to leverage support for a broader bankruptcy reform

measure that contains highly controversial and divisive

provisions unrelated to the farm bankruptcy law. We reject

this legislative strategy as an insensitive, cruel and

malicious effort that will only serve to increase the level

of distress of farm families who are already experiencing

severe financial difficulties.

Thank you for your attention to this important issue.

Sincerely,

David J. Frederickson,

President.

Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield 4 minutes to the gentleman from New York (Mr. Nadler).

Mr. Chairman, I yield myself 30 seconds.

I am a little perplexed by the gentleman's statement. He was yielded 4 minutes. He took 3 minutes and 50 seconds to talk about the problems with the bill and 10 seconds to praise the bill; yet he is going to support it. If there is no public policy justification for this provision, it seems to me that the gentleman would be voting against this bill.

Mr. Chairman, I yield 4 minutes to the gentlewoman from the District of Columbia (Ms. Norton).

Mr. Chairman, I yield 5 minutes to the gentleman from Michigan (Mr. Conyers) the ranking member of Committee on the Judiciary.

I yield to the gentleman from Michigan.

Reclaiming my time, Mr. Chairman, let me also just make a couple of responses to the statement of the gentleman from Wisconsin (Mr. Sensenbrenner).

Number one, it is interesting that the chairman thinks that the abortion issue should not be part of the bankruptcy bill. Seemingly, everybody who abuses the bankruptcy process other than people who have had judgments against them for destroying or damaging bankruptcy clinics would be an appropriate subject for this. I thought this whole thing was to try to get to people who are abusing the system. If that is not an abuse, then I am not sure I understand what it is.

Second, in response to the gentleman's comments about this bill preserving criminal discharges, this is not about criminal discharges, this is about people who have gotten judgments against abortion clinic bombers or damagers, civil judgments, and had those defendants thumb their noses at those judgments by saying ``I am just going to declare bankruptcy so I do not have to pay this judgment.''

So if that is not an abuse, then I do not understand what an abuse is. If this bill is about dealing with abuse, then it seems to me people who fall into the category of abortion clinic abusers of the process should be equally accountable.

Mr. Chairman, I yield 4 minutes to the gentleman from Virginia (Mr. Scott).

Mr. Chairman, I yield as much time as he may consume to the gentleman from Virginia (Mr. Scott) to pursue this discussion.

Mr. Chairman, I yield such time as he may consume to the gentleman from New York (Mr. Nadler).

Mr. Chairman, it is obvious that maybe all of my colleagues need to read this bill. Mr. Chairman, I reserve the balance of my time.

Mr. Chairman, I yield myself the balance of the time, although I doubt that I will use it.

Let me just correct a couple of things that have been put out here that seem to me to need correction. First of all, child support and alimony are already nondischargeable and all of the women's and children's advocacy groups oppose this bill. So do not be misled by this claim that somehow or another this bill is going to do something to help women's and children's advocacy groups with child support.

Second, the implication has been made that there is somehow a cap on the homestead exemption in this bill, and that is not the case. We tried to get one on several occasions. It has never worked. It has always failed. And so anybody who is proceeding on the assumption that there is some kind of cap in this bill should dissuade themselves of that notion.

Having made those corrections and comments, Mr. Chairman, I presume the gentleman from Wisconsin (Mr. Sensenbrenner) will have the last word. I encourage my colleagues to vote against the bill on the grounds that it will play Russian roulette with family farmers. We ought to proceed with the family farmer bill, which needs to be extended to protect family farmers and not get them caught up in all of this other politics about abortion and in a larger bankruptcy reform bill.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I claim the time in opposition to the amendment, and I yield myself such time as I may consume.

Mr. Chairman, I rise solely to advise that we have had no indication from our side that there is anybody who opposes these technical amendments and we, therefore, concur in the amendments.

Mr. Chairman, I yield back the balance of my time.

Mr. Chairman, I thank the gentlewoman for yielding me the time; and, Mr. Chairman, I do not think I will take 5 minutes, but I wanted to make a couple of comments because the chairman of the full committee has chided me on one or more occasions about voting against the rule that would have allowed the old bankruptcy bill that had the abortion clinics provisions in it to come to the floor and has made it sound like I did something that was inappropriate.

Now the chairman of the committee is going to have the opportunity to show how committed he is to a permanent extension of the family farms because the gentlewoman from Wisconsin's (Ms. Baldwin) amendment would make the family farms provisions of the bankruptcy law permanent, and he has gone out of his way to talk about how he would like to see those provisions be permanent. I will be anxious to see how he plans to vote on this

amendment because this is the clear way to make the provisions that protect family farmers permanent in the law, to keep it away from all of this abortion clinic politics, to keep it completely away from bankruptcy reform politics. This is the vote that will show either my colleagues are committed to protecting family farmers in this country or they are not.

I am anxiously awaiting how my colleagues are going to cast their vote on this, since the gentleman from Wisconsin (Mr. Sensenbrenner) has made such a point of pointing out that I voted against the rule that would have allowed the prior bill to come to the floor last year. So this amendment is on the floor. There will be a recorded vote. I will be anxious to see how my chairman votes on it.

It is clear that farmers in this country are having a difficult time. Whereas there was a 7 percent, almost-8 percent decline in small business or business bankruptcies in 2003 and a 7 percent increase in individual bankruptcy filings in 2003, there was a 116.8 percent increase in bankruptcy filings by farmers in this country.

So it is clear that farmers have been in distress.

This bill started out being a noncontroversial, farmer-friendly bill that would have passed this House on the suspension calendar had the leadership decided that it would put it on the suspension calendar. It had broad bipartisan support. We have extended on several occasions before the family-farm provisions.

It is not tied up in the politics of bankruptcy reform. It is not tied up in the politics of abortion clinics and whether there ought to be abortion provisions in the bankruptcy bill. This is a clear, clear- cut vote on whether we want to permanently extend the family-farm provisions.

So let there be no mistake about it, family farmers ought to hold Members of this body accountable on this vote. It is not trapped with any kind of political agenda. It is what we all have fought for. It is what we say we all believe in. This is our opportunity to vote on it. So I want to encourage my colleagues to support the Baldwin amendment.

Mr. Chairman, I rise in opposition to S. 1920, the bill to extend for 6 months the period for which Chapter 12 of Title 11 of the United States Code is reenacted. This legislation covers a significant amount of ground-consumer filings, small business bankruptcy, ancillary and cross-border cases, financial contract provisions, amendments to chapter 12 governing family farmer reorganization, and health care and employee benefits. These issues affect many constituents; therefore, we as creators of legislation must not take lightly the consideration of its passage. On its face, S. 1920 temporarily extends Chapter 12, the family farmer bankruptcy protection provision, for 6 months, retroactive to January 1, 2004 through June 30, 2004.

If we allow the amendment offered by Mr. Sensenbrenner to pass favorably, it will essentially incorporate H.R. 975, the Bankruptcy Abuse Prevention and Consumer Protection Act. H.R. 975 passed the House last March by vote of 315 but did not surpass the Senate by virtue of a contentious debate related to preventing abortion protesters from filing for bankruptcy to avoid civil fines and judgment.

H.R. 975 is a significant departure from the current bankruptcy laws that would make it more difficult for individuals to obtain relief from their debts through bankruptcy proceedings. Attorneys practicing in this field would be faced with more complicated technical requirements, and judgment debtors would be faced with additional filing requirements and a ``means test.''

The ``means test'' entails the use of a formula for debtors to determine their eligibility for Chapter 7 or Chapter 13 bankruptcy relief based on their ability to repay debt, relying in part on Internal Revenue Service (IRS) calculations of estimated living expenses. Debtors whose remaining income over a 5-year period--after allowable expenses are deducted--is sufficient to repay at least 25 percent of their unsecured debt or $100 a month over 5 years, whichever is greater, or $10,000, would not be eligible for relief under Chapter 7. Under the measure, the current monthly income of the debtor would be calculated using the 6-month period ending on the last day of the month immediately before the bankruptcy filing was made. Monthly income would not include Social Security benefits and payments to victims of war crimes or crimes against humanity, or victims or international or domestic terrorism. Under the measure, if a debtor's income meets or exceeds the means-test threshold, there would be a ``presumption of abuse.'' Under current law, there is a presumption in favor of granting the debtor a discharge'' i.e., forgiving the debt, so this proposal will severely curtail the rights currently enjoyed by taxpayers. Under this measure, debtors can refute the presumption of abuse by demonstrating ``special circumstances'' that justify additional expenses or adjustment to their income to challenge the means-test formula. The debtors would have to itemize and document each additional expense or income adjustment--a very onerous and laborious ordeal.

This legislation is simply the wrong measure proffered at the wrong time. It will do nothing to address the critical problems facing our country. It will unfairly benefit the credit card and banking industries, rewarding large financial institutions-those paid for by those least able to afford it. The bill includes an extreme means test to determine whether a family can file for bankruptcy protection that helps them get out of debt, or whether the family must enter into a stringent repayment plan under Chapter 13 of the IRS Code.

Currenlty, less than one-third of Chapter 13 plans are successfully completed, and this rigid ``one-size-fits-all'' means test would result in an even greater number of failed repayment plans, increased administrative costs to the courts, and unnecessary constraints on families in genuine need of bankruptcy relief. The bill, along with the amendment that incorporates H.R. 975 hurts families. The problem with escalating personal bankruptcy filings is not that families are abusing the bankruptcy system. Ninety percent of bankruptcies are attributable to a crisis in the debtor's family such job loss, divorce, or excessive medical bills. In addition, credit card companies are extending credit far too easily. Credit card companies want all the benefits of a deregulated credit industry, with high interest rates and low minimum- payment requirements. They continue to irresponsibility extend credit to already debt-laden consumers and then run to Congress for help to apply pressure to consumers already struggling in this troubled economy.

While the bill purports to elevate the priority of child support payments, in reality, credit card companies would receive repayment of debt at the same rate as child support obligations. Those provisions would have a severe impact on the most vulnerable members of society, including women and children who rely on alimony and child support payments to live. The bill's homestead exemption cap does little to address the problem of wealthy debtors shielding their assets from creditors by purchasing million-dollars homes. Sophisticated, wealthy debtors can easily plan ahead and evade the cap. Under the bill, with a little planning, chief executive officers like Ken Lay, formerly of Enron, would be able to keep their homes, while lower-income renters-- the former janitors at Enron, for example--could end up homeless.

The bill also imposes artificial deadlines and cumbersome new paperwork requirements on small businesses trying to reorganize and unnecessarily limits the discretion of bankruptcy judges in crafting the best possible result for small business debtors and creditors. The overbroad requirements called for will force many viable small businesses to permanently close their doors. The bill is great for credit card companies, but bad for everyone else. In fact, it hurts those who most need the second chance offered by bankruptcy.

I do, however, support amendment No. 2 of House Report No. 108-407 offered by Ms. Baldwin of Wisconsin. This amendment would make Chapter 12 of Title 11 of the U.S. Bankruptcy Code that deals with ``family farmer'' reorganization permanent and would expand the eligibility requirements found within that Chapter. The number of Chapter 12 filings has risen in the past two years. Allowing this law to lapse would be irresponsible for us as legislators. Farmers with debts up to $1.5 million can qualify for Chapter 12 protection if 80 percent of that debt is related to farm operations. In normal bankruptcy proceedings, all assets are subject to liquidation, but under Chapter 12, land and equipment is exempt, allowing a family farmer to keep farming.

From its incipiency, this has always been a bad bill--one that kicks honest debtors when they are already down on their luck--but the timing could not be worse. The policy message that is being conveyed with this legislative scheme amounts to a slap in the face of the families of our brave men and women in uniform who fought and are still fighting in the expensive ``Operation Iraqi Freedom,'' a war that has to date not been substantially justified. This bill should be defeated so that Congress instead of using the public's time and money to pay back credit card companies for their campaign contributions, can get back to work addressing the very real problems facing our country.

For the reasons stated above, Mr. Chairman, I oppose this bill.

Mr. Chairman, I thank the chairman for yielding me this time.

Mr. Chairman, I rise in strong support of this bill and would urge this body to adopt it. I would like to adopt the words of Edith Jones, who served on the Bankruptcy Commission and is on the Fifth Circuit Court of Appeals, when she said ``bankruptcy reform legislation is essential to restoring integrity to personal and business bankruptcies, redressing the imbalances and opportunities for manipulation that plague current law, and encouraging individual responsibility in financial affairs.'' However, and I say this to the gentleman from Wisconsin (Chairman Sensenbrenner), he has done an outstanding job on this legislation. It is very much a thankless job, and it is with some hesitancy that I rise simply to point out one provision that I share with Judge Jones when she says, however, ``Section 414, in removing investment bankers from a rigorous standard of disinterestedness, is out of character

with the rest of this important legislation and should be eliminated.''

Section 414 of the present legislation, I think, is a large snake. It is the proverbial fox in the henhouse. And what section 414 does is it eliminates the disinterested rule. That rule has existed in bankruptcy law for 66 years. Under current law, a person that advises the trustee must be ``disinterested'' in order to avoid conflicts of interest. Section 414 eliminates that exclusion. Consequently, section 414 would allow the same entities that may be engaged in negligence or even fraud prior to bankruptcy to advise the trustee during the bankruptcy process.

Our experience alone with the recent wave of corporate scandals means that we need to carefully examine any provision that would weaken the conflict of interest standards. Weakening those standards in the bankruptcy code promotes conflicts of interest rather than corporate reform.

Let me quote the Wall Street Journal addressing this section 414: ``Relaxing the disinterestedness rules will serve to reward firms that had some part of the company's demise . . . By allowing firms that helped the company into bankruptcy continue to stay on the payroll, the firms are being rewarded for essentially failing at the task for which they were hired.''

Eliot Spitzer has testified against section 414. He says, ``The inherent conflict of interest created by section 414 and the perverse incentives created by such a section ought to be clear to all,'' and I would agree with him. And here we have the Attorney General of New York and we have the very conservative Judge Jones agreeing on this point, as did almost all the bankruptcy commissioners.

No convincing case has been made for drastically weakening the current standard as section 414 does. Indeed, one would be hard pressed to offer any public policy rationale for this change. As Judge Jones said, section 414 is totally out of character with the rest of this important legislation. And I include a copy of her letter.

Let me conclude by saying that section 414, which is contrary to the legislation's goal of creating a fair and more streamlined bankruptcy system, must be addressed at conference. Nonetheless, I strongly support this much-needed bankruptcy reform legislation which will limit abuses of the bankruptcy system without affecting bankruptcy protection to all who truly need it.

U.S. Court of Appeals Fifth Circuit,

March 11, 2003.

Hon. F. James Sensenbrenner, Jr.,

Chairman, House Committee on the Judiciary, Rayburn House

Office Building, Washington, DC.

Dear Mr. Chairman: I understand that the House Committee on

the Judiciary will consider H.R. 975, bankruptcy reform

legislation, on the morning of March 11, 2003. I also

understand that the Committee may consider whether or not to

retain Section 414 of the bill, which would amend the

``disinterested person'' standard codified at 11 U.S.C.

Sec. 101(14). As a former member of the National Bankruptcy

Review Commission and, in that capacity, a consistent

advocate of maintaining strict disinterestedness standards

for bankruptcy professionals, I urge the Committee not to

change existing law. I support Congressman Bachus's effort to

remove Section 414.

The National Bankruptcy Review Commission was asked to

recommend a modification of the disinterestedness standard in

order to accommodate, as I recall, the geographic growth and

increasing sophistication of professional firms of all kinds

involved in Chapter 11 bankruptcy practice. Despite fervent

lobbying by prominent bankruptcy professionals and scholars,

the Commission resisted making such a recommendation. We

voted (by a lopsided majority, I believe) to retain the

standard as it has existed since the 1930's.

The Commission report cites two reasons for retaining a

strict prophylactic standard for all bankruptcy

professionals. These are worth brief restatement. First, such

a standard can alone protect integrity in the bankruptcy

process. If professionals who have previously been associated

with the debtor continue to work for the debtor during a

bankruptcy case, they will often be subject to conflicting

loyalties that undermine their foremost fiduciary duty to

the creditors. Strict disinterestedness, required by

current law, eliminates such conflicts or potential

conflicts.

Second, enforcing a strict standard of disinterestedness is

necessary to maintain public confidence in the integrity of

the bankruptcy system. A bankruptcy case should not be

subject to the criticism that professional fees are generated

to no purpose or for a bad purpose such as delay. The courts'

efforts to ensure that fees remain reasonable are enhanced

when, because of the complete disinterestedness of

participating professionals, no hidden motives may be imputed

to the actors in the case.

One need not focus solely on today's high-profile

bankruptcy cases to realize that the challenge of maintaining

disinterested professional services has permeated modern

corporate reorganization law. The Commission, for instance,

voted to retain the original standard in the wake of the

criminal conviction of a prominent bankruptcy lawyer and

several well-known instances in which law firms were required

to disgorge part of their fees--all for violating

disinterestedness standards. Given the ongoing nature of the

problem, I do not see how any professional group can

advocate, consistent with the public interest, eliminating

the statutory requirement of disinterestedness. Moreover, as

it appears likely that many future complex bankruptcy cases

will arise in which the role of investment bankers will have

to be explored, it seems particularly unwise to grant that

group--alone among bankruptcy professionals--a status

insulated from the strict disinterestedness requirement.

Since the close of the Commission's work in October 1997, I

have been a proponent of the bankruptcy reform legislation

that has been repeatedly passed by Congress. I still believe

the bankruptcy reform legislation is essential to restoring

integrity to personal and business bankruptcies, redressing

the imbalances and opportunities for manipulation that plague

current law, and encouraging individual responsibility in

financial affairs. Section 414, in removing investment

bankers from a rigorous standard of disinterestedness, is out

of character with the rest of this important legislation,

however, and it should be eliminated.

Very truly yours,

Edith H. Jones.