Judiciary Committee Release on Bankruptcy Reform Bill, S.420

JUDICIARY COMMITTEE

[2] As many of you know, we have been working on the issue of bankruptcy reform for a number of years now. By way of background, both Houses demonstrated overwhelming margins in favor of this legislation in December, but President Clinton pocket-vetoed the legislation and we simply ran out of time in the session to come back and override the veto. So, earlier this month, rather than introducing something to serve as a starting point for negotiations, Senator Grassley introduced exactly the language that passed both houses so overwhelmingly in December. This language was the result of a long process of bipartisan negotiations last year that resulted in agreement on over four hundred pages of legislative language, on all but two issues. Although we were prepared to go directly to the Senate Floor and complete this unfinished business of last session, because of complaints by some Democrats on the Committee, we held yet another Committee gearing on the subject. Even after the hearing, some Democrats on the Committee raised additional objections, and that is why we marked up the legislation in Committee, instead of moving directly to the Senate Floor for its quick consideration.

[3] Although some 27 democratic amendments were circulated for the Committee markup, I am pleased that our Democratic colleagues ultimately limited their offering of some of the amendments, because those of us on the Republican side of the aisle worked very hard to accommodate Democratic concerns with respect to substantive amendments. We accepted several amendments, and developed compromise provisions on several others. It is my sincere hope that we can work constructively on the Floor without an unnecessary flood of amendments and without undue delay.

[4] Again, this legislation was agreed to during bipartisan negotiations last year, with the exeception of two provisions, one of which, the issue of the dischargeability of debts relating to violence, we worked in Committee to resolve. I am pleased that the bill now includes a reasonable compromise developed by Senator Schumer and me that addresses the concerns of both sides in a fair manner. Let me take this opportunity to thank Senator Schumer for his leadership and hard work on this issue.

[5] I am also pleased to have worked with the Ranking Democratic Member Of the Judiciary Committee, Senator Leahy, to include for the first time, privacy protection in bankruptcy. The amendment protects personally identifiable information given by a consumer to a business debtor by adding new privacy protections to the Bankruptcy Code and by creating a Consumer Privacy Ombudsman to appear before the bankruptcy court.

[6] Given that the language we are considering is the Senate- passed conference report with the only changes being ones sought in Committee by our Democratic colleagues, I am hopeful that we can all stand by the compromises we reached in good faith last year. I am the first to acknowledge that there are things I would like to see changed in the bill, but I recognize that we all have cooperated and compromised in order to enact this legislation that provides new consumer protections, helps children in need of child support, and makes other necessary reforms to a system that is open to abuse.

[7] As we move to consideration of this legislation, I am heartened, but not surprised, by the results of the nationwide voter poll conducted for the Credit Union National Association, which indicates broad public support for reforming our bankruptcy system.

o According To the poll, the vast majority of people believe

o The poll also shows that most people think it should be more

[10] There are numerous examples of people who take advantage of loopholes today at the expense of everyone else. I recently heard from the President of a Credit Union in Wisconsin, who told me about a young couple who wanted a "clean financial slate" before they got married. What did they do? They ran up their credit card purchases. One of them prepaid on a car loan with the credit union to have the other cosigner released. Then, although they were both employed full time, they filed for bankruptcy to wipe out all their debt. The credit union -- and its members -- had to eat the $3,000 in credit card debt and another couple of hundred dollars on the car.

[11] Bankruptcy relief was never meant to allow this kind of abuse. Hard working Americans, including the members of credit unions nationwide, have been victimized by abusers of the current bankruptcy system long enough.

[12] Bankruptcy abuse also hurts our nation's small businesses. As Thomas Donahue, the President and CEO of the US Chamber of Commerce said recently, "Without Congressional action, losses from bankruptcy abuses will continue to break the banks, and backs of the nation's small businesses and retailers, which work with slim profit margins, and an even smaller margin for error."

[13] Make no mistake: Misrepresentations about this legislation have been running rampant by those who oppose any meaningful bankruptcy reform. Perhaps we can take some comfort in the words of former British Prime Minister Harold Macmillan who said, "I have never found, in a long experience of politics, that criticism is ever inhibited by ignorance."

[14] Despite the allegations of opponents of reform, the poor are not affected by the means tests. The legislation provides a "safe harbor" for those who fall below the median income, so they are not subjected to the means test at all.

[15] Another misrepresentation I have heard again and again is that this legislation won't let people file for bankruptcy relief when they need it. The fact is, this legislation does not deny anyone access to bankruptcy relief, it just requires those who have the means to repay their debts based on their income to do so. It is that simple.

[16] Opponents of this legislation have also waged the claim that it somehow hurts women and children. This falsehood is a particularly disturbing for me to hear, because I have had a long history of advocating for children and families in Congress, and I have worked tirelessly, provision by provision, to make this legislation dramatically improve the position of children and ex- spouses who are entitled to domestic support.

[17] It can be difficult to get the word out, when misrepresentations abound, about what bankruptcy reform legislation really does. In fact, the bankruptcy legislation will put a stop to letting deadbeat parents use bankruptcy to avoid paying child support. And, this bill will mean putting an end to paying the lawyers ahead of the children who rely on child support. Current bankruptcy law simply is not adequate, and frankly I was outraged to learn of the many ways deadbeat parents are manipulating and abusing the current bankruptcy system in order to get out of paying their domestic support obligations. The bill is a tremendous improvement for children and families over current law. That is why there is such overwhelming support for this legislation from the child support professionals across the country -- the very people who go after deadbeats to get children the support they need.

[18] I hope that those who oppose any reform to our nation's bankruptcy system will not engage in petty parliamentary tactics and try to encumber it with frivolous amendments. Nonetheless, I am optimistic that this much needed bankruptcy reform legislation will be signed into law this year. We have a no-nonsense president in the White House, who understands the importance of personal responsibility. Let's enact this meaningful bankruptcy reform. As I said last year, the American People have waited long enough.