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Public Statements

Bankruptcy Abuse Prevention and Consumer Protection Act of 2003

By:
Date:
Location: Washington, DC


BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2003 -- (House of Representatives - January 28, 2004)

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Mr. WATT. 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.

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

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Mr. WATT. 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).

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

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

Mr. CONYERS. Mr. Chairman, will the gentleman yield?

Mr. WATT. I yield to the gentleman from Michigan.

Mr. CONYERS. Mr. Chairman, I thank the gentleman for yielding to me.

I would just like to respond to the distinguished chairman of the Committee on the Judiciary, the gentleman from Wisconsin (Mr. Sensenbrenner), who feels very strongly that the abortion consideration has no place in this bill.

Well, I will be happy to report that to the predecessor chairman of the Committee on the Judiciary, the gentleman from Illinois (Mr. Hyde). He will be happy to know that you do not feel it does and that a whole group of Senators, not to mention a fairly substantial number of Members of the House, all think that it does, and to think that by running an end-run around this provision with an arcane debt farmers provision, it is not going to work.

Now, for my friend, the gentleman from Michigan (Mr. Smith), who has served with great distinction in the Congress, I will be happy to let his farmers know that everything is okay, that the provision has expired; but somehow he can get into court, or somebody, and they can just continue on, that with the judges, even though the provision has no effect, that the farmers are okay. I am sure they will be very comforted to hear that.

Mr. WATT. 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."

[Time: 14:30]

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. SCOTT of Virginia. Mr. Chairman, I rise in opposition to the bill in its present form. Instead of passing the bipartisan bill to help family farmers, we have substituted a controversial bill that violates traditional bankruptcy principles.

For centuries, American bankruptcy laws had the principle that if people get over their heads in debt, they can cash in all of their assets, pay off all the debts they can, and then get a fresh start. For policy reasons, a few assets have historically been exempted and a few debts have historically been nondischargeable, especially those that have been incurred by fraud, a result of crime, or through abuse of the bankruptcy system. Yet the principle has always been the same: cash in all you have and get a fresh start.

This bill violates the basic principle. People who incurred debts because of illness, unemployment, business failure and have debts they can never pay off will be denied an opportunity to get a fresh start. They will be stripped of every penny of income after basic expenses of food and rent without reasonable allowance for unforeseen emergencies such as automobile repairs, which will inevitably come up. People in these circumstances will be in economic slavery for 5 years and will probably be worse off at the end of 5 years than they were before.

The bill has no rational measure of determining a person's ability to pay off debts. If someone can pay off $10,000 in his debts over 5 years, that is $167 a month, then he is not entitled to a discharge. A person could cosign a spouse's business loan only to have the spouse die or disappear. If that person has a $50,000 salary, he may find himself owing $1 million, never even able to make interest payments, and that person would be denied relief under this bill. A person with hospital bills could have hospital bills of hundreds of thousands of dollars. That person will be denied relief under this bill. This will cause many Americans who have unforeseen business failures, health problems, or unemployment to find themselves unable to pay their debts and be trapped with no way out. And for 5 years that person would have nothing to lose.

Mr. Chairman, if our goal is to create a situation where people are stressed out with nothing to lose and to maximize the chances that a person would totally lose control and terrorize a community or its coworkers, this is it. Last year in Washington, D.C., we saw the impact of financial distress. A North Carolina farmer drove his tractor into the pond near the National Mall and was quoted as saying, "I am broke. I am busted. I am out." No one in the community is safe when we have increased the number of neighbors who feel like they have nothing to lose.

Finally, Mr. Chairman, we have to consider the impact the bill will have on small business entrepreneurs. How many people will be willing to take a chance on a new business if any failure will result not just in bankruptcy but no relief for the family for 5 years? No bank in the future will lend a business any cash, especially one in financial distress that actually needs the money without the personal signature of the owner. And so who will risk not only loss of everything but also risk family poverty with no relief for 5 years if the business fails?

Long ago we decided that there would be no debtors prisons in America. This bill represents an effort to take a giant step backwards towards that bygone era.

So I urge my colleagues to reject this bill in its present form so that we can return to the original bill and help family farmers.

Mr. SENSENBRENNER. 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. CANNON. Mr. Chairman, first of all I would like to associate myself with the comments of the gentleman from Wisconsin (Mr. Sensenbrenner) on these two points that he has just made and then point out in response to the gentleman from Virginia (Mr. Scott) this bill is about getting money from people who have it. It is not about oppressing the poor. And I think the structure of the bill, if you look at it fairly, will show that I rise in support of Senate 1920.

The amendment in the nature of a substitute of the gentleman from Wisconsin (Mr. Sensenbrenner) merely makes technical corrections to H.R. 975, which was passed by the House early last year. Given the uncontroversial nature of these revisions, I urge my colleagues to support the amendment.

Last March the House passed H.R. 975 by an overwhelming bipartisan vote of 315 to 113. The administration has endorsed this legislation. The House has voted affirmatively on five separate occasions to pass this bill. Today we are reconsidering this bill in an attempt to reignite a stalled process. We must take action. America's bankruptcy system is, in fact, broken. It gets worse every day with more filings that break record after record, putting an enormous strain on the judiciary's resources. I have seen numbers that indicate the exponential growth to the number of bankruptcy filings.
I believe the increase in consumer bankruptcy filings will have adverse financial consequences for the American economy. In 1997 alone, more than $40 billion was discharged as a result of bankruptcy cases. This loss translates into a $400 annual tax on every household in our Nation in the form of higher prices and higher interest rates.

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

Mr. SCOTT of Virginia. Mr. Chairman, will the gentleman yield?

Mr. CANNON. I yield to the gentleman from Virginia.

Mr. SCOTT of Virginia. Mr. Chairman, if the gentleman from Utah (Mr. Cannon) suggested that what I said was not accurate, I ask what did I say that was not accurate?

Mr. CANNON. Mr. Chairman, reclaiming my time, what I would like to point out is if you look at the structure of the bill, this is not intended to keep people in slavery or economic servitude. It is intended to take money from those people who are gaming the system who have a large ability to earn income.

Mr. SCOTT of Virginia. If the gentleman would yield, I said that people who have $2 million in debt that could pay $10,000 of that debt that they obviously can never pay will not be able to get relief under this bill. Is that true?

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

Mr. SCOTT of Virginia. Mr. Chairman, I said that somebody who can pay off $10,000 but can never pay off the $2 million, are they denied relief under this bill?

Mr. CANNON. Mr. Chairman, if the gentleman will continue to yield, will they be able to pay off the $10,000?
Mr. SCOTT of Virginia. They can pay $10,000 on a $2 million debt. The fact is they can never pay off the debt. They will be denied relief under the bill. Is that right?

Mr. CANNON. If they can pay off $10,000? In other words, is it possible that someone who owes millions and millions of dollars in debt may be held responsible for $10,000? We would certainly hope so.

Mr. SCOTT of Virginia. Mr. Chairman, reclaiming my time, so that someone who owes $2 million in debt can pay $10,000 and can never pay it will be in economic slavery because every dime they make over food and rent will go into the fund to help pay the $10,000.

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

Mr. NADLER. 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.

Mr. CANNON. Mr. Chairman, will the gentleman yield?

Mr. NADLER. I yield to the gentleman from Utah.

Mr. CANNON. Mr. Chairman, it is my understanding of this bill that the court can impose a structured pay-out. And that is $10,000, and he can pay $10,000, then he is relieved under the bill.

Mr. SCOTT of Virginia. Mr. Chairman, if the gentleman will yield, so every dime that they make over food and rent goes into the fund to help pay the $10,000. If that is all they can pay, they have to pay that so they are down to food and rent for 5 years although they can only pay $10,000 on a $2 million debt. They cannot get relief from the $2 million under this bill. And the gentleman agrees with that.

Mr. CANNON. Mr. Chairman, I believe I understand the gentleman's question, and the point is that the person can get discharged in the course of bankruptcy including a payment, but that payment is not related to what his grocery bill is. It is related to what he can earn and presumably based upon the judgment and discretion of the court what should be paid in addition to a general discharge.

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

Mr. WATT. 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.

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Mr. WATT. 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.

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Mr. WATT. 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.

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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.

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