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Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

Location: Washington, DC



Mr. OBAMA. Thank you, Mr. President.

I have come to the floor today to briefly address the pending legislation. This issue forces us to face a fundamental question about who we are as a country, how we progress as a society, where our values lie as a people, how do we treat our fellow Americans who have fallen on hard times, and what is our responsibility to cushion those falls when they occur. We do so not only out of compassion for others but also knowing that hard times might at any moment fall on ourselves.

The proponents of this bill claim it is designed to curb the worst abuses of our bankruptcy system. I think that is a worthy goal shared by all those in this Chamber, and we can all agree that bankruptcy was never meant to serve as a ``get out of jail free'' card for use when you foolishly gamble away all your savings and don't feel like taking responsibility for your actions.

But to accomplish that, this bill would take us from a system where judges weed out the abusers from the honest to a system where all the honest are presumed to be abusers, where declaring chapter 7 bankruptcy is made prohibitively expensive for people who have already suffered financial devastation.

With this bill, it doesn't matter if you run up your debt on a trip to Vegas or a trip to the emergency room; you are still treated the same under the law. You still face the possibility that you will never get a chance to start over.

It would be one thing if most people were abusing the system and falling into bankruptcy because they were irresponsible with their finances. I think we need more responsibility with our finances in our society as well as from our Government. But we know that for the most part bankruptcies are caused as a result of bad luck.

We know from a recent study, which was mentioned by the distinguished Senator from Massachusetts, that nearly half of all bankruptcies occur because of an illness that ends up sticking families with medical bills they can't keep up with.

Let me give you as a particular example the case of Suzanne Gibbons, a constituent of mine. A few years back, Suzanne had a good job as a nurse, and a home on Chicago's northwest side. Then she suffered a stroke that left her hospitalized for 5 days. Even though she had health insurance through her job, it only covered $4,000 of the $53,000 in hospital bills. As a consequence of that illness, she was soon forced to leave her full-time nursing job and take a temporary job that paid less and didn't offer health insurance. Then the collection agencies started coming after her for her hospital bills that she couldn't keep up with. She lost her retirement savings, she lost her house, and eventually she was forced to declare bankruptcy. If this bill passes as written without amendment, Suzanne will be treated by the law the same as any scam artist who cheats the system. The decision about whether she can file for chapter 7 bankruptcy would not account for the fact that she fell into financial despair because of her illness.

With all that debt, she would have to hire a lawyer and pay hundreds of dollars more in increased paperwork. After all that, she still might be told she is ineligible for chapter 7 bankruptcy.

As much as we like to believe that the face of this bankruptcy crisis is credit card addicts who spend their way into debt, the truth is it is the face of people such as Suzanne Gibbons. It is the face of middle-class Americans.

Over the last 30 years, bankruptcies have gone up 400 percent. We have had 2,100 more in Illinois this year. We also know what else has gone up: the cost of childcare, the cost of college, the cost of home ownership, and the cost of health care which is now at record highs. People are working harder and longer for less, and they are falling farther and farther behind.

We are not talking about only the poor or even the working poor here. These are middle-class families with two parents who both work at good-paying jobs that put a roof over their heads. They are saving every extra penny they have so their children can go to college and do better than they did. But with just one illness, one emergency, one divorce, these dreams are wiped away.

This bill does a great job helping the credit card industry recover profits they are losing, but what are we doing to help middle-class families to recover the dreams they are losing?

The bankruptcy crisis this bill should address is not only the one facing credit card companies that are currently enjoying record profits. We have to look after those hard-working families who are dealing with record hardships. As Senator Dodd, Senator Feinstein, and others have pointed out, this bill also fails to deal with the aggressive marketing practices and hidden fees credit card companies have used to raise their profits and our debt. Charging a penalty to consumers who make a late payment on a completely unrelated credit card is but one example of these tactics. We need to end these practices so that we are making life easier not only for the credit card companies but for honest, hard-working, middle-class families.

If we are going to crack down on bankruptcy abuse, which we should, we should also make it clear we intend to hold the wealthy and the powerful accountable as well.

One example: In my own State, we had a mining company by the name of Horizon that recently declared bankruptcy and then refused to pay its employees the health benefits it owed them. A Federal bankruptcy judge upheld the right of Horizon to vacate the obligations it had made to its workers. The mine workers involved had provided a total of 100,000 years of service and dedication and sacrifice to this company. They had spent their entire lives working hard. They had deferred part of their salaries because there was an assurance that health care would be available for them. These are men and women with black lung disease, with bad backs, with bad necks, and the company made a decision to go back on their promise, saying we will not pay the debt we owe these workers. And a Federal bankruptcy judge said that is OK, you are permitted to do that.

These same workers now are going to have a tough time as a consequence of this bill filing for bankruptcy. The irony should not be lost on this Chamber. It is wrong that a bill would make it harder for those unemployed workers to declare bankruptcy while doing nothing to prevent the bankrupt company that puts them in financial hardship in the first place from shirking its responsibilities entirely.

Mr. KENNEDY. Mr. President, will the Senator yield on that point?

Mr. OBAMA. I yield.

Mr. KENNEDY. As I understand it, these workers had health insurance that would have protected them as a result of illness and sickness. They had it probably for themselves and their families. What the Senator is saying is obviously in most of these circumstances when they had health insurance, they sacrificed wage increases and other kinds of benefits in order to get that health insurance. As I listened to the Senator, I heard that many of these workers have worked for lifetimes for this company. Now, as a result of the company going into bankruptcy, these workers effectively lost their health care coverage. I imagine a number of them may have some illness, perhaps some health care needs, probably an older population, and the cost to them to replace that kind of family coverage would be rather dramatic.

Mr. OBAMA. It would be prohibitive.

Mr. KENNEDY. Particularly if they are out of work.

What we are talking about here is, if they run into illness and sickness under the existing bankruptcy laws, they have a chance to be able to measure their assets and their creditors to be able to at least go on to another day. They may pay a fearsome price in terms of their own lives, but under the circumstances of the bill as proposed, they would be treated even more harshly.

As I listened to the Senator, he was talking about a rough sense of equity in terms of legislation that we ought to be considering here in the Senate.

Mr. OBAMA. That is an accurate assessment by the distinguished Senator from Massachusetts. I appreciate that amplification.

The central point is, what kind of message does it send when we tell hard-working, middle-class Americans, you have to be more responsible with your finances than the companies you work for? They are allowed to be irresponsible with their finances and we give them a pass when they have bad management decisions, but you do not have a pass when confronting difficulties outside of your control.

We need to reform our Bankruptcy Code so corporations keep their promises and meet their obligations to their workers. I remain hopeful our companies want to do the right thing for workers. Doing so should not be a choice, it should be a mandate.

Senator Rockefeller and I have proposed two amendments to ensure this. I strongly urge my colleagues' support. One will increase the required payments of wages and employee benefit plans to $15,000 per individual from the current level of $4,925. It requires companies that emerge from bankruptcy to immediately pay each retiree who lost health benefits an amount of cash equal to what a retiree would be expected to have to pay for COBRA coverage for 18 months.

The second amendment prevents bankruptcy courts from dismissing companies' Coal Act obligations to pay their workers the benefits they were promised. These companies made a deal to their mine workers. They should be forced to honor that deal. That will be an amendment that hopefully will be added to the pending bill.

This bill gives a rare chance to ask ourselves who we are here to protect, for whom we are here to stand up, for whom we are here to speak. We have to curb bankruptcy abuse and demand a measure of personal responsibility from all people. We all want that. We also want to make sure we are helping middle-class families who are loving their children and doing anything they can to give them the best possible life ahead.

To wrap up, in the 10 minutes I have been speaking, about 30 of those middle class families have had to file for bankruptcy. We live in a rapidly changing world, with an economy that is moving just as fast. We cannot always control this. We cannot promise the changes will always leave everyone better off. But we can do better than 1 bankruptcy every 19 seconds. We can do better than forcing people to choose between the cost of health care and the cost of college. We can do better than big corporations using bankruptcy laws to deny health care and benefits to their employees. And we can give people the basic tools and protections they need to believe that in America your circumstances are no limit to the success you can achieve and the dreams you may fulfill.

While, unfortunately, I cannot support this bill the way it is currently written, I do look forward to working with my colleagues in amending this bill so we can still keep the promise alive.

Mr. KENNEDY. Will the Senator yield for one more question?

Mr. OBAMA. I yield.

Mr. KENNEDY. As I listened carefully to the excellent presentation of the Senator from Illinois on this legislation, this legislation has been presented as though it is for going after spendthrifts, individuals who abuse the credit system, who go out and live life high on the hog, go to the malls, buy the expensive clothes and charge it up. These individuals should not be let off scot-free. I gather from remarks of the Senator from Illinois he agrees with me, that we want accountability for those individuals.

Legislation that ought to be targeted toward those individuals and corrected with a hammer is addressed with a cannon, picking on the working families in its path who face bankrupcy through no fault of their own, as a result of the explosion of health care costs, the explosion of housing costs, explosion of tuition cost, the outsourcing of jobs, the increase in part-time jobs, and the issue of a growing older population which has a greater proclivity toward serious illness and disease such as cancer and stroke, and increasing numbers of individuals who are virtually cast adrift by major companies such as Enron, WorldCom, and Polaroid, and the company from Illinois the Senator has mentioned. The sweep of this legislation is going to be unduly harsh on a lot of hard-working, middle-income families playing by the rules, struggling for their families. They will be treated unjustly.

Mr. OBAMA. That is an accurate statement by the distinguished Senator from Massachusetts. He characterizes it correctly.

I add that all the statistics I have seen indicate one of the fastest growing segments engaged in bankruptcy is senior citizens who I don't think are any different than they were back in the day when we think people were more responsible and more thrifty. I think they are still thrifty and responsible. What has happened is they are experiencing extremely tough times partly because they are having difficulty paying for prescription medicines that are not covered under Medicaid.

Mr. KENNEDY. If the Senator will yield further, the Senator mentions the number of bankruptcies for our senior citizens has tripled in the last 10 years. The average income for those over 65 is $24,000. These are not great populations of free-spending people ringing up large expenses at the mall.

Shouldn't we take a look at the impact of the legislation before the Senate and the impact it will have on our population?

I commend the Senator for bringing this very important fact to the attention of the Senate. We have three times the number of bankruptcies now for our senior citizens. These are not the spendthrifts. Are those the people we are trying to catch with punitive measures in this bankruptcy legislation? I don't think so.

The Senator made a strong point. I thank him.


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