F. Sensenbrenner

Mr. SENSENBRENNER

Mr. SENSENBRENNER. Mr. Speaker, the motion to recommit creates a blanket exemption from the bill's needs-based test, and I do not think that that is necessary because it would exempt a wealthy debtor from the needs-based test solely based on the debtor's military service. People who fall behind the lines of the needs-based test will continue to have bankruptcy protection under chapter 7 as is provided in the current law. The bill also contains an exception from the needs-based test for disabled veterans who incurred indebtedness while on active duty. CRS and even the New York Times recognized that the Servicemembers Civil Relief Act of 2003 provides a broad spectrum of protection to servicemembers, their spouses and their dependents; and the revised statute, according to the New York Times, is clearer and more protective than the old one. The Times also recognized that the news was apparently slow in reaching those who would have to interpret and enforce the law, which apparently includes the people who are offering this motion to recommit. Let me summarize. Already there is in law, signed by President Bush in 2003, we have responded to the special financial burdens that members of the military may encounter. CRS has said the Servicemembers Civil Relief Act provides protection for servicemembers in the event their military service impedes their ability to meet financial obligations incurred before their entry into active military service, as well as during that service. There is a cap on the interest rates of 6 percent. It clarifies that the balance of interest for the period of the servicemember's military service is to be forgiven by the lender. There are protections against evictions from rental property or foreclosures on mortgaged property. There are restrictions on cancellation of life insurance and more flexible options to allow servicemembers on active duty to terminate residential and automobile leases. We do not need this motion to recommit. Congress has already passed a law that provides those types of protections. The motion to recommit should be defeated, and the bill should be passed. Mr. Speaker, I yield back the balance of my time.

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

Mr. SENSENBRENNER. Mr. Speaker, I yield myself the balance of my time. Mr. Speaker, one does not need to get a good grade in Economics 101 to realize that those who pay their bills as agreed end up having to pay for the cost of debts that are ripped off in bankruptcy. The number of bankruptcy filings has exploded. The number of proven instances of people gaming the system and using bankruptcy as a financial planning tool has gone up, and this bill stops those types of abuses. I would like to quote from page 4 of the committee report from testimony that was given by Professor Todd Zywicki, and he said, ``Like all other business expenses, when creditors are unable to collect debts because of bankruptcy, some of those losses are inevitably passed on to responsible Americans who live up to their financial obligations. Every phone bill, electric bill, mortgage, furniture purchase, medical bill and car loan contains an implicit bankruptcy tax that the rest of us pay to subsidize those who do not pay their bills. Exactly how much of these bankruptcy losses is passed on from lenders to consumer borrowers is unclear, but economics tell us that at least some of it is. We all pay for bankruptcy abuse in higher down payments, higher interest rates and higher costs for goods and services.'' The Credit Union National Association, which is a national organization of nonprofit credit unions that are owned by their members, said that, as of 2002, they lost over $3 billion from bankruptcies since Congress started its consideration of bankruptcy reform legislation in 1998; and CUNA estimates that over 40 percent of all credit union losses in 2004 will be bankruptcy related, and those losses will total approximately $900 million. Now the credit unions are not the big issuers of credit cards. They are owned by their members, and those members have to pay additional costs of the services of their own credit unions because of the huge write-offs that have been described in this report. Now if my friends on the other side of the aisle were so concerned about bankruptcy abuse and the fact that this bill does not deal with the problem, they could have spent the time drafting an amendment in the nature of a substitute. They were offered by the Committee on Rules and I requested the Committee on Rules to make such a substitute in order, but, no, all they want to do is criticize, attack and come up with no positive alternatives. If that is their position, then the bankruptcy tax that everybody realizes is passed on to people who pay their bills as agreed to is on their shoulders, because we are trying to stop the abuse. I have heard an awful lot about the homestead exemption. If this bill goes down, eight States and the District of Columbia will continue to have an unlimited homestead exemption where corporate crooks can hide their assets from bankruptcy in a homestead and, once they get their discharge, sell that mansion and go off on their merry way. They want to keep that. Our bill closes it. We have heard an awful lot about asset protection trusts that become the law in a number of States. Page 506 of the bill contains a new section on fraudulent transfers and obligations that says that anybody who creates one of these trusts within 10 years of the date of filing can have that transfer voided if such a transfer was made to a self- settled trust or similar device, such transfer was made by the debtor, the debtor is the beneficiary of the trust or similar device, and the debtor made the transfer with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date such transfer was made, indebted. Our bill closes those asset protection trusts. If the other side votes this bill down, they continue on and the blame for that is on their shoulders. We have heard an awful lot about medical bills. Well, the people who are complaining about medical bills put a tin ear on to the testimony that has been submitted in this extensive hearing record. The United States trustees program, independent people who administer the Bankruptcy Code, collected data and made findings on medical debt. They drew a random sample and, of 5,203 debtors, 54 percent listed no medical debt. Those that did, medical debt accounted for 5.5 percent of the total general unsecured debt; 90.1 percent reported medical debts of less than $5,000; 1 percent of the cases accounted for 36.5 percent of the medical debt; and less than 10 percent of all cases represented 80 percent of all reported medical debt. This is not the big problem that the people on the minority side have said it is. The data from the United States trustees proves this. Finally, we have heard about debt that has been run up by service people who are on active duty, whether it is the permanent active duty military service or Guard and Reserve members who have been called up to active duty. In the last Congress, the Congress enacted the Servicemembers Civil Relief Act, Public Law 108-189, which gives protection to people on active duty from collection of these debts by those that they have become indebted to, and this law puts a cap on interest at an annual rate of 6 percent on debts incurred prior to a person's entry into active military duty service. Mr. Speaker, this is a good bill. It is not a perfect bill. It is a good bill, but it plugs a lot of loopholes that abuse has been generated under, and it does provide protection for medical debts and to our service people. Let us not listen to the inaccurate statements that have been made by people who have been opposed to bankruptcy reform beginning 8 years ago, long before the military actions in Iraq and Afghanistan. Let us give some protection to the people who pay their bills that they have agreed to from the hidden bankruptcy tax, and the way we do that is by passing this legislation.

Mr. SENSENBRENNER

Mr. SENSENBRENNER. Mr. Speaker, I yield 3 minutes to the gentleman from Utah (Mr. Cannon), the chairman of the Subcommittee on Commercial and Administrative Law.

Mr. SENSENBRENNER. Mr. Speaker, I reserve the balance of my time.

Mr. SENSENBRENNER. Mr. Speaker, I yield by myself such time as I may consume. Mr. Speaker, I rise in support of S. 256, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. This legislation consists of a comprehensive package of reform measures pertaining to consumer and business bankruptcy cases. The current system has created a set of incentives that encourage opportunistic personal filings and the abuse of a bankruptcy system originally intended to strike a delicate balance between debtor and creditor rights. These abuses ultimately hurt debtors as well as creditors, consumers as well as businesses, suppliers as well as purchasers. The only winners in the current bankruptcy system are those who game the system for personal gain. S. 256 restores personal responsibility and integrity to the bankruptcy system and ensures that the system is fair to both debtors and creditors. This legislation represents the most comprehensive reform of the bankruptcy system in more than 25 years. As many of us know, bankruptcy reform has been subject to exhaustive congressional review for more than a decade, beginning with the establishment of a National Bankruptcy Review Commission in 1994. It is important to note that over the course of the last four Congresses, the House has passed bankruptcy reform on eight separate occasions by overwhelming and bipartisan margins. This bill will help stop fraudulent, abusive, and opportunistic bankruptcy claims by closing various loopholes and incentives that have produced steadily cascading claims. Central to these reforms is a merit-based test that reflects the commonsense proposition that those who are capable of repaying their debts after seeking bankruptcy relief must actually repay their debts. S. 256 will also give the courts greater powers to dismiss abusive bankruptcy cases and to punish attorneys who encourage their clients to file such claims. In addition, the bill prevents violent criminals or drug traffickers from using bankruptcy relief to evade their creditors. The bill closes the ``millionaire's mansion'' loophole in the current bankruptcy code that permits corporate criminals to shield their multi- million dollar homesteads from deserving creditors. Of critical importance, the legislation prevents deadbeat parents from abusing the bankruptcy system to shirk their child support obligations. With respect to these reforms, the National Child Support Enforcement Association stated that S. 256 is ``crucial to the collection of child support during bankruptcy.'' Some might ask why Congress has been so concerned about abuse in the bankruptcy system. The answer to this question should be obvious. It is estimated that every American household bears an annual $400 hidden tax for profligate and abusive bankruptcy filings. That is a $400 tax on every household that no politician has to vote for, but gets paid anyhow. As a result, every abusive bankruptcy filing impacts hard-working Americans in the form of higher interest rates and increased costs of goods and service. Our economy and the hard-working Americans who sustain it should not suffer any longer from the billions of dollars in losses associated with abusive bankruptcy filings. Mr. Speaker, this legislation not only deals with abuse in the bankruptcy system; it includes many vital consumer protections as well. S. 256 will provide the tools to crack down on bankruptcy petition mills, which often misrepresent the benefits and risks of bankruptcy relief. It will impose heightened standards of professional responsibility for attorneys who represent debtors. It will require certain credit card solicitations, monthly billing statements, and related materials to include important disclosures and explanatory statements on a broad range of credit terms and conditions, including introductory interest rates and minimum payments. The bill also helps America's family farmers and fishermen confronting economic hard times by providing more tools to assist in their bankruptcy reorganization. The bill includes protections for medical patients in bankruptcy health care facilities and pro-privacy provisions that protect against the unwanted disclosure of personal information. There are several other critical reforms contained in this comprehensive legislation, but the limits of time prevent an exhaustive recitation. Mr. Speaker, the time for bankruptcy reform is long overdue. Bankruptcy reform legislation has been subject to more process, more consideration, more deliberation, more debate, and more voting than virtually any other legislative item in the past decade. We have before us legislation that represents the culmination of a decade of legislative toil and persistence. It is the product of extensive bicameral and bipartisan compromise and was approved by the other body by a vote of 74 to 25. We also have before us a historic opportunity to return a measure of fairness and accountability to the bankruptcy system in a manner that will curb bankruptcy abuse while rewarding the vast majority of hard- working Americans who play by the rules and pay their bills as agreed upon. Mr. Speaker, I urge my colleagues to seize this opportunity to join me in supporting this legislation. Mr. Speaker, before closing, I include for the Record a supplemental statement acknowledging the hard work of many Members and staff who have helped make this legislation possible, as well as a summary of the principal provisions of this bill. Mr. Speaker, over the many years this legislation has been pending in the Congress, many Members, Senators, and staff members have devoted themselves to making S. 256 a reality. I would like to take this opportunity to recognize these individuals. Beginning with my colleagues in the House, I would like to mention the many contributions of the Chairman of the Subcommittee on Commercial and Administrative Law (Mr. Cannon) for his hard work on behalf of this legislation. The Chairman of the Financial Services Committee (Mr. Oxley) has also been a great resource. I also appreciate the contributions of my colleagues on the other side of the aisle, the Ranking Member of the Judiciary Committee (Mr. Conyers) and the gentleman from Virginia (Mr. Boucher). Former Members should also be recognized for their contributions. Bill McCollum is to be commended for being the first to introduce comprehensive bankruptcy reform and George Gekas deserves our gratitude for his tireless efforts. In addition, I would like to mention the following staff on the Judiciary Committee for their contributions: Phil Kiko, Majority Committee General Counsel and Chief of Staff; Rob Tracci, Chief Legislative Counsel and Parliamentarian; Raymond Smietanka, Chief Counsel, Subcommittee on Commercial and Administrative Law; Perry Apelbaum; David Lachmann; Matt Iandoli, Legislative Director for Representative Cannon; Todd Thorpe, Chief of Staff for Representative Cannon; Laura Vaught, Deputy Chief of Staff for Representative Boucher; Jean Harmann, House Legislative Counsel and Dina Ellis, Counsel for the House Financial Services Committee. Former staffers who should also be recognized, include Will Moschella, Joe Rubin, Alan Cagnoli, and Liz Trainer. The vital and indispensable efforts of one staff member have uniquely contributed to the bankruptcy reform legislation we consider today. From her service as general counsel on the congressionally-created National Bankruptcy Review Commission to her often behind the scenes work on bankruptcy reform legislation extending to the 105th Congress, Susan Jensen, counsel to the Judiciary Subcommittee on Commercial and Administrative Law, deserves special recognition. Her technical expertise in a complex area of law has resulted in dramatic improvements in successive drafts of bankruptcy reform legislation and helped establish a record of legislative history that elucidates the legislation we consider today. Her professionalism, attention to detail, and commitment to serving the House of Representatives deserves the recognition and commendation of this House. I would also like to acknowledge the countless contributions of our colleagues in the other body. These include Senators Grassley, Hatch, Sessions, Specter, Biden and Leahy. This legislation has also benefitted from the hard work and devoted assistance of numerous Senate staff members. These include, Rita Lari, counsel for Senator Grassley, who has been a wonderful resource for our staff. In addition, the following individuals must also be acknowledged: Harold Kim and Tim Strachan, counsels for Senator Specter; Perry Barber, Rene Augustine, and former staffer Makan Delrahim, counsels for Senator Hatch; and Ed Pagano, Chief of Staff for Senator Leahy. Summary of Principal Provisions of S. 256, ``The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005''

Mr. SENSENBRENNER. Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks and include extraneous material on S. 256.

Mr. SENSENBRENNER. Mr. Speaker, I yield 2 minutes to the gentleman from Virginia (Mr. Goodlatte). (Mr. GOODLATTE asked and was given permission to revise and extend his remarks.)

Mr. SENSENBRENNER. Mr. Speaker, pursuant to House Resolution 211, I call up the Senate bill (S. 256) to amend title 11 of the United States Code, and for other purposes, and ask for its immediate consideration in the House.

Mr. SENSENBRENNER. Mr. Speaker, I yield 2 minutes to the gentlewoman from Illinois (Mrs. Biggert).

Mr. SENSENBRENNER. Mr. Speaker, I reserve the balance of my time.

Mr. SENSENBRENNER. Mr. Speaker, I reserve the balance of my time.

Mr. SENSENBRENNER. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman from Delaware (Mr. Castle).

Mr. SENSENBRENNER. Mr. Speaker, if the gentleman will yield, just me at the present time.

Mr. SENSENBRENNER. Mr. Speaker, I yield 2 minutes to the gentleman from Virginia (Mr. Boucher) to show that this is truly a bipartisan effort. (Mr. BOUCHER asked and was given permission to revise and extend his remarks.)

Mr. SENSENBRENNER. Mr. Speaker, I yield myself 1 minute. Mr. Speaker, unfortunately what the gentlewoman from California (Ms. Zoe Lofgren) said is not correct. There is a means test that is contained in this bill, but 11 United States Code, section 1307 which permits the conversion of a chapter 13 case to a chapter 7 case is not amended at all in any respect. I would just like to read 11 U.S.C. 1307(a): ``A debtor may convert a case under this chapter to a case under chapter 7 of this title at any time. Any waiver of the right to convert under this subsection is unenforceable.'' So if chapter 13 is such a straight jacket, the way out is through the conversion as provided for in section 1307. Mr. Speaker, I yield 4 minutes to the gentleman from Ohio (Mr. Chabot).

Mr. SENSENBRENNER

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

Mr. SENSENBRENNER. Mr. Speaker, I move to table the resolution.

Mr. SENSENBRENNER

Mr. SENSENBRENNER. Mr. Speaker, I recall yesterday when the death tax repeal was on the floor. It was a similar rule, and the minority was offered a chance to offer a substitute. They offered a substitute which was voted on and debated in the House of Representatives. But that rule passed by voice vote. So the rule under which we considered the death tax repeal yesterday is the same type of rule that we are considering today, except that the minority on this bill decided not to offer a constructive alternative substitute.

Mr. SENSENBRENNER. Mr. Speaker, will the gentleman yield?

Mr. SENSENBRENNER. Mr. Speaker, I withdraw for now the motion to table.

Mr. SENSENBRENNER. Parliamentary inquiry, Mr. Speaker. Is the material asked to be inserted covered under the General Leave that was requested at the beginning of the debate by the gentleman from Georgia (Mr. Gingrey)?

Mr. SENSENBRENNER. Mr. Speaker, I move to table the appeal.

Mr. SENSENBRENNER. Mr. Speaker, I would like to lay to rest the fact that we have not had a full and complete debate on this. This year, on March 16, the Committee on the Judiciary had a full markup on this bill. Anybody who wished to offer amendments was allowed to do so. Our committee publishes the complete transcript of markups as a part of the committee report. This transcript goes on for 160 pages in the committee report, which shows that everybody had an opportunity to speak their peace. There were 23 amendments that were offered, and all of them were voted down by overwhelming margins. Now, amending this bill is what the people who wish no bankruptcy reform have in mind because they know the other body has had difficulty in finding time to debate this bill and vote cloture. The gentlewoman from New York (Ms. Slaughter), whom I greatly respect, has voted against this bill every time it has come up when she has cast a vote in a rollcall. Much of the complaints we are going to be hearing are coming from Members who wish to sink this bill through amendments. They have never supported it in the past. They are against it even if it were amended, and that is why the rule is the way it is.

Mr. SENSENBRENNER. Mr. Speaker, I thank the gentleman from Georgia for yielding me time. I rise in support of the rule for consideration of S. 256, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. This bill consists of a comprehensive package of reform measures that will improve bankruptcy law and practice by restoring personal responsibility and integrity to the bankruptcy system. It will also ensure that the system is fair for both debtors and creditors. As we now consider this rule, and the legislation later today, I believe it is particularly important to keep in mind bankruptcy reform's extensive deliberative history before the Committee on Rules, the Committee on the Judiciary, and both bodies of Congress, which I would like to briefly summarize. First, the bill represents the culmination of nearly 8 years of intense and detailed congressional consideration. The House, for example, has passed prior iterations of this legislation on eight separate occasions. Likewise, the other body has repeatedly registered its strong support for bankruptcy reform. Just last month, the bill passed there 74 to 25, marking the fifth time that body has overwhelmingly adopted bankruptcy reform legislation since 1998. Second, S. 256 has benefited immensely from an extensive hearing and amendment process, as well as meaningful bipartisan and bicameral negotiations. Over the past four Congresses, the Committee on the Judiciary has held 18 hearings on the need for bankruptcy reform, 11 of which focused on S. 256's predecessors. The Senate Judiciary Committee likewise has held 11 hearings on bankruptcy reform, including a hearing held earlier this year. In the 105th Congress, 4 days were devoted to the Committee on the Judiciary's markup of bankruptcy reform legislation. In the 106th Congress alone, the Committee on the Judiciary entertained 59 amendments over the course of a 5-day markup on bankruptcy reform legislation, which included 29 recorded votes. On the floor, 11 more amendments were considered. In the 107th Congress, the Committee on the Judiciary considered 18 amendments during the course of its markup of bankruptcy reform legislation, and the House, thereafter, considered five amendments. In the last Congress, the Committee on the Judiciary entertained nine amendments to the bill, and five amendments were considered on the House floor. Also in the last Congress, the Committee on Rules made two amendments in order in connection with a similar bill, addressing bankruptcy reform, which was considered on the floor. Last month, the Committee on the Judiciary entertained 23 more amendments, each of which has been soundly defeated. Mr. Speaker, I have over here the paper record of the House consideration of bankruptcy reform legislation over the last four Congresses. Here's the committee report on this bill, over 500 pages long. We have a copy of the House version of the bill, which is over 500 pages long. We have the committee report from 2003. We have a conference report from the 107th Congress. We have a committee report from the 107th Congress. We have a committee report from the 106th Congress. We have a committee report earlier in the 106th Congress, one from the 105th Congress, and then we have a committee report from the 105th Congress on the House side. All of these are debates in the Congressional Record when this bill has come up, and we have had conference reports filed, amendments filed, original bills filed. There has been plenty of process on this legislation. The time to pass it is now, and that is why this rule is coming up in the way it is structured the way it is. Mr. Speaker, I thank the gentleman for yielding again for the time. Mr. Speaker, I rise in support of this rule for consideration of S. 256, the ``Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.'' S. 256 consists of a comprehensive package of reform measures that will improve bankruptcy law and practice by restoring personal responsibility and integrity to the bankruptcy system. It will also ensure that the system is fair for both debtors and creditors. As we now consider this rule, and the legislation later today, I believe it is particularly important to keep in mind bankruptcy reform's extensive deliberative history before the Rules Committee, the Judiciary Committee, and both bodies of Congress, which I would like to briefly summarize for you. First, S. 256 represents the culmination of nearly 8 years of intense and detailed congressional consideration. The House, for example, has passed prior iterations of this legislation on eight separate occasions. Likewise, the other body has repeatedly registered its strong support for bankruptcy reform. Just last month, they passed S. 256 by a vote of 74 to 25, making the fifth time that body has overwhelmingly adopted bankruptcy reform legislation since 1998. Second, S. 256 has benefitted immensely from an exhaustive hearing and amendment process as well as meaningful bipartisan, bicameral negotiations. Over the past four Congresses, the Judiciary Committee held 18 hearings on the need for bankruptcy reform, 11 of which focused on S. 256's predecessors. The Senate Judiciary Committee, likewise, has held 11 hearings on bankruptcy reform, including a hearing held earlier this year. In the 105th Congress, 4 days were devoted to the Judiciary Committee's mark up of bankruptcy reform legislation. In the 106th Congress alone, the Judiciary Committee entertained 59 amendments over the course of a 5-day markup of bankruptcy reform legislation, which included 29 recorded votes. On the floor, 11 more amendments were considered. In the 107th Congress, the Judiciary Committee considered 18 amendments during the course of its markup of bankruptcy reform legislation, and the House, thereafter, considered five amendments. In the last Congress, the Judiciary Committee entertained nine amendments to the bankruptcy legislation and 5 amendments were considered on the House floor. Also in the last Congress, the Rules Committee made two amendments in order in connection with a similar bill, addressing bankruptcy reform, which was considered on the floor. Last month, the Judiciary Committee entertained 23 more amendments, each of which was soundly defeated. Third, it must be remembered that S. 256 is a result of extensive bipartisan and bicameral negotiation and compromise. For example, conferees during the 106th Congress spent nearly 7 months engaged in an informal conference to reconcile differences between the House and Senate passed versions of bankruptcy reform legislation. In the 107th Congress, conferees formally met on three occasions and ultimately agreed--after an 11-month period of negotiations--to a bipartisan conference report. The legislation before us today represents a delicate balance and various compromises that have been struck over the past 7 years. Fourth, and perhaps most importantly, the need for bankruptcy reform is long-overdue and should not be further delayed. Every day that passes by without these reforms, more abuse and fraud goes undetected. Mr. Speaker, there simply is no reason to further amend this legislation given its uniquely extensive deliberative record. Those who come to the floor today and complain about lack of process or the need to further refine this legislation--simply oppose bankruptcy reform. Accordingly, I believe this rule is appropriate, and urge Members to support it.