[Pages S2142-S2152]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

BANKRUPTCY REFORM ACT OF 2001

The PRESIDING OFFICER. Under the previous order, the Senate will now
resume consideration of S. 420, which the clerk will report.
The assistant legislative clerk read as follows:

A bill (S. 420) to amend title 11, United States Code, and
for other purposes.

Pending:

Schumer amendment No. 25, to ensure that the bankruptcy
code is not used to exacerbate the effects of certain illegal
predatory lending practices.
Feinstein amendment No. 27, to place a $2,500 cap on any
credit card issued to a minor, unless the minor submits an
application with the signature of his parents or guardian
indicating joint liability for debt or the minor submits
financial information indicating an independent means or an
ability to repay the debt that the card accrues.
Leahy amendment No. 20, to resolve an ambiguity relating to
the definition of current monthly income.
Conrad modified amendment No. 29, to establish an off-
budget lockbox to strengthen Social Security and Medicare.
Sessions amendment No. 32, to establish a procedure to
safeguard the surpluses of the Social Security and Medicare
hospital insurance trust funds.

Mr. WELLSTONE. Madam President, I will summarize these amendments
before we get into whatever debate might take place. I say to the
Senator from Iowa, as he looks over the amendments, one of the
amendments I am hoping will meet with his approval. Let me explain them
very quickly and then go into the payday loan amendment.
The first amendment is protecting the legal rights of retirees of
bankrupt companies. This amendment simply clarifies companies in
bankruptcy must fulfill their legal obligations as plan administrators
and plan sponsors of employee and retirement benefit plans. I think
Senator Sessions has some interest in this amendment, as well.
Companies occasionally stop administering benefit programs during
bankruptcy. This means retiree benefit plans are left without anybody
in charge, which results in the failure to pay out benefits to workers
such as reimbursements for covered health care costs. This often occurs
toward the end of bankruptcy, either a 7 or 11, when there is not much
left of the business. The company's management and bankruptcy trustees
are trying to wind up the business, and the benefit programs quite
often end up falling between the cracks.
I have a specific situation in Minnesota but I know Senator Sessions
and others can talk about this in their own States. In Minnesota, LTV
Corporation shut down and 1,300 people are out of work. People have no
jobs. They are out of work. Those out of work, the younger workers, are
terrified they will lose their health care coverage in 6 months. Those
who worked longer will lose coverage within a year. But the retirees
are terrified they will not have their health care benefits any longer
after the bankruptcy proceeding. The persons ordinarily responsible for
the management of the benefits programs may have been laid off and
those who remained refuse to administer the plan. This can happen.
Or it may be a ``lights out bankruptcy'' where the power is shut off,
the doors are locked, and all functions of the company cease. However,
even in these cases, the firm is required to either terminate any
benefit plans or to continue to administer them.
This is what our amendment does. We don't impose any new burdens on
the companies. The companies are already required by law to continue to
administer the plans that have not been terminated or to administer
plans that are part of the trust. This amendment simply results in
companies fulfilling their current legal obligations without any
expensive litigation on the part of the workers. We are just trying to
codify this into law.
Let me talk about how this helps LTV workers and retirees. Health
care and other benefits for retirees at LTV are guaranteed by a trust
fund known as the Voluntary Employee Benefit Association Trust Fund,
also referred to as the VEBA trust funds. The trust cannot be wiped out
even if LTV is liquidated in bankruptcy, but LTV must administer the
VEBA for workers to get any of the benefits and guarantees. We have no
reason to believe as of now that LTV will not fulfill its obligation to
administer the VEBA. This amendment simply provides added assurance in
case the worst happens. So it is an important amendment for a lot of
retirees who are worried that somehow through the bankruptcy processes
companies are not going to provide them with their retiree benefits.
I will give a real-world example of the worst case scenario. In
August of 2000, Gulf States Steel in Alabama locked its doors after
failing to conclude a chapter 11 reorganization. Over 1,000
steelworkers immediately, and with little warning, lost their jobs. The
union had ordered a VEBA trust as part of the workers' contract. That
trust, made up of employee contributions, is intended to cover the
costs of retiree health plans under just this scenario.
Gulf States still refuse to administer the trust so the assets and
income are not being used to cover the workers' health care costs.
Since September of last year, Gulf States retirees have effectively
had no health care coverage because they cannot access the resources of
their own VEBA.
Absent the changes made in the bankruptcy law by this amendment, the
union will be forced to file an expensive and lengthy lawsuit to force
the company to comply with the law. The lawsuit could take months--for
all I know, it could take years --to resolve and will do little to
address the immediate needs of the retirees. Again, as the several
examples I have given indicate, I think this is almost a fix.
I am hopeful there will be support for this amendment. It is
certainly the right thing to do. It is one of several amendments I want
to lay down.
The second amendment is the payday loan amendment. I assume since we
are talking about this today that there

[[Page S2143]]

may be some time to talk about it. This is an amendment to protect the
legal rights of retirees of bankrupt companies which I hope fits in
with my colleague's definition of reform.
The second amendment I propose is an amendment that almost passed
last Congress. I hope it will pass this time. It will curb a form of
predatory lending which targets low- and moderate-income families.
I apologize for having to read. Usually I don't do that. But I am not
a lawyer. I find some of these proposals and some of the language of
bankruptcy to be technical and not all that easy.
This amendment would prevent claims in bankruptcy on high-cost credit
transactions in which the annual interest rate exceeds 100 percent.
I know my colleague from Iowa doesn't much like the payday loan
amendment. I know that. I have heard him speak about it. That is what I
am talking about, these payday loans and car title pawns.
Payday loans are intended to extend small amounts of credit--
typically $100-500--for an extremely short period of time--usually a
week to two weeks. The loans are marketed as giving the borrower ``a
little extra till payday,'' hence the term payday loan. The loans work
like this: the borrower writes a check for the loan amount plus a fee.
The lender agrees to hold the check until an agreed upon date and give
the borrower the cash. On the due date, the lender either cashes the
check or allows the borrower to extend the loan by writing a new check
for the loan amount plus an additional fee. But calculated on an annual
basis, these fees are exorbitant. For example, a $15 fee on a two week
loan of $100 is an annual interest rate of $391 percent. Rates as high
as 2000 percent per year have been reported on these loans.
I am just saying I don't think that crowd ought to have claims under
bankruptcy that are resolved for these high-cost transactions with the
kind of exorbitant and outrageous interest they can charge.
Car title pawns are one month loans secured by the title to vehicles
owned by the borrower. Typical title pawns cost 300 percent interest.
Consumers who miss payments have their cars repossessed. In some
States, consumers do not receive the proceeds from the sale of
repossessed vehicles--even if the value of the car far exceeds the
amount of the loan! For example, a borrower might put up their $2000
car as collateral for a $100 car title loan--at an outrageous interest
rate--and if the borrower defaults, the lender can take the car, sell
it, and keep the full $2,000 without returning the excess value back to
the borrower. Such schemes are almost more lucrative if the borrower
does default! Often, the borrower is required to leave a set of keys to
the car with the lender, and if the borrower is even one day late with
a payment he might look out the window and find the car gone.
I don't think these kind of lenders ought to be given special
treatment. Nobody needs to charge this type of interest rate for a
loan. Indeed, this industry is grossly profitable as a result. An
investors report by Stephens Incorporated on the industry stated that
an operator of a payday lending establishment could expect a return on
investment of 48 percent in nine months to a year and could expect
profit margins to be in excess of 30 percent! As a result, the payday
loan industry has exploded in growth in states with favorable
regulatory systems and many more states have changed their laws to
allow this type of lending. California has seen 1,600 payday loan store
fronts spring up since the legislature made the business legal in 1997.
Wisconsin went from 17 store fronts in 1995 to 183 in early 1999.
Stephens Inc. reported that there were 6,000 storefronts making payday
loans in 1999 across the country, but estimates the potential
``mature'' market as being 24,000 stores nationwide generating $6
billion in fees. With these kinds of profits, only your conscience will
keep you out of this business.
I say to my colleague, these sleazy debt merchants expanding their
tentacles into our cities and towns is the mirror image of the retreat
of mainstream financial institutions from these same communities.
Poor people are forced to get their loans from these loan sharks. As
banks merge and close branches, their former customers--often unable to
access the new, consolidated locations--have little choice but to deal
with the seamy underbelly of the financial services industry.
That is what I am talking about. And the Stephens report notes, that
even with the market saturated, lenders need not expect losses in
profits which is further evidence that the payday lender truly has a
captive customer base who has little market power to drive prices down.
We are talking about the exploitation of vulnerable citizens and poor
people who are charged outrageous interest rates, and we should do
something about it.
This was a close vote last time. I expect to win the vote on this
amendment this time.
The worst part is that many borrowers are unable to pay the loan when
it comes due. They then extend the loan, for another fee and then
extend it again. Often such borrowers may end up carrying several
payday loans and rolling them over from week to week as the fees
skyrocket. Additionally, there is a perverse incentive for the lender
to encourage the borrower to defer payment on the loan, because of the
additional fee that the lender can charge for deferring the loan for
another week or two weeks. It is fine for these unscrupulous loan
sharks to extend the loan. According to an analysis by brokerage firm
Piper Jaffrey as reported in the Washington Post, ``established
customers'' of one payday lender engage in 11 transactions per year and
could end up paying $165 to $330 for a $100 loan.
The following from the June 18, 1999 New York Times is typical of the
horror stories associated with payday lending, quote:

Shari Harris who earns around $25,000 a year as an
information security analyst, was managing money well enough
until the father of her two children, 10 and 4, stopped
paying $1,200 in child support. ``And then,'' Ms. Harris
said, ``I learned about the payday loan places.'' She
qualified immediately for a two-week $150 loan at Check Into
Cash, handing it a check for $183 to include the $33 fee. ``I
started maneuvering my way around until I was with seven of
them,'' she said. In six months, she owed $1,900 and was
paying fees at a rate of $6,000 a year. ``That's the sickness
of it,'' Ms. Harris said. ``I was in a hole worse than when I
started. I had to figure a way to get out of it.''
Madam President, I could go on and on. I think my colleagues know
what this is about. Let me just simply say, there is no question that
these high-interest-rate loans take advantage of low- and moderate-
income working people. On the face of it, paying 300 percent or 500
percent or 800 percent for a $100 loan or $200 loan is unconscionable,
but that is exactly the issue. These folks may not always have a
choice.
Often borrowers turn to payday lenders and car title pawns because
they cannot get credit any other place. So these borrowers are a
captive audience, unable to shop around to seek the best rates, are
uninformed about their choices, and unprotected from coercive
collection practices. There is no way the borrower can win. At best
they are robbed by high interest rates, and at worst their lives are
ruined by a $100 loan which spirals out of control.
These loans, I say to my colleague from Iowa, and others, are
patently abusive. They should not be protected by the bankruptcy
system. And because they are so expensive, they should be completely
dischargeable in bankruptcy so debtors can get a true fresh start and
so more responsible lenders' claims are not ``crowded out'' by these
shifty operators.
Why should unscrupulous lenders have equal standing in bankruptcy
court with a community banker or a credit union that tries to do right
by their customers? Lenders should not be able to take advantage of
their customers' vulnerability through harassment and coercion.
My amendment simply says, if you charge over 100 percent annual
interest on a loan, and the borrower goes bankrupt, you cannot make a
claim on that loan or the fees from that loan. In other words, the
borrower's slate is wiped clean of your usurious loan, and he or she
gets a fresh start. Additionally, such lenders will be penalized if
they try to collect on their loan using coercive tactics.
I say to Senators, I am going to repeat this one more time today. And
I assume tomorrow, before the vote, I will have a chance to summarize.

[[Page S2144]]

The amendment says, if you charge over 100 percent annual interest on
a loan, and the borrower goes bankrupt, you cannot make a claim on that
loan or the fees from that loan. These borrowers are going to be wiped
clean of the lender's usurious loan, and they get a fresh start.
Additionally, what this amendment says is that these lenders are going
to be penalized if they try to collect by using coercive practices.
I do not know how anybody can vote against this amendment. But that
has happened to me before on the floor of the Senate. I have said that.
Amendments do not always get adopted. This amendment should be adopted.
This amendment is a commonsense solution to the problem I have
described. It allows the Senate to send a message to loan sharks. We
say this to these loan sharks: If you charge an outrageous interest
rate, if you profit from the misery and misfortune of others, if you
stack the deck against the customers so they become virtual slaves to
their indebtedness, you can get no protection in bankruptcy court for
your claims.
I say to my colleagues on the other side of the aisle, and, as I have
found out, Democrats, you should support this amendment. If a lender
wants to make these kinds of loans, under my amendment, the lender can
do it. But if he wants to be able to file claims in bankruptcy, he or
she could charge no more than 100 percent interest. I do not believe
any of my colleagues would come to the floor to claim that 100 percent
interest is an unreasonable ceiling. This amendment is in the spirit of
reducing bankruptcies. I believe it will significantly improve the
bill, and I urge its adoption.

I have just one other amendment to discuss.

Amendment No. 35

Mr. WELLSTONE. Madam President, I have three amendments at the desk.
I ask unanimous consent, they be reported separately.
The PRESIDING OFFICER. Without objection, it is so ordered. The
pending amendment is set aside, and the clerk will report the
amendments.
The assistant legislative clerk read as follows:

The Senator from Minnesota [Mr. Wellstone] proposes an
amendment numbered 35.

Mr. WELLSTONE. I ask unanimous consent reading of the amendment be
dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:

(Purpose: To clarify the duties of a debtor who is the plan
administrator of an employee benefit plan)

At the appropriate place, insert the following:

SEC. ____. DUTIES WITH RESPECT TO A DEBTOR WHO IS A PLAN
ADMINISTRATOR OF AN EMPLOYEE BENEFIT PLAN.

(a) In General.--Section 521(a) of title 11, United States
Code, as so designated by section 106(d) of this Act, is
amended--
(1) in paragraph (4), by striking ``and'' at the end;
(2) in paragraph (5), by striking the period at the end and
inserting ``; and''; and
(3) by adding at the end the following:
``(6) unless a trustee is serving in the case, if at the
time of filing, the debtor, served as the administrator (as
defined in section 3 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002)) of an employee benefit
plan, continue to perform the obligations required of the
administrator.''.
(b) Duties of Trustees.--Section 704(a) of title 11, United
States Code, as so designated and otherwise amended by this
Act, is amended--
(1) in paragraph (10), by striking ``and'' at the end;
(2) in paragraph (11), by striking the period at the end
and inserting ``; and''; and
(3) by adding at the end the following:
``(12) where, at the time of the time of the commencement
of the case, the debtor served as the administrator (as
defined in section 3 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002)) of an employee benefit
plan, continue to perform the obligations required of the
administrator;''.
(c) Conforming Amendment.--Section 1106(a) of title 11,
United States Code, is amended by striking paragraph (1) and
inserting the following:
``(1) perform the duties of the trustee, as specified in
paragraphs (2), (5), (7), (8), (9), (10), (11), and (12) of
section 704;''.
Amend the table of contents accordingly.

Amendment No. 36

The assistant legislative clerk read as follows:

The Senator from Minnesota [Mr. Wellstone] proposes an
amendment numbered 36.

Mr. WELLSTONE. I ask unanimous consent reading of the amendment be
dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:

(Purpose: To disallow certain claims and prohibit coercive debt
collection practices)

At the end of subtitle A of title II, add the following:

SEC. 204. DISALLOWANCE OF CERTAIN CLAIMS; PROHIBITION OF
COERCIVE DEBT COLLECTION PRACTICES.

(a) In General.--Section 502(b) of title 11, United States
Code, is amended--
(1) in paragraph (8), by striking ``or'' at the end;
(2) in paragraph (9), by striking the period at the end and
inserting ``; or''; and
(3) by adding at the end of the following:
``(10) such claim arises from a transaction--
``(A) that is--
``(i) a consumer credit transaction;
``(ii) a transaction, for a fee--

``(I) in which the deposit of a personal check is deferred;
or
``(II) that consists of a credit and a right to a future
debit to a personal deposit account; or

``(iii) a transaction secured by a motor vehicle or the
title to a motor vehicle; and
``(B) in which the annual percentage rate (as determined in
accordance with section 107 of the Truth in Lending Act)
exceeds 100 percent.''.
(b) Unfair Debt Collection Practices.--
(1) In general.--Section 808 of the Fair Debt Collection
Practices Act (15 U.S.C. 1692f) is amended--
(A) in the first sentence, by striking ``A debt collector''
and inserting the following:
``(a) In General.--A debt collector''; and
(B) by adding at the end the following:
``(b) Coercive Debt Collection Practices.--
``(1) In general.--It shall be unlawful for any person
(including a debt collector or a creditor) who, for a fee,
defers deposit of a personal check or who makes a loan in
exchange for a personal check or electronic access to a
personal deposit account--
``(A) to threaten to use or use the criminal justice
process to collect on the personal check or on the loan;
``(B) to threaten to use or use any process to seek a civil
penalty if the personal check is returned for insufficient
funds; or
``(C) to threaten to use or use any civil process to
collect on the personal check or the loan that is not
generally available to creditors to collect on loans in
default.
``(2) Civil liability.--Any person who violates this
section shall be liable to the same extent and in the same
manner as a debt collector is liable under section 813 for
failure to comply with a provision of this title.''.
(2) Conforming amendment.--Section 803(6) of the Fair Debt
Collection Practices Act (15 U.S.C. 1692a(6)) is amended by
striking ``808(6)'' and inserting ``808(a)(6)''.
On page 253, line 15, insert ``as amended by this Act,''
after ``Code,''.
On page 253, line 16, strike ``period'' and insert
``semicolon''.
Amend the table of contents accordingly.

Amendment No. 37

The assistant legislative clerk read as follows:

The Senator from Minnesota [Mr. Wellstone] proposes an
amendment numbered 37.

Mr. WELLSTONE. I ask unanimous consent reading of the amendment be
dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:

(Purpose: To provide that imports of semifinished steel slabs shall be
considered to be articles like or directly competitive with taconite
pellets for purposes of determining the eligibility of certain workers
for trade adjustment assistance under the Trade Act of 1974)

At the appropriate place, insert the following:

SEC. ____. DETERMINATION OF ELIGIBILITY FOR TRADE ADJUSTMENT
ASSISTANCE IN CASES INVOLVING TACONITE PELLETS.

For purposes of determining, under section 222 or 250 of
the Trade Act of 1974 (19 U.S.C. 2272 and 2331), the
eligibility of a group of workers for adjustment assistance
under chapter 2 of title II of the Trade Act of 1974,
increased imports of semifinished steel slabs shall be
considered to be articles like or directly competitive with
taconite pellets.

Mr. WELLSTONE. Madam President, again, I say to my friend from Iowa,
there are three amendments I have on the floor. I assume we will have
debate about payday loans. I say to my colleague from Iowa--I know what
he believes--I do not believe these loan sharks should get the same
protection under this bankruptcy bill, and I am hoping to get his
support.
The first amendment that I talked about earlier, which clarifies that
the companies in bankruptcy must fulfill their legal obligations as
plan administrators and plan sponsors, is an amendment that we may or
may not have to

[[Page S2145]]

debate. I am hoping to get full support for it.
The third amendment I have offered is an amendment--and I say to my
colleagues, I think Senator Dayton will either be down here later today
or tomorrow to speak about these amendments, both on the protection of
retirees and also this trade adjustment assistance amendment to the
bankruptcy bill.
Madam President, this is a hugely important amendment. Both Senators
from Michigan are cosponsors of the bill, and they may want to speak on
this amendment. Again, I say to my colleague from Iowa, it may very
well be that Senator Baucus may come down, and we may have a colloquy
on this and talk about other ways of trying to accomplish the same
goal, but I offer the amendment today as a basis for the discussion
that we are going to have.
This amendment goes to why all too many people find themselves in
bankruptcy. We have a situation where many taconite workers in
Michigan, and certainly in northeast Minnesota, have now lost their
jobs, and some are losing their jobs. The problem is, when it comes to
trade adjustment assistance, which is a lifeline program, where these
workers, whether they are in their 30s or 40s or 50s, are provided with
some financial help, be it income, be it being able to go back to
school, be it money for relocation--we do not know yet, we are going to
be talking to the Secretary of Labor on Wednesday about this--but we
are very concerned that the taconite workers are not included.
In other words, the flaw to trade policy right now, which affects
trade adjustment assistance, is that these taconite workers are not
viewed as being in competition with slab steel or semifinished steel
that comes to the market. We have had an import surge of slab steel and
semifinished steel. And when it comes into this country, with this
import surge, all of the trade legislation will say to steel workers:
You will be eligible for trade adjustment assistance when you are
competing with foreign steel and, for whatever reason, there is an
import surge. But in this highly integrated industry, the shame of it
and the flaw to this is that taconite workers are not covered.
The reason I talk about this as an amendment to the bankruptcy bill
is, look, if you lose your job--next to medical bills, the other two
reasons most people file for bankruptcy is loss of job or divorce. In
the iron range in Minnesota there is a tremendous amount of economic
pain. Senator Dayton and I are in a rush to try to get as much help to
these workers as possible, just as any Senator, Democrat or Republican,
would be doing the same for people in their State.
I have introduced this amendment. There may come a time when I will
have a discussion with Senator Baucus as to other ways we can approach
this. There is a meeting with Secretary Chao on Wednesday. Senator
Dayton is very engaged in this as well. We are doing it together. This
may be an amendment on which we may not have an up-or-down vote because
we might be able to move it forward with some other way of getting at
it.
It is a huge problem. These workers are out of work, and they are not
eligible for the trade adjustment assistance. The same import surge
that is affecting them affects other workers. We are just desperately
trying to work out a fix to get them some help. It may be that I could
do that with Senator Baucus and Senator Grassley and others in another
way.
This is not some trump political thing I am doing. It is very painful
to see people who are so desperate and who fall between the cracks and
are not getting the help they need.
Those are the three amendments I have. I know there are other
colleagues who are coming to the floor. I will wait to see what kind of
response there is from the other side. I am hopeful we can at least
have this one amendment incorporated into this bill that will provide
retirees with some protection. I am hoping the amendment will be
accepted. I believe Senator Sessions may also be engaged on this
question. I am hopeful.
On the payday loan, I wait to hear from my colleagues from the other
side.
I yield the floor.
Mr. GRASSLEY. Madam President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. LOTT. Madam President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. LOTT. Madam President, it is my understanding that three
amendments have been offered today by Senator Wellstone. Would the
Senator clarify? Has he offered three amendments that are now pending
for discussion, or does he intend to do so? What is the status on his
amendments?
Mr. WELLSTONE. The majority leader is correct. I was here in the
beginning of the debate last week and I offered one. I have offered
three now. I have a number of other amendments to offer, but I have
offered three; correct.
Mr. LOTT. I understand there are still some 80-plus amendments to be
disposed of just from the other side of the aisle. I guess there are
probably a dozen or more on this side of the aisle, not counting the
relevant amendments that were identified from the list that might be
offered. So we still have a lot of work to do.
I do know that on Friday, and today, some work was accomplished.
Senator Wellstone is certainly carrying through with his commitment to
offer amendments dealing with bankruptcy. I know the staffs have been
working on both sides to see if we can find a way to complete this
without the necessity of a cloture vote this week. However, we have to
dispose of this bill this week.
As Senator Daschle and I discussed on the floor last Thursday, it is
our intent to offer a cloture today or tomorrow, to make sure we have
enough time to complete this very important legislation. It is my
intent--and I see Senator Daschle here now--to file cloture in order to
assure passage of the bill this week. If we can make substantial
progress by Wednesday, or if some agreement can be reached that would
limit the number of amendments, certainly I would be open to that.
I think the record is clear. I have repeatedly tried to move this
legislation and I have tried to be respectful of the committee process,
which we have followed, and also to be respectful of the Senator from
Minnesota, who feels strongly about this legislation, as others do. It
is time that we make sure we get it completed this week.
I am prepared to send a cloture motion to the desk to the pending
legislation. Before I do that, I say to Senator Daschle I will be glad
to yield for any comment he might have.
Mr. DASCHLE. Madam President, I appreciate Senator Lott's expression
of intent here. As we said last week, there is a real hope that we can
resolve whatever procedural difficulties we face in accommodating the
desire the majority leader has noted: that we schedule a vote for final
passage sometime before the end of this week.
It is clear now we really do have a number of pieces of legislation
that have to be addressed, including campaign finance reform as early
as next Monday or Tuesday. In order to accommodate that schedule, it
would be best if we could complete our work on this bill before Friday.
I will be supportive of whatever procedural arrangements we can make
that respect the rights of Senators on both sides to be heard. I want
to accommodate those Senators who may have amendments that will fall if
cloture is invoked, if we can address those amendments first early in
the week so we can make sure those who have other ideas and other
proposals can be accommodated.
I will work with the majority leader to try to find a way to schedule
a vote on cloture, if it comes to that, perhaps later in the day on
Wednesday. Our preference is later in the day to accommodate those
Senators, with an expectation that we can certainly finish the bill by
Friday. I will work with our colleagues to see what arrangements best
suit their needs.
Mr. WELLSTONE. May I ask a question of my colleagues?
Mr. LOTT. I am not clear, I may have yielded the floor.
Mr. DASCHLE. I yield to the Senator from Minnesota.
Mr. WELLSTONE. I appreciate that. That is very gracious of Senator
Daschle.

[[Page S2146]]

Just to clarify a couple of things, this is the third time we have
really had debate. On Monday and Friday, we know a lot of Senators are
not around. I came back. It seems to me, if I may express my dissent,
that the majority leader asked for a list of amendments prematurely. We
all know that Senators, to protect themselves, list a number of
amendments they may not use, and now that is being used as an argument
for filing a cloture motion.
I work with the majority leader. We all disagree at times. I think it
violates the spirit of what we talked about. I remember coming to the
Senate floor and having a discussion that we would have substantive
debate on the bankruptcy bill and Senators could offer those
amendments.
We are just now starting that process, and now we are talking about
filing for cloture. We have had 2 days on this bill. We all know on
Monday and Friday people do not come. I am here, but a lot of people do
not come. The majority leader asked for a list, and people listed a lot
of amendments to protect themselves. In my humble opinion, the majority
leader is using that as a pretext for premature filing of cloture,
which goes against what I thought we were going to do with this bill.
I will finish. I know both leaders look as if they are more than
ready to respond. We have a lot of amendments. People come out with
amendments, and we go at it. If it takes 2 weeks to do a bill, we have
done that on many bills. I do not understand why we are not doing that
on this bill.
Mr. DASCHLE. The Senator perceives my stance correctly. I was
prepared to respond. I must say I am not sympathetic to that argument,
and I am very sympathetic oftentimes of the admonitions and suggestions
of the Senator from Minnesota. Friday and Mondays are legitimate
legislative days.

Mr. WELLSTONE. To be clear, I am not arguing they are not. I am just
saying----
Mr. DASCHLE. I will be happy to yield again in a moment. I have done
everything to encourage Senators to come to the floor to offer their
amendments. For some reason, we have gotten into this habit of thinking
any amendment offered after 6 in the evening is not really considered
prime time, or it is not considered to be a legitimate time to offer an
amendment. Fridays and Mondays are considered, for some reason, not
equal in quality to Tuesday, Wednesday, or Thursday as times to offer
amendments.
We have to break out of that mind set. We have done everything to
petition Senators to come to the floor today to offer amendments. We
did it on Friday.
Those Senators who now express some concern they are going to be
precluded from offering amendments--when they passed up the opportunity
on Friday, they passed up the opportunity to offer amendments later in
the evening, they passed up the opportunity to come here on Monday--are
not going to get much sympathy.
I am very sympathetic to many of the substantive questions raised by
Senators with their amendments, but procedurally, if they are concerned
about it, they ought to be here. They ought to come to the floor to
offer these amendments.
I am hopeful we will get more reaction than we have so far, at least
for the remainder of the day and tonight.
Mr. WELLSTONE. I will finish up. I say to our Democratic leader two
things: No. 1, it still does not speak to my point--we talk about
substantive debate, which is the commitment we made on this bill. Quite
often, we are talking about 2 weeks of amendments and debate going
through those amendments. All of a sudden, with the bankruptcy bill, we
are talking about Friday and Monday as litmus test days and people need
to be here. I am all for that. I am here.
I find it interesting that in the haste to get through this bill--I
understand a whole lot of folks and a whole lot of powerful folks are
for it--I think this violates what I heard stated last week. There are
a lot of important amendments that are going to be clotured out now,
and I think that goes against the agreement. I am expressing my dissent
on it.
Mr. DASCHLE. I appreciate that. If I may, before yielding the floor--
and I will certainly yield so the majority leader can respond as well--
I am told that we asked virtually every author on Friday if they could
be prepared to come to the floor on Friday to offer at least one
amendment, and not one of our colleagues responded to that.
Again, I want to use these days productively. We are not using them
very productively if we cannot even offer one amendment for
consideration and a vote at some point Friday or Monday.
I yield the floor.
The PRESIDING OFFICER. The Senator from Mississippi.
Mr. LOTT. Madam President, I appreciate Senator Daschle's efforts. He
and I have worked very hard to be fair on this legislation. I have the
same problems he has. I do not want the burden to appear just to be on
his side of the aisle. We have difficulty getting our Senators to offer
amendments on Fridays and Mondays and even Thursday afternoons. Even
though there are often very legitimate reasons that we cannot proceed
late into the evening on Thursday, we are not able to do so.
I say to Senator Wellstone, yes, he was here I think on Friday and
again this morning. Back on January 22, Senator Daschle and I started
talking about trying to move this legislation. We have been trying to
move it ever since. Even though I filed cloture, that does not end it.
Amendments can be debated, amendments can be voted on, and we still
have some opportunity to work through this, perhaps without cloture. I
am not sure that is possible. It may not be.
The point Senator Daschle made was we have to go to campaign finance
reform, and at some point we have to go to the budget resolution. The
law requires we do it before April 15, so we are getting to the point
where other things will overtake this bill.

Cloture Motion

Mr. LOTT. Madam President, I send a cloture motion to the desk to the
pending legislation.
The PRESIDING OFFICER. The cloture motion having been presented under
rule XXII, the Chair directs the clerk to read the motion.
The assistant legislative clerk read as follows:

Cloture Motion

We the undersigned Senators, in accordance with the
provisions of rule XXII of the Standing Rules of the Senate,
do hereby move to bring to a close debate on the motion to
proceed to S. 420, an original bill to amend title II, United
States Code, and for other purposes:
Trent Lott, Robert F. Bennett, Chuck Grassley, Orrin G.
Hatch, Susan Collins, Pat Roberts, Lincoln Chafee,
Strom Thurmond, Frank H. Murkowski, Mitch McConnell,
Rick Santorum, Jeff Sessions, Richard G. Lugar, Gordon
Smith of Oregon, George V. Voinovich, and Bill Frist.

The PRESIDING OFFICER. The cloture motion is addressed to the motion
to proceed, and I am advised we are on the bill.
Mr. LOTT. Madam President, if I may make a parliamentary inquiry, in
view of the revision, I believe the clerk will need to read the whole
cloture motion again.

cloture motion

The PRESIDING OFFICER. The cloture motion having been presented under
rule XXII, the Chair directs the clerk to read the motion.
The assistant legislative clerk read as follows:

Cloture Motion

We the undersigned Senators, in accordance with the
provisions of rule XXII of the Standing Rules of the Senate,
do hereby move to bring to a close debate on S. 420, an
original bill to amend title II, United States Code, and for
other purposes:
Trent Lott, Robert F. Bennett, Chuck Grassley, Orrin G.
Hatch, Susan Collins, Pat Roberts, Lincoln Chafee,
Strom Thurmond, Frank H. Murkowski, Mitch McConnell,
Rick Santorum, Jeff Sessions, Richard G. Lugar, Gordon
Smith, George Voinovich, and Bill Frist.

Mr. LOTT. Madam President, as just stated, this cloture vote will
occur on Wednesday unless it is changed by consent. The Democratic
leader and I will discuss the bill and make a determination as to the
timing. I am sure it will be in the afternoon, and we will see how late
that will need to be. It would be affected by what has been achieved.
I ask that the mandatory quorum under rule XXII be waived.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. LOTT. I yield the floor.

[[Page S2147]]

Mr. DASCHLE. If I might say to the majority leader, as I understand
it, a number of amendments, in fact, over 20 amendments, have been
cleared on our side. I guess we are awaiting some indication as to
whether or not those amendments might be cleared on the majority side.
That would move things along as well in terms of scheduling amendments.
If Senators know those amendments have been adopted, we would be in a
better position to whittle down the list and determine which of those
amendments still need floor consideration.
Mr. LOTT. Keeping with full disclosure on this, I think our staffs
have been working on that, and I think we did clear a number of
amendments like this last time this bill was up. We were in hopes at
some point perhaps that this could be done in such a way that we would
not have to go to conference and the bill could be accepted by the
House. It does not appear that will be possible.
We will try to clear as many of the amendments as possible. I will
take it up with the chairman when we complete our action.
I yield the floor.
The PRESIDING OFFICER. The Senator from Massachusetts.
Mr. KENNEDY. Madam President, is it appropriate to ask consent to set
aside the pending amendment and proceed to other amendments to the
bankruptcy bill?
Mr. GRASSLEY. Will the Senator yield for a question?
Mr. KENNEDY. I am happy to yield.
Mr. GRASSLEY. Madam President, would the Senator tell us the content
of the amendment, or is there a copy we can have?
Mr. KENNEDY. It is an amendment dealing with health insurance
benefits for the debtor's monthly expenses permitted in the
consideration of the means test, the opportunity for those going
through the process to be able to have included consideration for
paying their health insurance and premiums.
Mr. GRASSLEY. I apologize. We have a copy.
The PRESIDING OFFICER. Is there objection to the request of the
Senator from Massachusetts? Without objection, it is so ordered.

Amendment No. 38

The PRESIDING OFFICER. The clerk will report the amendment.
Mr. KENNEDY. This is an amendment that if we had a cloture motion we
would not have qualified, yet it is absolutely relevant.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:

The Senator from Massachusetts [Mr. Kennedy], for himself,
Mr. Rockefeller, and Mrs. Clinton, proposes an amendment
numbered 38.

Mr. KENNEDY. Madam President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:

(Purpose: To allow for reasonable medical expenses, and for other
purposes)

On page 10 between lines 17 and 18, insert the following:
``(V) In addition, if the debtor does not have health
insurance benefits, the debtor's monthly expenses shall
include an allowance to purchase a health insurance policy
for the debtor, the dependents of the debtor, and the spouse
of the debtor in a joint case if the spouse is not otherwise
a dependent.

Mr. KENNEDY. Madam President, the Bankruptcy Reform Act of 2001
includes a means test that determines whether debtors will be granted
relief under Chapter 7 of the bankruptcy code or whether they must
enter into a Chapter 13 repayment plan. Supporters of the bill believe
it will prevent abuse in the bankruptcy system. I believe, as do the
experts, that it is problematic.
For better or worse, however, the means test is in the bill and it
requires a calculation of the debtor's monthly expenses based on the
Internal Revenue Service collection standards. The IRS standards
provide for food, clothing, transportation, and some health care-
related expenses. What the IRS standards don't provide for is the cost
of health care insurance for many debtors, particularly those who
recently lost their insurance or may not have been able to afford it.
The amendment I'm offering today says that if a debtor doesn't have
health care insurance, the bankruptcy court must include a reasonable
allowance for health care insurance for the debtor, his or her
dependents, and his or her spouse, when calculating the debtor's
monthly expenses.
This amendment is necessary because many Americans declare bankruptcy
because of health care-related problems. A recent report tells us that
nearly half of the 1.2 million Americans who file for bankruptcy do so
because of medical problems. According to the report, in 1999, an
estimated 326,000 families filed for bankruptcy because of an illness
or injury to themselves or a family member and an additional 267,000
families had substantial medical bills. That is extraordinary. Again,
in 1999, an estimated 326,000 families filed for bankruptcy because of
an illness or an injury to themselves or a family member and an
additional 267,000 families had substantial medical bills. Almost
600,000--nearly half of all those who filed for bankruptcy--filed for
medical reasons.
During discussion of this legislation, we've found that there are
three major reasons why people are filing for bankruptcy. One is job
related and that is triggered for the most part, not completely but for
the most part, because of the various mergers, downsizing and pink
slipping effecting great numbers of Americans. Second, many women are
filing for bankruptcy after falling on hard times as a result of
divorce, lack of alimony, or lack of child support payments. And the
third reason is health related. The explosion of health care costs,
particularly in the area of prescription drugs, and the general cost of
health insurance has led many to file for bankruptcy.
Close to 600,000 bankruptcies involve families or individuals--half
of all of those who are going into bankruptcy --have health-related
bankruptcies.
Two hundred and sixty-seven thousand of those who filed for
bankruptcy in 1999 had no health insurance. A report published in
Norton's Bankruptcy Adviser says:

The data reported here serve as a reminder that self-
funding medical treatment and loss of income during a bout of
illness or recovery from an accident make a substantial
number of middle class families vulnerable to financial
collapse.

Some families once had health insurance but, in an attempt to avoid
bankruptcy, let their policy payments lapse so every penny could be
used to buy food and pay the rent. Those families later find themselves
in bankruptcy without an appropriate health insurance safety net.
Others never had health insurance because they simply could not
afford it. And, others lost their insurance when they lost their job.

For example, one debtor tells us that he had a heart attack which led
to quadruple bypass surgery. He amassed outrageous medical bills that
he could not pay because he didn't have medical insurance. He then had
to declare bankruptcy. Another debtor told us that the loss of a job,
which led to loss of health care, precipitated bankruptcy. She used
credit cards, credit cards, to pay for COBRA insurance and prescription
drugs. The COBRA insurance won't last for very long, and soon she will
be without any health insurance at all.
These families are now among the 43 million Americans who have no
health insurance, and we must ask, what happens to them? The children
fail to get a healthy start in life because their parents cannot afford
the eye glasses or hearing aids or doctors visits they need. Family
income and energy are sucked away by the high financial and emotional
cost of uninsured illness. An older couple sees hope for a dignified
retirement dashed when the savings of a lifetime are washed away by a
tidal wave of medical debt.
Without health insurance, many families forgo health care. One-third
of the uninsured go without needed medical care in any given year.
Eight million uninsured Americans fail to take the medication that
their doctor prescribes, because they cannot afford to fill the
prescription. 400,000 children suffer from asthma but never see a
doctor. 500,000 children with recurrent earaches never see a doctor.
Another 500,000 children with severe sore throats never see a doctor.
32,000 Americans with heart disease go without life-saving and life-
enhancing bypass surgery or angioplasty.
Overall, 83,000 Americans die each year because they have no
insurance. It is the seventh leading cause of death in America today.

[[Page S2148]]

Given these facts, the Federal Government shouldn't be in the
business of telling people to repay their credit card debts rather than
pay for health care insurance. And, debtors shouldn't be forced to
choose between eating and purchasing health care insurance while being
forced to repay creditors. To avoid this Hobson's choice, when
determining whether a debtor can repay his creditors, the bankruptcy
court must consider health insurance premiums part of the debtors'
monthly expenses.
I hope my colleagues will support this amendment. It adds some
fairness and balance to an unnecessarily harsh bill.
This is something that can be dealt with by the bankruptcy judges.
Obviously, the amount of repayment is going to depend to some extent on
the size of the family's health insurance premium, and perhaps to some
extent on where they live and the cost of health insurance in that
area. But all of those kinds of calculations are readily made by the
bankruptcy court and by bankruptcy judges.
This does not mean an unreasonable additional kind of responsibility.
And, beyond that, for those who are strong in terms of the bankruptcy
reform, this makes sense from their point of view because what happens
is the individual who is in bankruptcy will be kept healthier and their
families will be healthier and able to at least move towards meeting
their responsibilities under the bankruptcy court, if they are able to
go ahead and afford those health insurance premiums.
It is a win-win situation. It is a win in terms of those who are
going to have responsibility for meeting their debts because they won't
find additional kinds of drain on scarce resources, and it means they
will be healthier and be able to afford to repay. It also works to the
advantage of the individual and their families.
I believe this makes a good deal of sense. I look forward to my good
friend from Iowa enthusiastically embracing this amendment so that I
might get onto my second amendment which is equally commendable.
The PRESIDING OFFICER (Mr. Voinovich). The Senator from Iowa is
recognized.
Mr. GRASSLEY. First of all, Mr. President, whether I enthusiastically
endorse this or not, the Senator from Massachusetts knows that he can
lay his amendment aside and move on to another amendment that he wants
adopted since we will not be voting on these amendments until tomorrow.
The first thing I want everyone who has questions to know about this
legislation is that we want people who have health insurance to
maintain their health insurance when they go into bankruptcy because
our legislation provides that health expenses, including health
insurance, under the IRS guidelines--which are used by the bankruptcy
court in deciding the ability to repay debt under our means test--are
fully accounted for.
Not only are health insurance premiums subtracted, but all health
care costs are subtracted out of a person's ability to pay in making a
determination whether they go into chapter 7 where they get a
completely fresh start, or whether they go into chapter 13 to make a
determination of whether or not they have the ability to repay. If they
are in chapter 13, then the extent to which they repay the final
judgment is that those people in chapter 13 will not get off scot-free.
But in making that determination, all health costs are taken into
consideration.
The reason I take some time to emphasize that point is because we
have had several speeches on the floor of the Senate that say and imply
we do not want to take into consideration all those health care costs
in making that determination. We even had the Time magazine article of
last spring in which there were several case studies done by Time
magazine with the implication that if this legislation passed, those
people would not be able to get into bankruptcy court for fair
consideration of whether or not they could repay their bills, and
whether or not they get a fresh start.
In a lot of those case studies, there was the implication that they
were going into bankruptcy court because of high health costs.
In every one of those instances, as I have said before on the floor
of this Senate, those folks used in that magazine article would have
been able to get a fresh start under our legislation.
Consequently, we still have this brought up as somehow a problem of
our bill because we are not going to take into consideration people who
are in bankruptcy being able to maintain their health costs and health
insurance.
I asked the question last week for those Senators who think we do not
give adequate consideration through the IRS guidelines of whether or
not somebody should be in chapter 7 or chapter 13: If we don't, do we
give credit for 100 percent of health cost? If 100 percent isn't
enough, would 101, 102, or 110 percent be enough?
Now we get to this situation that Senator Kennedy has brought to our
attention.
I give the prelude to this by saying our legislation takes into
consideration 100 percent of health care costs, including paying health
insurance.
If the person does not have health insurance before going into
bankruptcy court, obviously the person does not have an expense out
there to claim in bankruptcy court.
It seems to me what Senator Kennedy is trying to do here--because we
already allow people who have health insurance to maintain that health
insurance as one of those legitimate costs--is raise the possibility
that a debtor who did not have health insurance before he went into
bankruptcy court ought to be able to carve out a portion of the
creditor's claims, and would be able to get a fringe benefit, or a
benefit they did not have before they went into court.

I think we have a couple of questions to ask. Is there any provision
in this amendment that requires the debtor to use this allowance for
health insurance? And is there any provision to verify that the money
is being used for health insurance if it is allowed?
Since the debtor wasn't using the allowance for health insurance
before bankruptcy, it seems to me we need some guarantees on how the
money will be spent.
I have those questions. If the Senator wants to respond to those, he
can. If he doesn't, there are questions out there that have to be
answered.
I yield the floor.
The PRESIDING OFFICER. The Senator from Massachusetts is recognized.
Mr. KENNEDY. Mr. President, I would be glad to work out the question
as to how the debtors are going to make sure they are going to get an
allocation in terms of health insurance--to make sure it would be used
for that particular purpose. I would be glad to work out over the
nighttime those kinds of protections. But I say the answer would be the
same way that particular provision applies to food and rent. You do not
have the additional written in stone with regard to food and rent in
this particular proposal. But if you want additional kinds of
protections to ensure that it goes to insurance, I do not think that is
going to be really a stumbling block.

Now let me just respond to the general theme my good friend from Iowa
discussed.
This amendment simply ensures that while a debtor is repaying his
creditors, he has enough money to purchase health insurance for himself
and his family. The supporters of the legislation assert that the other
necessary expense provisions in the IRS collection standards include
health care insurance for all debtors. That simply is not true. The
other necessary expense provision does say that other expenses, which
may meet the necessary expense test, includes health care. But if a
debtor has recently lost his health insurance or lost his job--and
therefore his health insurance--health care insurance premium expenses
will not be included in his monthly expense allowance. And the IRS
staff confirms that.
So a Senator says: Look, if they paid their health care insurance
premium at the time, we will make sure they will be able, within the
IRS means test, to pay their premium as well.
The point is, as we have seen with great numbers of people, almost
half of those who have gone into bankruptcy have done so because of
health-related expenses. The great majority of those are losing their
health insurance, or they have health insurance and it does not cover
these catastrophic additional kinds of costs, or they have lost their
job and lost their health insurance. They are not provided for.

[[Page S2149]]

Here is somebody who has worked hard all their life, paid into their
health insurance, then they lose their job, lose their health, and they
run into one of these catastrophic illnesses, and they had been paying
the premiums all of this time. But there is no provision for them, even
though they have conscientiously provided health insurance for
themselves and their families throughout their employment. They cannot
even work that out with the restrictive language here.
There ought to be a reasonable way of ensuring that those people are
going to get health insurance within the means test standard, which
supposedly looks at essential needs. I think getting health insurance
is an essential need. It is as important for many people as food and a
roof over their heads.
As we've seen, many people are unable to take the prescription drugs
they need. We find, from all the medical indicators, the number of
people who do not have health insurance and who end up actually dying.
So that is what the bill that is before the Senate fails to respond
to; and those are the real facts out there in terms of these
individuals losing their jobs and losing their health insurance. They
find out that even though they paid into their health insurance over a
lifetime, they run into these catastrophic kinds of additional
illnesses--here they were, paying in, working hard--and, under the
language in the bill, there is virtually no kind of inclusion for them.
I think health insurance protection for their families makes an
enormous amount of sense with regard to individuals, and it makes an
enormous amount of sense in terms of the individual's ability to meet
their responsibilities of payment under the Bankruptcy Act.
It just seems to me that those are the additional kinds of
protections we are talking about. It isn't that this individual is
going to be able to set the sky as the limit, and try to walk out of
there with a good deal of free cash in their pockets.
We would be glad to include in the Record very extensive analyses of
what the costs are for individual workers and for families, using GAO
figures. We could make that part of the Record. That could be a pretty
clear indication of a reasonable standard that might be used or might
be followed. But that is why I believe this is so important.
In many ways, this amendment, as I mentioned, will improve the
debtor's chance of being able to repay his creditors while also
ensuring that he and his family have a decent--not luxurious but
decent--standard of living.
If the debtors are able to purchase health insurance, they will be
able to withstand the predictable and unpredictable circumstances that
are part of everyday living--the birth of a child, a previous
undiagnosed illness, necessary trips to the doctor's office. Instead of
scraping for pennies to pay those bills, the debtor and his family will
have the health insurance that every American needs. Instead of failing
to meet the obligations of a chapter 13 repayment plan, all available
resources must go to unexpected health care expenses. The debtor can
meet both obligations.
So I hope we can continue to visit this issue and see what we might
be able to work out.

Amendment No. 39

Mr. KENNEDY. If it is the desire of the floor manager, I ask
unanimous consent that the existing amendment be temporarily laid aside
and we go to the amendment which is what they call the cap on IRA
assets.
The PRESIDING OFFICER. Is there objection?
Mr. KENNEDY. I believe the Senator has that amendment.
Mr. GRASSLEY. Reserving the right to object, and I will not object,
before we go on to his next amendment and lay this one aside, I hope I
can continue a dialog between the staff of the Senator from
Massachusetts and my staff to see if we can make arrangements, so that
we know the money that is set aside is used for health insurance, that
it is verifiable, that it would not be used for some sort of Cadillac
insurance policy that maybe the person would not otherwise have had in
their place of employment, and things of that nature. If we could talk
about that, we might be able to work something out.
Mr. KENNEDY. Sure. I appreciate the attitude of the Senator. We would
be glad to try to follow through with that. I am grateful for the
Senator's interest and sensitivity. I appreciate that.
The PRESIDING OFFICER. Without objection, it is so ordered.
The clerk will report the amendment.
The legislative clerk read as follows:

The Senator from Massachusetts [Mr. Kennedy] proposes an
amendment numbered 39.

(Purpose: To remove the dollar limitation on retirement savings
protected in bankruptcy)

Beginning on page 101, line 10, strike all through page
102, line 2.

Mr. KENNEDY. Mr. President, this bankruptcy bill includes a provision
that would undermine existing pension law by allowing creditors to
claim workers' retirement savings in bankruptcy. One of the greatest
domestic policy challenges facing Congress is the challenge of ensuring
that elderly Americans do not live in poverty. After a lifetime of hard
work, senior citizens deserve a secure and comfortable retirement.

Clearly, we need to do more to improve the private pension system.
Nearly half of all working Americans--some 73 million men and women--do
not have pension coverage. The lack of pension security is a critical
issue. It is a women's issue, because only 39 percent of working women
are covered by a pension plan. It is a civil rights issue, because only
26 percent of Hispanic workers and 38 percent of African-American
workers have pension coverage.
So it is imperative that Congress do all it can to expand pension
coverage and encourage retirement savings. We must work to improve our
retirement savings system--not move backward. The provision in the
bankruptcy bill that would cap the amount of retirement savings held in
individual retirement accounts that can be exempted from a debtor's
bankruptcy estate is a step backward.
Federal pension laws are intended to protect workers by guaranteeing
that their retirement savings will be there when they retire. The
entire pension community--worker groups, employers, mutual fund
companies, and other pension service providers--are united in
opposition to a cap on retirement savings for three reasons: one, it is
unnecessary, two, it is unworkable, and three, it would discourage
savings and portability.
First, a cap on IRA savings is unnecessary because Federal tax law
already imposes strict limits on IRA contributions. The cap is aimed at
preventing wealthy individuals from trying to stuff assets into their
IRAs before declaring bankruptcy. But because IRA contributions are
limited to only $2,000 per year, wealthy individuals cannot stuff
assets into an IRA before filing bankruptcy as a way to avoid paying
debts. At the rate of $2,000 per year, it would take about 40 years to
accumulate retirement savings of $1 million.
Second, the cap is unworkable. It will be extremely difficult--if not
impossible in many cases--to administer. There are thousands of IRA
accounts with balances in excess of $1 million due to rollovers from
401(k) plans and other retirement vehicles. Under the current bill,
those rollover amounts (and the earnings on them) would not be
available to creditors. However, a bankruptcy court will need to sort
through those accounts to determine how much of the account came from
direct IRA contributions and how much came from rollovers.
The court will also be forced to calculate how much of the earnings
in the account should be attributed to the IRA contributions and how
much should be attributed to the rollovers amounts. That will be a time
consuming administrative burden with no benefit to creditors.
Third, the cap will discourage retirement savings and portability.
Using retirement savings in IRAs to satisfy personal debts is
unprecedented, and collides head-on with efforts by Congress to
encourage individuals to save for retirement. Already, more than 60
percent of workers who change jobs take their retirement savings and
spend the money rather than rolling the money into another retirement
vehicle.
The cap will undermine the trust that over 35 million American
households have placed in the IRA as a safe and secure retirement
savings vehicle,

[[Page S2150]]

and will discourage workers from rolling money into their IRAs when
they change jobs.
I believe this provision would jeopardize the retirement security of
American workers. This is simply the wrong message for Congress to
send, particularly at a time when we are trying to encourage additional
private-sector retirement savings to ensure retirement income security
for the aging baby boom generation.
Mr. President, I hope this amendment will be accepted. I suggest the
absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GRASSLEY. Mr. President, I take this opportunity to tell my
colleagues why the amendment offered by the Senator from Massachusetts
is a very bad amendment.
First, I want to make clear that this amendment applies just to IRAs;
it does not apply to pensions. In addition, I would like to have people
reflect on the position of the Senator from Massachusetts on this
amendment and the position on the previous amendment. It seems to me
the Senator from Massachusetts is very much in character with his
amendment on making sure there is a preservation for the ability of
people in bankruptcy to keep health insurance. That, for a long time,
has been a concern of his for people who have needed health insurance,
maybe couldn't afford it--how to be able to get it to the people. Of
course, when bankruptcy steps in, it is very appropriate for him to
offer an amendment that would preserve health insurance for people.
That would most often fall into the category of his protecting those
people who have lesser incomes.
So it is quite out of character for me to respond to the Senator from
Massachusetts about an amendment about a provision in this bill where
we have a $1 million cap that protects retirement accounts and that you
would have to have resources over that $1 million in determining the
ability to repay.
As the author of this legislation, I am very embarrassed that I would
have in my own legislation a $1 million cap that would say people could
protect $1 million from their creditors as they went into bankruptcy.
That $1 million cap is in here because I didn't want any cap
whatsoever. I had to make an arrangement with Senator Kennedy last year
to reach compromise on this matter, and we compromised on $1 million.
In addition, for the Senator from Massachusetts, who never is very
often found defending the economic needs of those over $1 million a
year in savings and wanting to protect that $1 million from bankruptcy,
it seems to me somewhat out of character for him. It makes it a lot
easier for me to oppose his amendment that would eliminate the cap on
IRA savings.

He argues that the $1 million cap would be difficult to administer
because 401(k)s and other retirement rollovers are excepted from this
cap. He argues that the cap will be an administrative hassle with no
benefit to creditors. I argue that the bankruptcy bill is all about
having people who can repay their debts do just that--in other words,
pay their debts.
How many times have you heard me say the purpose of this bankruptcy
legislation is, for those who are gaming the system, those who are
using the bankruptcy laws for financial planning, that if you have the
ability to repay, you are no longer going to get off scot-free.
People who have the ability to repay their debts should not be
protected just because they have stashed away an IRA account. That is
why we have this $1 million cap. I don't even think the cap should be
there, but it was part of the compromise last year. We need to have a
cap on these savings so that people who can pay will be required to pay
a portion of their debts.
I don't think the super-rich should have additional protections just
because they can squirrel away their money in a retirement account. The
$1 million cap is consistent with our policy of encouraging people to
put away money for retirement, but we also need to balance this with a
policy that people who buy goods and other merchandise should pay for
them if they can. We can't allow deadbeats to get away with stiffing
creditors. That is why our bankruptcy bill is here. That is what it is
all about: Imposing some responsibility on people who can pay their
debts.
I would like to give you an example about abuse of the system. This
is from a press report. Dr. Neil Solomon declared bankruptcy after
three female patients sued him for sexual misconduct and sought $160
million in damages. Dr. Solomon paid these women less than $100,000,
while keeping a home in Baltimore, MD, valued at $323,000, a Mercedes
Benz, valued at $42,000, and $2.2 million in a retirement savings
account.
Congress should place reasonable limits on the ability of highly
compensated persons, such as Dr. Solomon, to shield millions of dollars
from creditors simply because the assets are deposited in retirement
accounts.
Clearly, Congress never intended for savings in retirement accounts
to become safe havens for the wealthy who seek to avoid paying their
bills by declaring bankruptcy.
I also point out to my friend from Massachusetts his position is much
contrary to his position in regard to the homestead exemption. He says
people who can pay their debts should not be able to shelter their
assets in a million-dollar homestead. But at the same time, he seems to
be saying that people should be able to shelter their assets in $1
million IRA accounts. That is what he is doing right now by lifting
that $1 million cap.
Moreover, I don't think the provision in our bill will impose an
administrative burden, particularly because the amount of the cap is so
high. I don't think it is unworkable, and I doubt that the
administrative burden charge will ever materialize.
In addition, I remind my colleagues this is an agreement that was
agreed to in the compromise pension bill last year. I didn't want this
cap in here, but I took it in the process of doing what I could to
alleviate some fears so this legislation could get passed. In other
words, we cut a deal, and I hope we stick by this deal. We need to
retain the hard limit of $1 million on the amount of IRA money that any
person who declares bankruptcy can shield from his or her creditors.
Just because it is a retirement account does not mean you can get away
from paying your debts with it. This is just plain wrong because this
is anti fraud and abuse reform, and it is badly needed. I strongly urge
my colleagues to reject the amendment.
I wish to point out that we put the exclusion of rollovers in the
bill at the request of the Senator from Massachusetts. So if the
Senator is concerned about administrative burdens, we would be happy to
take out the exclusion of rollovers. But my point to the Senator from
Massachusetts is that we cannot have this both ways.
I also suggest that I was lobbied against any restriction. I was
lobbied on the protection of pensions and IRAs from being a source of
repayment to creditors--not by individuals going into bankruptcy or
people who had strongly felt views as individuals that this money
should be protected from the creditors.
The source of interest in this legislation came from the pension and
insurance industries of my State who felt they did not want to be
bothered by the bankruptcy courts, so they wanted to retain protection
for pensions and for IRAs. They tried to make this historical claim
that it had always been this way. It is one thing to work on the floor
of the Senate to protect the interests of the little guy who is going
into bankruptcy; it is also OK to work on the Senate floor to make sure
we do preserve the ability of people to retire with dignity. It is
quite another thing to protect the interests of those who want to
retain a high lifestyle after they have gone into bankruptcy and, at
the same time, be in retirement. But it is quite another thing to
protect the interests of all the big business companies of America that
are writing this business and don't somehow want to deal with the
bankruptcy courts.
I ask my colleagues to oppose the amendment by the Senator from
Massachusetts. I yield the floor.
The PRESIDING OFFICER. The Senator from Massachusetts is recognized.

[[Page S2151]]

Mr. KENNEDY. Mr. President, I hope my friend from Iowa will continue
to reason with us a little bit about this particular provision. I point
out to him that for a long time in the Senate I have been interested in
championing the interests of working families and the interests that
deal not only with the basic issues of education, health, and housing,
but also retirement programs. That is a key element. The Senator knows,
as a member of the Finance Committee, how much of the tax expenditures
go to individuals making over $100,000, what the general taxpayers are
paying under tax expenditures at the present time that are being
deducted. Those are the higher income groups. There is very little for
working families, and he understands that very well as a member of the
Finance Committee.
I don't retreat a single step in terms of my desire to make sure we
are going to have sound retirement programs for working families,
schoolteachers, and other workers. The illustration that the Senator
from Iowa gave us about some doctor who had all of these savings is not
applicable. It doesn't even relate to what we are talking about because
there is only a $2,000 contribution that one can make to an IRA. Who
uses the IRAs? Basically, it is the working families. The Senator
understands that. Who uses the 401(k)? They are basically the more
affluent individuals in our society. Those are the facts.
But it is interesting that the bill the Senator has introduced
protects the 401(k), but not the IRA. So I don't want to have any
misunderstanding. The Senator's position is protecting the 401(k)--
$10,500 a year can be put in an 401(k), but only $2,000 in IRAs. This
is a millionaire's loophole? The Senator knows as well as I that you
haven't even got anybody who qualifies for the cap on IRAs at $2,000 a
year because the IRAs haven't been around long enough. You have tens of
thousands, hundreds of thousands of people in 401(k)s. But 401(k)s are
not going to be touched by the bankruptcy court. Oh, no, just the IRAs,
which serve whom? Working families--with limits of $2,000.
The more we get into this, the more difficulty we have in
understanding what the logic is in terms of defending 401(k)s. The fact
has been, historically, that it has been the opinion of the Congress--
with the exception of this Congress and this bill--that retirement
moneys would not be included in terms of the bankruptcy provisions.
They earned it and set it aside as retirement funds, and it would not
be included. In the course of our hearings on bankruptcy, there were
very few that would allege this kind of circumvention in terms of IRAs.
If the Senator is able to give me examples, or hearings, or testimony
on where we had all of these abuses in the IRAs--we are talking about a
schoolteacher making $40,000 a year who puts aside $2,000 in order that
they can retire and have substantially similar kinds of income when
they retire. They would have to do it probably for 35 years in order to
be able to get the kinds of resources allocated so that they are going
to be able to do it. Those are not the people we are talking about in
terms of gypping the credit card companies and the banks. The Senator
knows that.
The Senator knows that. I do not understand why we treat these
retirement funds differently: One way for 401(k)s and another for the
IRAs, which is the appropriate device working families have used and
with which they are increasingly developing some confidence.
We are going to be debating, we hope, Social Security. The average
Social Security is $13,000. That is the average Social Security check.
Eighty percent of those on Social Security live below $25,000. We have
to ask: What are we going to do to encourage individuals to save,
particularly working families? We have not done a very good job of it
as a matter of public policy. We have done a very poor job.
We do a very good job with respect to the most affluent members of
our society. We have all kinds of tax support in the Internal Revenue
Code, but for working families, we do a very poor job.
This is one of those small areas, the IRAs, that is open to working
families and on which we do not mind putting on the additional cap. On
the other side, we have serious reservations putting a cap on the
401(k). I do not think that is fair.
Also, undermining retirement money that has been paid in over a
lifetime, which may very well be a lifeline for that family, can be
eliminated, wiped out, in 4 days of catastrophic illness in a hospital.
That is what we are talking about. Four days of a catastrophic illness
for themselves, a wife or child, and it is wiped out. That is what the
current bill will do.
We encourage people to work hard, play by the rules all their lives,
and put something aside with which to retire in peace and dignity. I
caught myself getting choked up when the Senator talked about a
millionaire's tax loophole because it is not; it is $2,000 a year. One
has to contribute for an awful long time to use this as a gimmick.
There are a whole lot of other gimmicks in this bill, such as the
homestead provision and other provisions that can be used a lot easier
than this one.
For these reasons, I hope we prevail.
The PRESIDING OFFICER (Ms. Collins). The Senator from Iowa.
Mr. GRASSLEY. Madam President, the Senator from Massachusetts is
digging a hole for himself. No. 1, he talks about the difference
between 401(k)s and IRAs. He can mention $2,000, he can mention
$10,000, but there is a cap of $1 million. That means up to $1 million
is not subject to bankruptcy.
Then he mentioned IRAs and 401(k)s. I remind the Senator from
Massachusetts that 401(k)s are not covered because he objected to their
being covered, and we took them out. They are not part of it, not
because that is the way I want it. I think 401(k)s ought to be capped
at $1 million as well, if there is a cap at all. Madam President,
401(k)s are different than the individual retirement accounts capped at
$1 million, because that is what Senator Kennedy requested we do.
The other thing mentioned was about my being chairman of the Senate
Finance Committee and tax expenditures. First of all, I do not buy the
philosophy of tax expenditures because that implies every penny working
men and women in America earn belongs to the Federal Government and we
are going to let them keep some of their own money. I start from the
premise that the hard-working men and women of America, every penny
they earn is their money, and we tax them for part of it.
Just in case there is some injustice under present pension laws--I
admit there are injustices in present pension laws. The Senator from
Florida, Mr. Graham, and I have introduced legislation to correct some
of those inequities and particularly to correct some of those
inequities to benefit the very low-income wage earners to whom Senator
Kennedy is saying we do not give enough credit.
Before this Congress is done, hopefully even before the first bill
gets to the President of the United States, we will have passed some
tax legislation to take care of some of those inequities in the pension
laws of the United States, plus the fact that we had legislation out of
our committee last year that increased the $2,000 IRA limit to a $5,000
IRA limit.
I want to get back to the reason for having this $1 million cap on
individual retirement accounts, that anything over that is not
protected from the creditors.
Let's get it clear: Below $1 million is protected from the creditors
in bankruptcy court. I quote from President Clinton's administration in
their support of the concept of the cap. This is last year's
legislation as we were discussing this issue then. The Department of
Justice said:

A debtor should not be able to shield abundant resources
from creditors, including Federal, State, and local
governments, in the form of retirement savings.

I quote from the Securities and Exchange Commission:

We have seen insider traders do their trading through IRAs
and fraud participants stash their profits in their IRAs. The
State law exemptions have not defeated our Federal statutory
claims to date, but a new Federal exemption could do so. I am
concerned about the grave potential abuse that the exemption
for all retirement assets from bankruptcy estates poses.

That is a letter from Judith R. Starr, assistant chief litigation
counsel, Securities and Exchange Commission, to members of my staff.
The Department of Labor:

[[Page S2152]]

A fresh start is not meaningful if it requires a debtor to
accept an impoverished retirement. However, a debtor should
not be able to inappropriately shield resources from
creditors, including Federal, State, and local governments in
the forms of retirement savings.

That is a letter from the Secretary of Labor to Senator Hatch, April
14, 1999.
On the other hand, there are those among my colleagues across the
aisle who oppose the $1 million IRA cap that would prevent, to some
degree, the rich from shielding wealth from creditors in an IRA. In my
view, a wealthy debtor should not be able to shield large amounts of
wealth from creditors in an IRA or in a home.
The compromise provisions in the bill that we worked out with members
of the other party last year make important improvements over current
law and should be retained.
Accordingly, I urge my colleagues to oppose the effort to strip out
the individual retirement account cap. I yield the floor.
The PRESIDING OFFICER. The Senator from Massachusetts.
Mr. KENNEDY. Madam President, there may be others who want to speak
on other matters. As I mentioned earlier, the IRA was developed as a
retirement account basically for working families. The majority of
those who contribute are individuals who earn less than $30,000 a year.
These are the people who are putting in only a couple thousand dollars.
They are limited over a lifetime. You put the cap there. The retirement
program has historically been out of the reach of the credit card
companies and the bankruptcy courts, the retirement savings.

Now for the first time we are seeing an intrusion on that. There is a
cap. It is not being put in for the 401(k), basically the high rollers.
If you are not going to put it in for the 401(k)'s, you should not put
it in for the retirements for the working families. We will have a
commingling of the funding and there is a good chance there will be an
additional burden and cost in terms of the IRA. It doesn't make a great
deal of sense.
I thank my friend from Iowa. As always, he is a friend and I enjoy
working with him on many different matters. I will study more closely
his pension legislation this evening and give it a good deal of
additional thought.
The PRESIDING OFFICER. The Senator from Iowa.
Mr. GRASSLEY. Madam President, I make crystal clear when we talk
about $2,000 and $10,000 and $30,000, as the Senator from Massachusetts
has, it sounds as if we are just clamping down on people who should be
getting a fresh start in chapter 7 instead of being chapter 13 with
ability to repay.
I make very clear the first $1 million is exempted. That causes a
problem for the Senator from Massachusetts. I am embarrassed to present
a bill to the Senate of the United States that says a millionaire is
going to be protected from bankruptcy court if he can pay his bills.
Now the Senator from Massachusetts raises a very legitimate point.
There could be a catastrophic illness that could eat up a lot of the
money, even $1 million, presumably. We have even taken that into
consideration; that is, we have an interest of justice exception that
would be applicable in this case. So something over $1 million could be
exempted. I hope the Senator from Massachusetts realizes we have gone
through this last year. We tried to accommodate the Senator from
Massachusetts. We had a compromise I was embarrassed to accept in the
sense that a $1 million exemption is way too high for my background.
But I did it because I thought it was important we move this
legislation along. We are talking about just preserving in the bill
before the Senate a compromise worked out last year that would be law
today except for a pocket veto by President Clinton. Otherwise, this
Senator from Massachusetts wants to strike that compromise, and he was
part of that compromise. I guess I beg him to stick by his compromise.
I yield the floor.
Mr. DOMENICI. I ask consent to speak as in morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
THE PRESIDING OFFICER. The Senator from New Mexico is recognized.
Mr. DOMENICI. I thank the Chair.
(The remarks of Mr. Domenici pertaining to the introduction of S. 515
are located in today's Record under ``Statements on Introduced Bills
and Joint Resolutions.'')

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