BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2005; Congressional Record Vol. 151, No. 21
(Senate - March 01, 2005)

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[Pages S1834-S1857]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2005

  The PRESIDING OFFICER. The Senator from Hawaii is recognized.


                            Amendment No. 15

  Mr. AKAKA. Mr. President, I rise to speak on amendment No. 15, which 
I will offer to S. 256.
  I thank Senators Durbin, Leahy, and Sarbanes for working with me on 
this legislation, the Credit Card Minimum Payment Warning Act, and for 
cosponsoring the amendment.
  Mr. President, during all of 1980, only 287,570 consumers filed for 
bankruptcy. As consumer debt burdens have ballooned, the number of 
bankruptcies have increased significantly. From January through 
September of 2004, approximately 1.2 million consumers filed for 
bankruptcy, keeping pace with last year's record level. The growth in 
use of credit cards can partially explain this surge. Revolving debt, 
mostly compromised of credit card debt, has risen from $54 billion in 
January 1980 to more than $780 billion in November 2004. A U.S. Public 
Interest Research Group and Consumer Federation of America analysis of 
Federal Reserve data indicates that the average household with debt 
carries approximately $10,000 to $12,000 in total revolving debt.
  We must make consumers more aware of the long-term effects of their 
financial decisions, particularly in managing their credit card debt, 
so that they can avoid financial pitfalls that may lead to bankruptcy.
  While it is relatively easy to obtain credit, not enough is done to 
ensure that credit is properly managed. Currently, credit card 
statements fail to include vital information that would allow 
individuals to make fully informed financial decisions. Additional 
disclosure is needed to ensure that individuals completely understand 
the implications of their credit card use and the costs of only making 
the minimum payments as required by credit card companies.
  S. 256 includes a requirement that credit card issuers provide 
additional information about the consequences of making minimum 
payments. However, this provision fails to provide the detailed 
information for consumers on their billing statement that our amendment 
would provide. Section 1301 of the bankruptcy bill would allow credit 
card issuers a choice of disclosures that they must provide on the 
monthly billing statement.
  The first option included in the bankruptcy bill would require a 
``Minimum Payment Warning'' stating that it would take 88 months to pay 
off a balance of $1,000 for bank card holders or 24 months to pay off a 
balance of $300 for retail card holders. It would require a toll-free 
number to be established that would provide an estimate of the time it 
would take to pay off the customer's balance. The Federal Reserve Board 
would be required to establish a table that would estimate approximate 
number of months it would take to pay off a variety of account 
balances.
  There is a second option that the legislation permits. The credit 
card issuer could provide a general minimum payment warning and provide 
a toll-free number that consumers could call for the actual number of 
months to repay the balance.
  Both of these options are inadequate. They do not require the issuers 
to provide their customers with the total amount they would pay in 
interest and principal if they chose to pay off their balance at the 
minimum payment rate. The minimum payment warning included in the first 
option underestimates the costs of paying a balance off at the minimum 
payment. Since the average household with debt carries a balance has 
approximately $10,000 to $12,000 in total revolving debt, a warning 
based on a much smaller balance, $1,000 or under in this case, will not 
be helpful. If a family has a credit card debt of $10,000, and the 
interest rate is a modest 12.4 percent, it would take more than 10\1/2\ 
years to pay off the balance while making minimum monthly payments of 4 
percent.
  As we make it more difficult for consumers to discharge their debts 
in bankruptcy, we have a responsibility to provide additional 
information so that consumers can make better informed decisions. Our 
amendment will make it very clear what costs consumers will incur if 
they make only the minimum payments on their credit cards. If this 
amendment is adopted, the personalized information they will receive 
for each of their accounts will help them to make informed choices 
about the payments that they choose to make towards reducing their 
outstanding debt.
  This amendment requires a minimum payment warning notification on 
monthly statements stating that making the minimum payment will 
increase the amount of interest that will be paid and extend the amount 
of time it will take to repay the outstanding balance. The amendment 
also requires companies to inform consumers of how many years and 
months it will take to repay their entire balance if they make

[[Page S1835]]

only the minimum payments. In addition, the total cost in interest and 
principal, if the consumer pays only the minimum payment, would have to 
be disclosed. These provisions will make individuals much more aware of 
the true costs of their credit card debts. The amendment also requires 
that credit card companies provide useful information so that people 
can develop strategies to free themselves of credit card debt. 
Consumers would have to be provided with the amount they need to pay to 
eliminate their outstanding balance within 36 months.
  Finally, our amendment would require that creditors establish a toll-
free number so that consumers can access trustworthy credit counselors. 
In order to ensure that consumers are referred from the toll-free 
number to only trustworthy organizations, the agencies for referral 
would have to be approved by the Federal Trade Commission and the 
Federal Reserve Board as having met comprehensive quality standards. 
These standards are necessary because certain credit counseling 
agencies have abused their nonprofit, tax-exempt status and have taken 
advantage of people seeking assistance in managing their debts. Many 
people believe, sometimes mistakenly, that they can place blind trust 
in nonprofit organizations and that their fees will be lower than those 
of other credit counseling organizations. Too many individuals may not 
realize that the credit counseling industry does not deserve the trust 
that consumers often place in it.
  Our credit card minimum payment warning legislation has been endorsed 
by the Consumer Federation of America, Consumers Union, U.S. Public 
Interest Research Group, and Consumer Action.
  I urge my colleagues to support this amendment that will empower 
consumers by providing them with detailed personalized information to 
assist them in making better informed choices about their credit card 
use and repayment. This amendment makes clear the adverse consequences 
of uninformed choices, such as making only minimum payments, and 
provides opportunities to locate assistance to better manage their 
credit card debts.
  Mr. President, I ask unanimous consent that the pending amendment be 
set aside, and I call up amendment No. 15.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Hawaii [Mr. Akaka], for himself, Mr. 
     Durbin, Mr. Leahy, and Mr. Sarbanes, proposes an amendment 
     numbered 15.

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

  (Purpose: To require enhanced disclosure to consumers regarding the 
consequences of making only minimum required payments in the repayment 
              of credit card debt, and for other purposes)

        On page 473, strike beginning with line 12 through page 
     482, line 24, and insert the following:

     SEC. 1301. ENHANCED CONSUMER DISCLOSURES REGARDING MINIMUM 
                   PAYMENTS.

       (a) Disclosures Regarding Outstanding Balances .--Section 
     127(b) of the Truth in Lending Act (15 U.S.C. 1637(b)) is 
     amended by adding at the end the following:
       ``(11)(A) Information regarding repayment of the 
     outstanding balance of the consumer under the account, 
     appearing in conspicuous type on the front of the first page 
     of each such billing statement, and accompanied by an 
     appropriate explanation, containing--
       ``(i) the words `Minimum Payment Warning: Making only the 
     minimum payment will increase the amount of interest that you 
     pay and the time it will take to repay your outstanding 
     balance.';
       ``(ii) the number of years and months (rounded to the 
     nearest month) that it would take for the consumer to pay the 
     entire amount of that balance, if the consumer pays only the 
     required minimum monthly payments;
       ``(iii) the total cost to the consumer, shown as the sum of 
     all principal and interest payments, and a breakdown of the 
     total costs in interest and principal, of paying that balance 
     in full if the consumer pays only the required minimum 
     monthly payments, and if no further advances are made;
       ``(iv) the monthly payment amount that would be required 
     for the consumer to eliminate the outstanding balance in 36 
     months if no further advances are made; and
       ``(v) a toll-free telephone number at which the consumer 
     may receive information about accessing credit counseling and 
     debt management services.
       ``(B)(i) Subject to clause (ii), in making the disclosures 
     under subparagraph (A) the creditor shall apply the interest 
     rate in effect on the date on which the disclosure is made.
       ``(ii) If the interest rate in effect on the date on which 
     the disclosure is made is a temporary rate that will change 
     under a contractual provision specifying a subsequent 
     interest rate or applying an index or formula for subsequent 
     interest rate adjustment, the creditor shall apply the 
     interest rate in effect on the date on which the disclosure 
     is made for as long as that interest rate will apply under 
     that contractual provision, and then shall apply the adjusted 
     interest rate, as specified in the contract. If the contract 
     applies a formula that uses an index that varies over time, 
     the value of such index on the date on which the disclosure 
     is made shall be used in the application of the formula.''.
       (b) Access to Credit Counseling and Debt Management 
     Information.--
       (1) Guidelines required.--
       (A) In general.--Not later than 1 year after the date of 
     enactment of this Act, the Board of Governors of the Federal 
     Reserve System and the Federal Trade Commission (in this 
     section referred to as the ``Board'' and the ``Commission'', 
     respectively) shall jointly, by rule, regulation, or order, 
     issue guidelines for the establishment and maintenance by 
     creditors of a toll-free telephone number for purposes of the 
     disclosures required under section 127(b)(11) of the Truth in 
     Lending Act, as added by this Act.
       (B) Approved agencies.--Guidelines issued under this 
     subsection shall ensure that referrals provided by the toll-
     free number include only those agencies approved by the Board 
     and the Commission as meeting the criteria under this 
     section.
       (2) Criteria.--The Board and the Commission shall only 
     approve a nonprofit budget and credit counseling agency for 
     purposes of this section that--
       (A) demonstrates that it will provide qualified counselors, 
     maintain adequate provision for safekeeping and payment of 
     client funds, provide adequate counseling with respect to 
     client credit problems, and deal responsibly and effectively 
     with other matters relating to the quality, effectiveness, 
     and financial security of the services it provides;
       (B) at a minimum--
       (i) is registered as a nonprofit entity under section 
     501(c) of the Internal Revenue Code of 1986;
       (ii) has a board of directors, the majority of the members 
     of which--

       (I) are not employed by such agency; and
       (II) will not directly or indirectly benefit financially 
     from the outcome of the counseling services provided by such 
     agency;

       (iii) if a fee is charged for counseling services, charges 
     a reasonable and fair fee, and provides services without 
     regard to ability to pay the fee;
       (iv) provides for safekeeping and payment of client funds, 
     including an annual audit of the trust accounts and 
     appropriate employee bonding;
       (v) provides full disclosures to clients, including funding 
     sources, counselor qualifications, possible impact on credit 
     reports, any costs of such program that will be paid by the 
     client, and how such costs will be paid;
       (vi) provides adequate counseling with respect to the 
     credit problems of the client, including an analysis of the 
     current financial condition of the client, factors that 
     caused such financial condition, and how such client can 
     develop a plan to respond to the problems without incurring 
     negative amortization of debt;
       (vii) provides trained counselors who--

       (I) receive no commissions or bonuses based on the outcome 
     of the counseling services provided;
       (II) have adequate experience; and
       (III) have been adequately trained to provide counseling 
     services to individuals in financial difficulty, including 
     the matters described in subparagraph (F);

       (viii) demonstrates adequate experience and background in 
     providing credit counseling;
       (ix) has adequate financial resources to provide continuing 
     support services for budgeting plans over the life of any 
     repayment plan; and
       (x) is accredited by an independent, nationally recognized 
     accrediting organization.

  The PRESIDING OFFICER (Mr. Chambliss). The Senator from 
Massachusetts.
  Mr. KENNEDY. Mr. President, we have a lot of urgent problems pressing 
the Nation and this Congress. We have urgent problems with joblessness. 
We have urgent problems with the coverage of health care and the costs 
of health care. We have urgent problems with education. We have urgent 
problems dealing with poverty. We have problems that go to the heart of 
fairness and opportunity in this Nation. These are real problems of 
real people, and they test whether our commitment to America's core 
values is as important to us as we say it is. But we are not spending 
this month on any of those issues. We are spending most of the time 
between now and the March recess on a bill that does nothing about any 
of these problems, that does nothing for Americans facing job problems,

[[Page S1836]]

health problems, and education challenges. We are spending our time on 
a bill that was written by the credit card industry for the benefit of 
the credit card industry. We are spending our time on changes in the 
bankruptcy law which were opposed by the two distinguished national 
commissions which studied those laws during the 1970s and 1990s.
  This is a bill which is opposed by a long list of organizations 
representing many millions of real people, organizations representing 
workers, retired Americans, consumers, women's organizations, civil 
rights organizations, a large group of distinguished law professors and 
bankruptcy judges, 1,700 prominent doctors around the country, and even 
some financial service organizations that are truly responsible lenders 
and care about their customers. I am talking about people such as the 
CEO of ING Direct, the sixth largest thrift institution in the Nation; 
people like the CEO of the second largest credit union in the U.S., the 
North Carolina State Employees' Credit Union.
  This is what the CEO of ING Direct told the committee about the bill:

       The one-sided provisions of this bankruptcy legislation are 
     bad news for consumers, but they are also bad news for the 
     financial service industry. Consumers are our customers. By 
     creating a form of debt imprisonment, this bill will hobble 
     the most important player in the world economy, the American 
     consumer.

  Jim Blaine, the CEO of the North Carolina State Employees' Credit 
Union, had this to say about the bill:

       This bird is a turkey.

  So why are we here? Why are we spending our time on this supposed 
resolution to a nonexistent problem rather than addressing the real 
problems the Nation faces? It cannot be because the credit card 
industry needs help. The credit card industry is doing just fine, thank 
you. The profits of the credit card industry rose from $6.4 billion in 
1990 to $20 billion in 2000. By last year, those profits had increased 
another 50 percent to over $30 billion. Let me say that again. Credit 
card company profits have gone from $6.4 billion in 1990 to $30.2 
billion last year. Why are we spending our time on legislation designed 
to further enrich what is already one of the most profitable industries 
in America at the expense of middle-income Americans in financial 
distress, in most cases through no fault of their own?
  This is supposed to be a bill about spendthrifts, about people who 
abuse the credit system and abuse the bankruptcy system. If that were 
really what this bill was about, maybe there would be some reason for 
us to be here. If this were a bill that dealt with the truly incredible 
abuses of the bankruptcy system that we have seen in the Enron case, in 
the WorldCom case, in the Adelphia case, and the Polaroid case in my 
own State, then maybe there would be reason to be spending our time 
working on this bill.

  Look at the Polaroid case in my home State of Massachusetts. Polaroid 
filed for bankruptcy in 2001. In the months leading up to the company's 
filing, the corporation made $1.7 million in incentive payments to its 
chief executive Gary DiCamillo on top of his $840,000 base salary. The 
company also received bankruptcy court approval to make $1.5 million in 
payments to senior managers to keep them on board. These managers 
collectively received an additional $3 million when the company's 
assets were sold off.
  By contrast, just days before Polaroid filed for bankruptcy, it 
canceled health and life insurance for more than 6,000 retirees and 
canceled health insurance coverage for workers on long-term disability. 
It also stopped certain benefits for thousands of workers who were 
recently laid off. Polaroid workers had been required to pay 8 percent 
of their pay in the company's employee stock ownership plan, the ESOP 
programs. When the company declined, their retirement savings were 
virtually wiped out. Now, that is a real abuse of the bankruptcy 
system.
  But this bill is not about consumers who abuse the system. It is not 
about corporate executives who have exploited the system to line their 
own pockets. This is a bill for which the credit card industry hopes to 
squeeze a few extra dollars a month out of Americans who are out on 
their luck, people who have been hit hard by medical disasters, 
guardsmen and reservists who have suddenly been called to duty to serve 
their Nation, forcing them to leave their families and their businesses 
behind, people who were fired after years of hard work because their 
employer sent their jobs abroad. This is not what the Senate should be 
doing. This legislation is not worthy of the Senate. Our time should be 
spent helping, not hurting, the working families most in need.
  This bill does nothing to protect those hard-working Americans who 
did everything they could to stave off bankruptcy but were left with no 
other choice after exhausting their own resources. Yet this Republican 
bill actually makes it more difficult for good citizens such as these 
to get the fresh start that the bankruptcy laws are intended to offer.
  The idea of a fresh start lies at the heart of our bankruptcy law. In 
1833, Supreme Court Justice Joseph Storey, one of the great legal 
scholars in our history, explained why. He said that bankruptcy laws 
were intended to divide debtors' remaining assets among their creditors 
when they could not pay all of their debts, but the purpose was also to 
relieve unfortunate and honest debtors from perpetual bondage to their 
creditors. He said that bankruptcy legislation should relieve the 
debtor from a slavery of mind and body which robs his family of the 
fruits of his labor.
  One hundred years later, the Supreme Court emphasized Justice Story's 
views. The Bankruptcy Act, it said, is intended to:

     relieve the honest debtor from the weight of oppressive 
     indebtedness, and permit him to start afresh free from the 
     obligations and responsibilities consequent upon business 
     misfortunes.

  The power to earn a living, the Court said, is a ``personal 
liberty,'' and:

     from the viewpoint of the wage-earner there is little 
     difference between not earning at all and earning wholly for 
     a creditor.

  In short, the same fundamental values which led this Nation to 
abolish debtors' prisons, also led us to offer debtors a fresh start. 
They would be required to use their available assets to pay as much of 
their debt as they could, but no more. They would have full rights to 
their own future earnings, so that they would not have to live in 
perpetual bondage to their past debtors.
  That is the essence of our free enterprise system. We encourage 
entrepreneurs. People can borrow money for a car to go to work, for 
equipment to start a small business, for a tractor to run a farm, for a 
boat to start a fishing business. When decent people run into financial 
trouble, we don't write them off forever. We help them get back on 
their feet so they can provide for their families and contribute to our 
economy once again. Otherwise, few in America take the risks that our 
free enterprise depends on. There is a safety net to stop a free fall.
  Yet this legislation turns its back on that spirit of American 
entrepreneurship. It tells our citizens that they cannot get that fresh 
start unless they can maneuver through a maze of procedural obstacles 
created by the credit card companies and debt collection agencies. It 
imposes paperwork burdens that bankrupt Americans can not afford. It 
forces them to pay for credit counselors, who may be predatory 
themselves. It forces them to miss work to go to audits of their meager 
assets. It requires them to hire a lawyer to mitigate this maze, but 
then tells the lawyer that any error will make the lawyer personally 
liable.
  In short, this bill does everything the mind of the purveyors of 
predatory plastic could think up to make their cardholders pay in full, 
and prevent them from getting the ``fresh start'' that bankruptcy 
offers them. Its purpose is to keep the credit card payments rolling 
in, and prevent that money from being used to feed their children or 
pay their hospital bills or make their mortgage payments. It labels 
them as abusers of the system.
  Just listen to the words in the summary of the key standard for the 
``means test'' that lies at the heart of this bill. According to this 
summary, prepared by the Congressional Research Service, you are 
presumed to be an abuser of the system:

     if current monthly income, excluding allowed deductions, 
     secured debt payments, and priority unsecured debt payments, 
     multiplied by 60, would permit a debtor to pay

[[Page S1837]]

     not less than the lesser of (a) 25 percent of nonpriority 
     unsecured debt or $6000 (or $100 a month), whichever is 
     greater, or (b) $10,000.

  Maybe some people can figure that out--most cannot. But that 
convoluted paragraph determines whether your debts can be discharged in 
bankruptcy, or not.
  This bill is flawed from top to bottom. That is why, since it was 
first presented to Congress by the credit card industry, it has been 
opposed by bankruptcy judges, legal scholars, consumer advocates, labor 
unions, and civil rights groups. They all recognize that its harsh and 
excessive provisions will have a devastating effect on working 
families.
  It allows credit card companies to put their profits ahead of the 
well-being of our troops serving in Iraq and Afghanistan. Since 9-11 
about half a million reservists arid members of the National Guard have 
been called to active duty, half a world away from their homes and 
businesses. Many of their families are suddenly facing economic 
hardship, and their creditors keep calling. They are serving far away, 
and the small businesses they ran are running into trouble. This bill 
does nothing to protect the men and women who are fighting for us.
  When one reservist left home, his wife had to start leading his 
construction company, and the company ran into trouble. Their family 
income plummeted by 80 percent. They lost their savings, lost their 
credit, and the business is on the rocks--all because a soldier served 
his country. The troubles of families like that will be even more 
serious under this bill. Instead of helping to ease the burden, it 
treats that family like tax evaders or defrauders.
  This Republican bill also penalizes innocent victims of today's 
economy. We are stil1 recovering from the 2001 recession. Nearly 8 
million Americans are still unemployed. One in five of those workers 
has been out of work for more than 6 months. The unemployment insurance 
safety net they rely on has not been updated to meet today's demands. 
Jobs in health care, financial services, and information technology are 
being shipped overseas.
  Workers who lose their jobs today have great difficulty finding a new 
job with comparable wages, benefits, hours, and overall quality. Part-
time jobs don't begin to provide the same financial stability--yet 
today's companies are relying more and more on part-time workers to cut 
costs. The average part-time worker earns $4 an hour less than a 
regular full-time worker. Few part-time workers have a health insurance 
plan or a pension plan.
  Huge numbers of working families are being squeezed hard by the 
current economy. Their ability to live the American dream is 
increasingly out of reach with each passing year. They find it harder 
and harder to earn a living--to pay the mortgage, pay the rent, pay 
their medical bill, pay their food bill, pay their gasoline bill, pay 
the college bill. Yet the cost of getting by continues to rise faster 
than family income.
  Healthcare costs are out of reach. Health insurance premiums have 
soared 59 percent in the past 4 years. Drug costs have soared 65 
percent.
  Housing costs rose 33 percent in the last 4 years. Child care can 
often cost up to $10,000 a year for one child--more than the cost of 
tuition at a public college. College costs are rising at double-digit 
rates. Tuition at public colleges has risen 35 percent in the last 4 
years.
  Today, hardworking families are balancing on a precarious tower of 
bills that keep piling. Inevitably, many topple over. They go into debt 
just to get by. The average family now spends 13 percent of its income 
to pay debts--the highest percentage since 1986. The average household 
now has more than $8,000 in credit card debt. More than half of all 
Americans acknowledge they have too much debt. Three-quarters of that 
debt is a major reason it's harder to achieve the American dream today. 
It is no wonder so many families face bankruptcy.
  This year, more people will end up in bankruptcy than suffer a heart 
attack. More people will file for bankruptcy than graduate from 
college. More children will grow up in families facing bankruptcy than 
in families facing divorce.
  Many of us feel the Bush administration is bankrupt in more ways than 
one. Its reckless policies are bankrupting the economy and literally 
bankrupting millions of families. Bankruptcy is up 33 percent since 
President Bush took office. An American now goes bankrupt every 19 
seconds. In Massachusetts, there is a bankruptcy every half hour.
  One of the greatest weaknesses of this bill is its failure to address 
the issue of bankruptcies caused by serious illness or injury. Illness 
is bankrupting millions of Americans who have done everything right. 
They have worked hard, played by the rules, earned a good salary, saved 
their money, even purchased health insurance--only to find all that is 
not enough.
  More than half of all families facing bankruptcy today are facing it 
because of overwhelming medical costs. They are not irresponsible 
spendthrifts who bought too much at the mall, or were enticed to go in 
over their heads in debt by a credit card solicitation they couldn't 
say no to. They are facing bankruptcy because of a sudden serious 
illness or a severe injury that caused a mountain of debt they couldn't 
afford.

  The average American facing a serious illness is burdened with more 
than $13,000 of out-of-pocket expenses, even though they have health 
insurance. If you have cancer, it is $35,000. That is money you have to 
pay out of your own pocket for expenses not covered by your health 
insurance.
  If the bill before us passes, those fellow citizens will be penalized 
twice--once by the failure of the health care system and a second time 
by the failure of the bankruptcy laws. This bill will only make the 
second failure even worse.
  We need to make sure that bankruptcy continues to be available as a 
safety net for those Americans--men and women who have spent down their 
savings on a serious injury or illness, who face huge doctor and 
hospital bills their insurance didn't cover, who are unable to go back 
to work after suffering serious medical problems.
  They are people such as April Wetherell, a 50-year-old woman from 
Toms River, NJ, who went back to school after raising her children and 
received her master's degree in social work. She was serving as a 
visiting nurse 2 years ago, when she suffered a stroke while recovering 
from knee surgery. The stroke left her unable to speak, work, or care 
for her own needs. At the time, April still owed $25,000 in student 
loans. She had been making payments faithfully on her student loans 
until her illness left her unable to return to her job. Her health 
insurance did not cover all her medical costs, and she was left with 
more than $20,000 in unpaid medical bills. At the time of her stroke, 
she had about $7,000 in credit card debt, which she had been paying off 
on time. Even though she had done all the right things, she was forced 
into bankruptcy because of her serious, incapacitating illness.

  Walton Pinkney of Frederick, MD, has been an electrician for more 
than 10 years. He changed jobs in 2000, and his new employer did not 
provide health benefits for the first 90 days of employment. Sadly, 
Walton suffered heart failure during his first month on his new job. 
His new health plan had not yet taken effect, and he was responsible 
for more than $45,000 in medical expenses for his heart condition. He 
tried to return to work, but his employer said his health was too 
uncertain for him to return. Faced with large medical bills he could 
not pay after he lost his job, he had to file for bankruptcy in 2003.
  Zoraya Marrero is a single mother with three children from 
Woodbridge, VA. Her oldest child suffers from spina bifida. She 
received State disability benefits and medical coverage for her child 
due to the illness. After moving to another State 5 years ago, she no 
longer qualified for new benefits, and she also had to pay back $60,000 
for benefits she had already received. She has been fighting the 
$60,000 claim and paying her own medical expenses while working in a 
doctor's office. She cannot afford private insurance, and cannot afford 
to pay for her son's costly medical care. Overwhelmed by debt, she 
filed for bankruptcy.
  These people had no intention of seeking relief in bankruptcy. They 
were not ``gaming'' the system to avoid their responsibilities. They 
and millions of other Americans in similar circumstances filed for 
bankruptcy, but

[[Page S1838]]

only after they had exhausted all the other options--not because they 
wanted to but because they had to.
  In fact, before declaring bankruptcy, they had spent at least 2 
years, on average, making very real sacrifices in a futile effort to 
pay for their health care and make ends meet. One in five went without 
food. Almost one-third had their electricity shut off.
  I am talking about individuals who went into bankruptcy as a result 
of medical expenses, even though about 65 percent of them had health 
insurance before they actually went into bankruptcy. That is what they 
did, according to the Elizabeth Warren report from the Harvard Law 
School.
  One in five went without food, almost a third had their electricity 
shut off, almost half lost their phone service, many went without 
needed medical care, and some even moved their elderly parents to less 
comfortable nursing homes.
  As this chart indicates, here is what has happened to the lavish 
lifestyle of our fellow citizens. These are half of all the 
bankruptcies at the present time. How did they live, and what did they 
do for 2 years before filing for bankruptcy? They went without needed 
medical care, 61 percent; without doctors, 50 percent; utilities turned 
off, 30 percent; without food, 22 percent; and 70 percent moved their 
elderly parents to cheaper care facilities.
  These are our fellow Americans whom we want to punish with this 
bankruptcy bill? If you want to go after the spendthrifts, let us do 
that. But do you think we are going after corporate America in this 
bankruptcy bill? Read today's newspaper. Here it is: Former WorldCom 
chief executive, once hailed as one of the most brilliant 
telecommunications executives, told the packed courtroom, ``I don't 
know about technology; I don't know about finance; also, I don't know 
about accounting.''
  There it is. The corporate CEOs will be able to escape.
  But do you think these hard-working Americans are going to be able to 
escape anything with this bill at all to deal with WorldCom, Enron, 
Polaroid? There is absolutely nothing in here. Yet there is the result 
of what this legislation does.
  Generally around here, we have legislation that is reasonably 
balanced. Not this piece of legislation. The most profitable industry 
in the country, 100-percent profits in the last 5 years, and they are 
out there trying to squeeze some additional money ought of these hard-
working Americans. I would have thought at least a majority who were 
going to write this legislation here in the Senate would have tried to 
do something about corporate bankruptcies. But, no, no. They are 
letting those individuals alone, and most of those--we come back a 
little later to discuss how they profited--a number of them even 
profited after they went into bankruptcy. There is even one individual 
who profited after he was convicted of larceny. But we are not dealing 
with those particular issues.
  We often talk in America about safety nets. Social Security is a 
safety net to guarantee financial security for senior citizens. Poverty 
programs are safety nets for children and families. Our bankruptcy laws 
are a safety net for millions of families, too.
  Americans who live responsibly, do everything right, and still 
suddenly fall on hard times deserve a second chance, and the bankruptcy 
laws give them that chance. They can make a fresh start and pull 
themselves back up. They have renewed hope for the future.
  Unexpected financial setbacks for families should not mean the end of 
their American dream. They should not lose all hope for themselves and 
their children. It's the old ``cowboy up'' philosophy--when you fall 
off your horse, you pick yourself up, dust yourself off, and start all 
over again.
  When disaster strikes, when storms buffet a community, Americans 
respond. We see the images on television and immediately we send a 
donation to help out. That's the American spirit.
  But when financial disaster strikes a family--when a business 
collapses, when medical bills pile up, when a reservist is called up 
for extended active duty, when workers lose their jobs because of a 
plant closing or outsourcing--the economic catastrophes can be hidden 
from view. That is where our bankruptcy laws come in. We got rid of 
debtors' prisons almost two centuries ago for a reason. It is the 
American spirit to help these families through financial disasters.
  But this bill will destroy that financial safety net for many, many 
citizens who deserve help.
  This legislation is a bonanza for banks and credit card companies, 
and a nightmare for millions of average Americans. It rewrites the 
bankruptcy laws in a way that kicks average families while they're 
down, in order to pad the already high profits of the credit card 
industry and other lenders. It is greed, pure and simple.
  Predatory credit card companies are doing all they can to urge 
unsuspecting citizens to pile up huge debts on their credit cards. They 
especially target the elderly, college students, and the working poor. 
They advertise nationwide. They send out billions of solicitations 
every year to entice more people to sign up for their cards. The bold 
type talks about the minimum monthly payments--but you have to read the 
fine print to see the exorbitant interest payments that inevitably 
result.
  You cannot go to any college campus, any sporting event, or your 
mailbox without being solicited for another credit card, no matter how 
many you already have. Young students, still in their teens, are 
greeted with a deluge of offers from credit card companies. Before they 
buy books and find the cafeteria, they see credit card offers with 
credit lin1its in the thousands of dollars.
  So, in many cases, the very same companies that have been trying to 
get a bill like this passed for decades and had their lobbyists write 
this bill for them in 1997, are the ones who caused the indebtedness 
that they now complain about.
  Does this bill do anything abut that? Absolutely not.
  A lot has changed since the Senate last looked at this bill 4 years 
ago. Health costs are way up, health insurance protection is less 
obtainable and less affordable, hundreds of thousands of families have 
suffered economically from military callups, unemployment insurance has 
not been updated.
  The economy is still working its way out of a serious downturn. 
Corporate mismanagement and fraud have become a way of life in the 
highest echelons of corporate America.
  So I say to each of our colleagues, please consider who wrote this 
bill and why. Please think about your hard-working constituents who 
will be dealt a double whammy by this bill if they fall on hard times. 
Please think about what has happened since we last considered the bill. 
Please keep an open mind as we discuss the serious problems with this 
bill and the need for many substantial revisions and additions before 
it is ready to even be considered for adoption by this body.
  We do not work for the credit card companies; we work for our 
constituents. We can do better than this bill for our constituents, and 
we must do better than this bill for those we represent.
  Mr. President, I will unanimous consent to have printed in the Record 
some of the letters opposing the bill. I will not include all of the 
letters, but I am going to quote from some of them at this time.
  First of all, I refer to a letter from ING Direct to the American 
Bankers Association urging them to reconsider their support for the 
bill:

       As a member of the American Bankers Association, ING Direct 
     urges you to reconsider your wholesale support for the 
     Bankruptcy Reform Bill currently before the United States 
     Senate. . . . Yet this legislation has not received a 
     thorough review in the last 4 years. It has simply been 
     reproposed without careful thought. . . . It actually 
     encourages further bad lending decisions by removing an 
     important market discipline--the possibility of a clean 
     bankruptcy. Without important changes, millions of consumers, 
     who might otherwise be encouraged into debt by aggressive 
     credit card companies and other lending. They will be unable 
     to clear their names, even if they fall into debt because of 
     an illness or an economic downturn that costs them their 
     employment.
       We at ING Direct believe this country is still willing to 
     give working Americans--the engine of our economy, a second 
     chance when debt overwhelms them. This bill seriously limits 
     that second chance. The one-sided provisions of this 
     bankruptcy legislation are bad news for most Americans. But 
     they are also bad news for the financial services industry. 
     By creating a form of debt imprisonment, this bill will 
     hobble the most important player in the world economy--the

[[Page S1839]]

     American working family. For all these reasons, we ask you to 
     reconsider the ABA's support of this bill in its current 
     incarnation.

  This is written by Arkadi Kuhlmann who is the president of the 
company. It is the sixth largest thrift savings company in the country.
  The second letter is from the Consumers Union:

       Much evidence suggests that rising consumer bankruptcies 
     are tied to abusive lending practices by creditors. Yet this 
     bill does nothing to address this fundamental problem. 
     Instead, the bill protects predatory lenders who offer 
     credit, with abusive repayment terms, to high-risk consumers. 
     It also provides creditors with additional opportunities to 
     employ strong-arm collection tactics, threatening debtors 
     with new, costly litigation.

  Furthermore, the bill protects credit card companies who fail to 
disclose the true cost of credit they provide to college students and 
others, who may quickly find themselves trapped in serious debt, 
ruining their credit ratings for years to come.
  This is what they are pointing out.
  Furthermore, the bill protects credit card companies who fail to 
disclose the true cost of credit they provide to college students and 
others who may quickly find themselves trapped in serious debt, ruining 
their credit rating for years to come.
  I will include those sections. The list goes on. I have a number of 
letters and communications from consumer groups, from women's groups, 
children's groups, and from the doctors association that has been 
formed to bring focus and attention to the impact of this legislation 
and medical bills on families. I will also include in the Record a 
letter from one of the largest credit unions in the country from North 
Carolina. I ask unanimous consent that several of these letters be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                  National Women's Law Center,

                                Washington, DC, February 23, 2005.
     Re: Oppose S. 256, The Bankruptcy Act of 2005

       Dear Senator: The National Women's Law Center is writing to 
     urge you to oppose S. 256, a bankruptcy bill that is harsh on 
     economically vulnerable women and their families, but that 
     fails to address serious abuses of the bankruptcy system by 
     perpetrators of violence against patients and health care 
     professionals at women's health care clinics.
       This bill would inflict additional hardship on over one 
     million economically vulnerable women and families who are 
     affected by the bankruptcy system each year: those forced 
     into bankruptcy because of job loss, medical emergency, or 
     family breakup--factors which account for nine out of ten 
     filings--and women who are owed child or spousal support by 
     men who file for bankruptcy. Contrary to the claims of some 
     proponents of the bill, low- and moderate-income filers--who 
     are disproportionately women--are not protected from most of 
     its harsh provisions, and mothers owed child or spousal 
     support are not protected from increased competition from 
     credit card companies and other commercial creditors during 
     and after bankruptcy that will make it harder for them to 
     collect support.
       The bill would make it more difficult for women facing 
     financial crises to regain their economic stability through 
     the bankruptcy process. S. 256 would make it harder for women 
     to access the bankruptcy system, because the means test 
     requires additional paperwork of even the poorest filers; 
     harder for women to save their homes, cars, and essential 
     household items through the bankruptcy process; and harder 
     for women to meet their children's needs after bankruptcy 
     because many more debts would survive.
       The bill also would put women owed child or spousal support 
     who are bankruptcy creditors at a disadvantage. By increasing 
     the rights of many other creditors, including credit card 
     companies, finance companies, auto lenders and others, the 
     bill would set up an intensified competition for scarce 
     resources between mothers and children owed support and these 
     commercial creditors during and after bankruptcy. The 
     domestic support provisions in the bill may have been 
     intended to protect the interests of mothers and children; 
     unfortunately, they fail to do so.
       Moving child support to first priority among unsecured 
     creditors in Chapter 7 sounds good, but is virtually 
     meaningless; even today, with no means test limiting access 
     to Chapter 7, fewer than four percent of Chapter 7 debtors 
     have anything to distribute to unsecured creditors. In 
     Chapter 13, the bill would require that larger payments be 
     made to many commercial creditors; as a result, payments of 
     past-due child support would have to be made in smaller 
     amounts and over a longer period of time, increasing the risk 
     that child support debts will not be paid in full. And, when 
     the bankruptcy process is over, women and children owed 
     support would face increased competition from commercial 
     creditors. Under current law, child and spousal support are 
     among the few debts that survive bankruptcy; under this bill, 
     many additional debts would survive. But once the bankruptcy 
     process is over, the priorities that apply during bankruptcy 
     have no meaning or effect. Women and children owed support 
     would be in direct competition with the sophisticated 
     collection departments of commercial creditors whose 
     surviving claims would be increased.
       At the same time, the bill fails to address real abuses of 
     the bankruptcy system. Perpetrators of violence against 
     patients and health care professionals at women's health 
     clinics have engaged in concerted efforts to use the 
     bankruptcy system to evade responsibility for their illegal 
     actions. This bill does nothing to curb this abuse.
       The bill is profoundly unfair and unbalanced. Unless there 
     are major changes to S. 256, we urge you to oppose it.
           Very truly yours,
     Nancy Duff Campbell,
       Co-President.
     Marcia Greenberger,
       Co-President.
     Joan Entmacher,
       Vice President and Director, Family Economic Security.
                                  ____



                            National Consumer Law Center Inc.,

                                    Boston, MA, February 28, 2005.
       Dear Senator: The National Consumer Law Center, on behalf 
     of its low income clients, writes to express our strong 
     opposition to S. 256, the ``Bankruptcy Abuse and Consumer 
     Protection Act of 2005.'' This bill would hurt many Americans 
     who are facing financial problems due to job loss, transition 
     to lower paying jobs, divorce, child-rearing, lack of medical 
     insurance, or predatory lending practices. Although the 
     economy has improved recently for some American families, 
     there are millions of other families that continue to 
     struggle. In fact, real incomes have declined since 1989 for 
     the lowest 60 percent of the American population--including 
     especially single parent households. S. 256 contains a 
     shocking number of provisions which would have a severe 
     impact on families who desperately need to preserve their 
     homes from foreclosure and their cars from repossession, or 
     to focus their income on reasonable and necessary support for 
     dependent children. Here are just a few things the bill's 
     sponsors have failed to discuss:
       The key cause of the increase in bankruptcies is surely 
     that more families owe more money. The amount of consumer 
     credit outstanding increased from 789 billion dollars in 1990 
     to 1.7 trillion dollars in 2001. During this time, there was 
     a steady increase in the amount of debt payments American 
     families made as a percentage of their disposable income. 
     Although the total number of bankruptcies has increased, the 
     number of bankruptcies in relation to the amount of credit 
     outstanding has actually gone down.
       A big part of the equation is that some segments of the 
     credit industry, such as credit card companies, make huge 
     profits from lending to American families who cannot afford 
     to pay big card balances and who therefore pay interest on 
     those balances at rates of 29 percent or higher. It is not 
     surprising that when the credit industry sends three billion 
     credit card solicitations each year, they reach some 
     significant portion of American families who will ultimately 
     have financial problems.
       The journal Health Affairs recently published a path-
     breaking joint study by researchers at Harvard Law School and 
     Harvard Medical School that reveals alarming information 
     about the medical causes of bankruptcy. The researchers found 
     that illness and medical bills contributed to at least 46.2 
     percent, and as many as 54.5 percent of all bankruptcy 
     filings. Families with children were especially hard hit--
     about 700,000 children lived in families that declared 
     bankruptcy in the aftermath of serious medical problems.
       Cutting down the number of bankruptcy filings will not 
     result in savings for the credit industry or for other 
     consumers. The vast majority of debt discharged in bankruptcy 
     would not be paid back in any event, since the debtors 
     involved simply cannot afford to pay. A number of studies 
     have shown that the ``means test'' will raise little in new 
     money for creditors.
       S. 256 contains a variety of poorly conceived provisions 
     which are discussed in more detail in our paper entitled, 
     ``What's Wrong with S. 256, Let Us Count the Ways . . .'', 
     available at: http://www.nclc.org/. If enacted, S. 256 would:
       Subject debtors to a ``means test'' that fails to screen 
     for abuse and instead penalizes honest debtors by imposing 
     additional costs and filing burdens.
       Create a ``safe harbor'' from the means test for low-income 
     debtors, but still subject them to increased costs and filing 
     requirements.
       Require stricter scrutiny of low-income debtors' expenses 
     in chapter 13 than higher income debtors and make some 
     debtors too rich for chapter 7 and too poor for chapter 13.
       Erode bankruptcy's fresh start by making more debts 
     nondischargeable in both chapters 7 and 13.
       Promote predatory lending by encouraging creditors to take 
     liens on household goods of nominal value.
       Create new creditor opportunities for reaffirmation abuses 
     by weakening current debtor protections and giving creditors 
     safe harbor from liability.

[[Page S1840]]

       Undermine debtors' ability to save homes and cars in 
     chapter 13.
       Drastically reduce fundamental protections afforded debtors 
     under the automatic stay.
       Provide vast new opportunities for identity theft and other 
     privacy invasion by making public tax returns and sensitive 
     financial documents of consumers who file bankruptcy.
       As an organization which represents poor people, the 
     National Consumer Law Center vehemently disputes the credit 
     industry position that S. 256 will not hurt low-income 
     debtors. It is precisely those debtors who would be hurt the 
     most. The myriad new procedural requirements together with 
     the dozens of provisions which give creditors an opportunity 
     to pursue new types of litigation against debtors will raise 
     the cost of bankruptcy for all debtors. Other provisions will 
     take away important rights under current bankruptcy law to 
     save homes from foreclosure and evictions, and to challenge 
     predatory lending practices. Now is not the time to cut back 
     on the availability of a system which provides a second 
     chance to the unfortunate in the form of a fresh financial 
     start.
           Sincerely,
     Willard P. Ogburn,
       Executive Director.
     John Rao,
       Attorney.
                                  ____

         A National Health Program, Selected Massachusetts 
           Physician Co-Signers,
                                   Chicago, IL, February 14, 2005.
       Dear Senator Kennedy: We write, as physicians, to urge 
     rejection of Senate Bill 256, which would make bankruptcy 
     filing more difficult and punitive for millions of Americans 
     driven to financial ruin by medical problems. As health costs 
     spiral upward and insurance coverage shrinks, more and more 
     of our patients find that illness results in financial 
     catastrophe and bankruptcy. Only universal, comprehensive 
     health insurance coverage under a national health insurance 
     plan can really solve this problem. But pending such 
     solution, many families' only chance for financial recovery 
     lies in the limited protections available through the 
     bankruptcy courts.
       Last year one million Americans filed for bankruptcy in a 
     last-ditch effort to deal with the fallout from a serious 
     medical problem. Unfortunately, the very week that a Harvard 
     Medical/Law School study documented this fact, legislation 
     was re-filed that would greatly reduce the bankruptcy 
     protections available to the medically bankrupt. S. 256 would 
     drive up costs for every family filing for bankruptcy, 
     regardless of whether the reason is too many trips to the 
     mall or a visit to the emergency room. S. 256 would also 
     narrow bankruptcy protection for all families, increasing the 
     ability of creditors to collect from their debtors after 
     bankruptcy regardless of the reason for bankruptcy, and 
     causing many more families to lose their homes and their cars 
     because of medical problems.
       We are particularly worried that more punitive bankruptcy 
     laws will further erode access to care for many families 
     under financial duress and result in preventable suffering 
     and even death. Already, families who file for medical 
     bankruptcy suffer severe privations. According to the Harvard 
     study: 61 percent of medical bankrupts didn't seek medical 
     treatments they needed; 50 percent failed to fill a 
     prescription; 22 percent went without food; 7 percent moved 
     their elderly parents to cheaper care facilities.
       We make a plea for the one million sick and injured people 
     who turned to the bankruptcy system for relief last year. 
     Please reject S. 256.
           Sincerely,

                                     Julius B. Richmond, M.D.,

                           Past U.S. Surgeon General and Professor
     Emeritus, Harvard Medical School.
                                  ____

                                                February 14, 2005.

  Harvard Study Shows Legislation a Danger to Millions Bankrupted by 
                             Medical Bills


               Physicians Urge Congress to Reject S. 256

       On the heels of a major Harvard University study showing 
     that half of all personal bankruptcies are due to illness or 
     medical bills, more than 1,700 American physicians signed a 
     letter released today opposing legislation that would remove 
     protection from patients financially ruined by medical costs.
       Bankruptcy law currently offers some protection to the 
     millions of Americans affected by medical bankruptcies each 
     year. If passed, the bill would effectively close bankruptcy 
     as an option and allow creditors to take the homes, cars and 
     other assets of families who suffer a serious illness or 
     injury.
       ``It's a sad fact that bankruptcy courts have become the 
     last line of defense for the victims of our broken health 
     system,'' said Dr. David Himmelstein, an Associate Professor 
     of Medicine at Harvard Medical School and lead author of the 
     study. ``For many families affected by a costly illness, the 
     limited protections of bankruptcy are the only chance to get 
     back on their feet.''
       In the letter to the leaders of the Senate Judiciary 
     Committee, which is currently considering the bill, the 
     doctors expressed concern that the new bankruptcy rules would 
     further restrict the ability of patients suffering from 
     medical costs to get needed care for themselves and their 
     families.
       ``Medical debtors' access to care is already severely 
     compromised: more than 60 percent go without a needed doctor 
     visit and half don't fill a prescription because of the 
     costs,'' said Dr. Steffie Woolhandler, who is also an 
     Associate Professor of Medicine at Harvard and co-author of 
     the study. ``For those unable to seek relief from their 
     debts, the situation will undoubtedly get worse,'' she said.
       The epidemic of medical bankruptcies, which affect 2 
     million Americans (including 700,000 children) every year, 
     emphasizes the need for comprehensive health insurance 
     coverage under a national health insurance plan according to 
     the signers, who include former U.S. Surgeon General Julius 
     Richmond.
       ``Current insurance policies offer paltry protection for 
     the average American,'' said Dr. Quentin Young, National 
     Coordinator of Physicians for a National Health Program. 
     ``Most of those who are bankrupted by medical bills are 
     middle class people who had coverage but were mined by the 
     massive holes in their policies. Rejecting this new 
     bankruptcy legislation is just the first step we need to take 
     in healing our sick health system. We need a system of 
     universal, comprehensive Medicare for all.''
                                  ____

                                                February 28, 2005.
     Re: Letter from Responsible Lenders in Opposition to S. 256, 
         The Bankruptcy Abuse Prevention and Consumer Protection 
         Act

     Hon. William Frist, 
     Majority Leader, U.S. Senate.
     Hon. Harry Reid,
     Minority Leader, U.S. Senate.

       Dear Majority Leader Frist and Senator Reid: The 
     undersigned financial institutions and associations write in 
     opposition to S. 256. We believe that S. 256 
     disproportionately harms vulnerable debtors while rewarding 
     creditors who provide excess credit or who impose unfair 
     terms on borrowers. Further, we are concerned that the 
     changes to the bankruptcy code proposed in S. 256 are likely 
     to make more homeowners vulnerable to abusive lending and 
     fraudulent credit counseling practices.
       Bankruptcy is first and foremost a means to enable 
     overburdened families to get a fresh start. Nearly all 
     families in the bankruptcy system are there not because they 
     want to evade their obligations, but because they have had a 
     sudden decline in their economic fortunes. More than 90 
     percent of debtors file for bankruptcy due to unemployment or 
     underemployment, an illness or accident, or divorce. The bulk 
     of the remainder suffered from other legitimate difficulties, 
     including activation for military service, being a victim of 
     crime or natural disasters, or a death in the family.
       Abusive lending practices, especially by credit card 
     lenders, are a larger problem than debtor abuse of the 
     bankruptcy system. Growth in the bankruptcy filing rate tends 
     to increase with an increase in the ratio of household debt 
     to household disposable income. Given this fact, the 
     unfettered increase in available credit likely has 
     contributed significantly to the rise in bankruptcy filings 
     in recent years. For example, in 2000 the credit card 
     industry offered almost $3 trillion in credit--more than 
     three times the $777 billion of credit offered in 1993. 
     Excessive credit extension by unscrupulous lenders makes it 
     more difficult for responsible lenders to monitor their 
     debtors and preserve healthy lending portfolios.
       Some creditors seem to want to have it both ways: keep 
     interest rates high and underwriting standards loose, while 
     amending the bankruptcy laws to decrease losses resulting 
     from questionable extensions of credit. S. 256 unnecessarily 
     serves the interests of these credit card lenders--who are 
     experiencing record profits--at the expense of the vast 
     majority of families who declare bankruptcy for legitimate 
     reasons. Credit card lenders already cover losses by charging 
     extremely high interest rates at a time of historically low 
     rates, and they are able, should they choose, to limit losses 
     further by tightening underwriting standards. Irresponsible 
     lenders need to be reined in, not rewarded with 
     legislation that further harms suffering families.
       S. 256 will effectively deny bankruptcy protection to tens 
     of thousands of innocent lawabiding families who suffer 
     significant setbacks. Many of these families will lose 
     everything they own to creditors while remaining indefinitely 
     subject to their unsecured creditors, unable to ever get back 
     on their feet. Furthermore, by discouraging those who truly 
     need bankruptcy relief from seeking it, S. 256 may increase 
     the number of families that turn instead to unscrupulous 
     lenders and dubious credit counselors who do more harm than 
     good.
       First, S. 256 inflexibly forces more borrowers to file 
     under Chapter 13 of the Bankruptcy Code, notwithstanding the 
     fact that an independent academic study on the subject found 
     that less than four percent of debtors who filed under 
     Chapter 7 (where unsecured debt is discharged) couldn't 
     possibly repay any of their unsecured debt under Chapter 13. 
     Some families need to file under Chapter 7 because they 
     cannot afford to meet their housing, car, and student loan 
     obligations (which they generally have to pay under Chapter 
     7), pay their short-term unsecured debt, and still have money 
     left over for basic household needs. Forcing these people to 
     file under Chapter 13 threatens to exacerbate their suffering 
     without significantly benefiting creditors; you cannot 
     extract blood from a stone. Despite the good-faith

[[Page S1841]]

     repayment efforts of many debtors, historically nearly two-
     thirds of all Chapter 13 debtors fail to complete their 
     repayment plans even before additional Chapter 7 debtors, who 
     would be even less likely to complete Chapter 13 plans, are 
     forced to enter Chapter 13. Adding insult to injury, S. 256 
     makes it extremely difficult for borrowers to file a Chapter 
     7 bankruptcy once a Chapter 13 repayment plan fails, leaving 
     these borrowers entirely unprotected.
       Second, S. 256 creates so many disadvantages to filing 
     bankruptcy that severely strapped borrowers may forego filing 
     altogether and instead try to solve their problems by 
     borrowing money on abusive and unfair terms. For instance, S. 
     256 makes it harder for debtors to save their cars in 
     bankruptcy, makes it easier for creditors to take basic 
     household goods from debtors, and requires additional 
     procedures that delay initiation of a bankruptcy. Desperate 
     borrowers who should be seeking bankruptcy protection may 
     attempt to solve their problems by responding to 
     solicitations from unscrupulous lenders who push abusive home 
     refinance loans, dishonest credit counselors who bilk debtors 
     rather than help them, payday lenders who profit from 
     families caught in a debt trap, or a host of other bad 
     actors.
       While as financial institutions and associations we are 
     well aware that there are problems with our bankruptcy 
     system, current judicial discretion is far preferable to the 
     unbalanced bill before you. We therefore urge you to oppose 
     S. 256 and to revisit the issue of bankruptcy in a manner 
     that equitably meets the interests both of lenders and of 
     vulnerable borrowers.
           Sincerely,
       Martin Eakes, CEO, Self-Help Credit Union.
       Jim Blaine, State Employees' Credit Union, North Carolina.
       Terry D. Simonette, President & CEO, NCB Development 
     Corporation.
       Calvin Holmes, Executive Director, Chicago Community Loan 
     Fund.
       Elsie Meeks, Executive Director, First Nations Oweesta 
     Corporation.
       Ceyl Prinster, Executive Director, Colorado Enterprise 
     Fund.
       Bill Edwards, Executive Director, Association of Enterprise 
     Organizations.
       Mark Pinsky, National Community Capital Association.
       John Herrera, Board Chair, Latino Community Credit Union.
       Fran Grossman, Executive Vice President, ShoreBank 
     Corporation.
       Kerwin Tesdell, CEO, Community Development Venture Capital 
     Association.


                            Amendment No. 16

  Mr. KENNEDY. Mr. President, I want to speak for a few more moments 
about the excellent amendment that has been offered by my friend and 
colleague from Illinois, Senator Durbin, which I strongly support. 
Yesterday, in Massachusetts, I had an opportunity to have a meeting 
with a number of veterans. They actually were disabled veterans. We 
have 34 Massachusetts young men who have been killed primarily in Iraq. 
I think we had two killed in Afghanistan, but primarily Iraq. And we 
have had a number of wounded veterans.
  We had a very good meeting about their reentry into the community and 
what we can do to help them in terms of education, training, and 
employment. A number of the large companies in Massachusetts have made 
important commitments to employ veterans, and particularly the disabled 
veterans. I will mention one: Home Depot, a national company, employed 
10,000 veterans last year. They expect to exceed that number this year. 
It is a very impressive record.
  These young people are looking for how they are going to be able to 
live and have useful, productive, constructive, valuable lives. There 
is a lot that has to be done, obviously, by the VA and by the various 
organizations in the State and in the private sector, as well as at the 
national level, to help them in these ways. We can all be extremely 
involved and helpful in that endeavor.
  One of the central concerns they mentioned during the course of the 
discussion had to do with the times they heard from a number of their 
friends and colleagues who were in the Guard and Reserve serving in 
Iraq. We have 1,000 at the present time serving from Massachusetts and 
many more in the regular services. They are in the Guard and Reserve. 
But they told me of the concern their families have in terms of the 
dangers of bankruptcy and what would happen to these families. I do not 
think it is enough to say, well, we'll defer this to another day, or 
the existing laws are going to take care of it. We have a good 
opportunity to address that. And if we are serious about addressing it, 
we ought to accept the Durbin amendment. We are either going to be 
serious about doing this or we are not. The Durbin amendment is a 
serious effort to address this issue, and it deserves all of our 
support.
  Military families struggle financially for a number of reasons. 
Often, the low pay for newly enlisted men and women is not enough to 
support a family. Service men and women are also prey to predatory 
lending schemes that leave their families high and dry. Military 
retirees have been victims of pension schemes that destroy their 
savings. National Guard and reservists often face a loss of income when 
they are activated and deployed, and their families are left in serious 
financial distress. Veterans are not getting the federally promised 
health care benefits they need to stay healthy.
  The most recent data available show that in 2003, 20,000 active-duty 
members filed for bankruptcy. They would be considered active duty, 
even though they are in the Reserve or Guard because they are on active 
duty. That is 20,000 members of the Armed Forces whose service to their 
country resulted in financial ruin. Military service should be the 
source of pride, growth, and opportunity, not a financial crisis.
  That is why Senator Durbin's amendment is so important. It will 
ensure fair and strong bankruptcy protections for military families and 
veterans.
  The typical family who files for bankruptcy is at or near poverty at 
the time they file. It is appalling that America's service men and 
women, or any veteran, can be plunged into poverty in connection with 
their service to the Nation.
  The base pay for newly enlisted men and women is often between 
$15,000 and $20,000 a year. That is far from enough to support a family 
back home. Yet nearly half of all members of the military have 
dependents who rely on their income. The most recent data shows that 
more than 6,000 military families are forced to rely on food stamps. Do 
we hear that? We have 6,000 military families who are forced to rely on 
food stamps because of low pay. I pay tribute to our friend from 
Arizona, Senator McCain, who did so much to reduce that number. I am 
hopeful we can eliminate it during this session of Congress.

  In addition, predatory lenders often prey on service men and women. 
Payday lenders offer high-interest, short-term loans of usually $500 or 
less, and focus on the military, with their financial inexperience and 
regular paychecks. These loans result in huge interest rates and often 
leave the borrower in significant debt that can lead to bankruptcy. The 
Durbin amendment will protect military members against this shameful 
practice.
  National Guard members and reservists have other types of financial 
burdens. Since 9/11, 469,000 National Guard members and reservists from 
the Army, Navy, Marines, and Air Force have been called up for combat 
tours in Iraq or Afghanistan. That is virtually half a million. Their 
tours of duty can last for up to 2 years, and the Pentagon is currently 
considering broadening even that time limit. These deployments can 
cause extraordinary financial stress for their families.
  For example, an Army reservist medic with four teenage kids in Hot 
Springs, AR left for Iraq, leaving his family's gas station convenience 
store with no one to operate it. One month later, the family fell into 
serious financial trouble. They had no choice but to file for 
bankruptcy.
  After the bankruptcy, they couldn't pay their mortgage and had to 
give up their house. They moved in with the soldier's parents. But 
because the parents had cosigned on the loan for the store, they were 
forced to file for bankruptcy, too, or risk losing their own home. The 
grandfather is disabled, so the grandmother had to go back to work to 
keep the family financially afloat.
  Too many National Guard reservist families face this type of economic 
distress. Thirty percent of spouses of active reservists report a loss 
of household income after the reservists' mobilization. Forty percent 
of all reservists report loss of income. For those who are self-
employed, it's even worse. Half of self-employed reservists lose income 
when they are deployed.
  Of spouses who reported lost income, half had monthly decreases from 
$500 and $2,000 per month, and nearly a quarter lost over $2,000 a 
month. That's $24,000 a year in lost income that puts a heavy financial 
squeeze on these families.
  With other key expenses rising every year in the Bush administration, 
it's

[[Page S1842]]

even harder for military families to make ends meet. Since 2001, health 
insurance premiums have soared by 59 percent. Prescription drug costs 
have risen 65 percent. Housing costs are up 33 percent in the last 4 
years.
  The last thing Congress should do is make it harder for these 
families when they face bankruptcy. I urge my colleagues to support the 
Durbin amendment to protect military families.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. HATCH. Mr. President, I listened with a great deal of interest to 
my colleague's remarks with regard to the bankruptcy. I will have a few 
things to say about those remarks in just a few minutes.
  Mr. President, I rise in support of the bill, S. 256, the Bankruptcy 
Abuse Prevention and Consumer Protection Act of 2005. The essence of 
this bill is simple. This legislation is designed to make our 
bankruptcy system more fair and efficient. As well, this bill would cut 
down on the ability to abuse the current system.
  Before I detail some of the abuses of the system that is being 
abused, I want to make some other points. First, as I said yesterday, 
this bill has been in the making for 8 years. The Senate passed it 
three times already. Prior to Senate passage, the Judiciary Committee 
held an extensive set of hearings and several markups on this bill. 
This bipartisan, bicameral bill is ripe for passage. I am pleased to 
report that yesterday the White House released the following statement 
of the administration policy on the bill. It is short and to the point 
and it says the following:

       The administration supports Senate passage of S. 256 as 
     reported by the Senate Judiciary Committee. These commonsense 
     reforms to the Nation's bankruptcy laws will help curb abuses 
     of bankruptcy protections, reduce uncertainty in financial 
     markets through improved financial contract netting rules, 
     increase financial education to prevent unnecessary filings 
     and help avoid future credit problems, promote international 
     trade through coordination of cross-border insolvency cases, 
     and provide increased protection for family farmers facing 
     financial distress.

  I am pleased that the administration's SAP stressed some of the pro-
consumer aspects of the bill. While we want to see that those people 
who borrow money pay it back and that the value of personal property 
and responsibility is observed, we also want to help keep citizens out 
of bankruptcy in the first place.
  When honest people simply get over their heads financially, we want 
to give them a fair chance to have a fresh start. Where there are some 
who are clearly gaming the present system, there are many who find 
themselves in unfortunate financial circumstances. Given a chance to 
begin fresh, they can learn from their experiences and once again 
become the prudent, bill-paying consumers all of us are taught to be.
  The data tell us there is a problem and it is a growing problem. 
Bankruptcy filings are way up, and I mean way up.
  We are fortunate to live in a time of unprecedented economic growth. 
Stretching all the way back to the Presidency of Ronald Reagan, we have 
generally seen a sustained increase in economic activity. Personal 
assets and net worth have grown, when compared with individual 
liabilities. Yet, precisely at this time, bankruptcy filings have blown 
through the roof.
  These facts might help to put it in perspective. Bankruptcies doubled 
in the 1980s. They doubled again from 1990 to 2003. In 2004 alone, 
there were 1.6 million more bankruptcies than during the entire Great 
Depression. There will be more bankruptcies filed this year than in the 
entire decade of the Great Depression combined.
  What explains this dramatic rise in filings? Probably several reasons 
are at play. Certainly, one of the critical reasons behind the rising 
tide of filings under the Bankruptcy Code, as years of study document, 
are the actions of those who flagrantly abuse our generous bankruptcy 
laws.
  Many of those opposed to the bill suggest that bankruptcy filings 
were up because more and more people face economic hardship. To some 
extent, this is no doubt true. But we also know, however, that many 
bankruptcies stem from old-fashioned, outright fraud and abuse.
  This potential for abusing the system was not fully anticipated when 
Congress created our current Bankruptcy Code in 1978. A key purpose of 
this bill is to help crack down on the abuses of the system. In its 
simplest terms, our bankruptcy laws attempt to distinguish between 
those who can and those who cannot repay their debts. When a case is 
filed under chapter 7 of the Bankruptcy Code, the debtor is required to 
surrender his assets to a bankruptcy trustee for liquidation and 
distribution to creditors, except for those assets that are exempt 
under State or Federal law. Yet under this provision of law, the 
debtor's future income is protected from creditors.
  By contrast, those who file for bankruptcy under chapter 13 retain 
possession of their assets, but pay all or a portion of their debts 
through plans approved by the bankruptcy court.
  For some contemplating bankruptcy, this makes for a simple strategy: 
Do everything you can to get into chapter 7. Chapter 7 protects all of 
your future income from creditors. Once you are protected by chapter 7, 
you pay off secured creditors--such as your mortgageholder--first.
  Only then do unsecured creditors get their chance to get paid back.
  Experts tell us about 70 percent of consumer bankruptcy filings are 
chapter 7 filings, and 95 percent of those make no distribution at all 
to unsecured creditors.
  Let me repeat those statistics because they are important. About 70 
percent of consumer bankruptcy filings are chapter 7 filings, and 95 
percent of those make absolutely no distribution at all to unsecured 
creditors.
  If you are listening to this debate and you are a creditor, these 
statistics mean you have only a small chance to be repaid if you are an 
unsecured creditor.
  The problem with this is, according to the FBI, about 10 percent of 
these chapter 7 filings are fraudulent. So what if only 10 percent of 
filers are abusing the system? This represents $3 billion in costs that 
can be recovered rather than being passed along to consumers. You and I 
and everybody else pay for these abuses of the system. We all end up 
paying for it. The problem with this is, according to the FBI, about 10 
percent of these chapter 7 filings are fraudulent. One can understand 
the financial motive of a debtor running up his or her unsecured credit 
card debt to pay down his or her secured mortgage just before filing 
chapter 7, even though he or she knows full well the debts will never 
be paid back.
  The data suggest to many experts that some relatively high-income 
debtors truly belong in chapter 13 where they will have to establish a 
plan for repayment for at least some debts. In theory, our bankruptcy 
courts have the opportunity to defy chapter 7 filing because of 
``substantial abuse.'' Yet with so many bankruptcy filings, our courts 
are often overwhelmed, and in practice few people are bounced out of 
chapter 7, no matter their actual ability to repay their debts. It 
should come as no surprise, then, that a few bad apples who could 
afford to pay some of their debts actively seek to avoid chapter 13 and 
get into the often less onerous treatment of chapter 7. A key component 
of S. 256 is a means test that will help prevent such gaming of the 
system.
  Some have attempted to criticize this commonsense safeguard as 
somehow taking away bankruptcy protection. Let me be clear. The means 
test does no such thing. All it does is identify those who can repay at 
least some of their debts. It makes certain they enter into a chapter 
13 reorganization and repayment plan rather than let them simply walk 
away from their obligations, no matter how steep or outrageous. Believe 
me, there is strong evidence to support this improvement in the law.
  The U.S. Trustee Program has been challenging and documenting abuse 
now for some time. The following examples show why changes are needed 
in the current system. The primary function of the U.S. Trustee Program 
is to identify fraud and abuse in the bankruptcy system. In fiscal year 
2002, there were 1,470,430 bankruptcy case filings. With such a large 
number of filers, there will always be those who will try to game the 
system.
  Although some opponents of the bill may minimize the problem of 
abuse, consider these facts: The U.S. Trustee Program successfully 
pursued 5,000

[[Page S1843]]

chapter 7 debtors for ``substantial abuse'' of the bankruptcy system. 
The program prevented the discharge of an estimated $59 million of 
unsecured debt through fraudulent chapter 7 filings. In addition, the 
Trustee Program obtained disgorgement of more than $1.3 million in 
attorney's fees in consumer and business cases and imposed almost 
$534,000 in sanctions against attorneys. This indicates that bankruptcy 
fraud is no small problem and that reforms are in order.
  The evidence of fraud is so widespread that many believe it is no 
longer sufficient to rely on watchdogs to police these abuses after 
they have occurred. We must take proactive steps to prevent them from 
happening in the first place. That is what S. 256 does. The means test 
contained in the bill will provide a uniform standard to bankruptcy 
judges to evaluate the ability of bankruptcy filers to repay debts. 
With some people gaming the current system to avoid paying debts they 
have taken on, we must make sure that the people who file in chapter 7 
actually belong in chapter 7. We should not absolve people of their 
debts when they have the means to pay them back. Bankruptcy law has 
always meant that.
  This is no exaggeration. Just consider these examples, if you will.
  I am told one debtor in California sought to discharge $188,000 in 
unsecured debt. This person had more than $10,000 a month in expenses. 
She paid $4,500 a month on the mortgage for her house in San Juan 
Capistrano and then paid another $2,500 a month on rent for an 
apartment in Silicon Valley. This woman was spending $7,000 a month for 
two homes. The simple fact was, however, if the woman got rid of just 
one of the homes, she would likely be able to fund a chapter 13 plan 
and repay, rather than ignore her debts. This does not seem to me to be 
too much to ask. In fact, it just makes common sense.

  In another instance, a woman in Dallas filed for chapter 7 bankruptcy 
attempting to discharge $122,527 in credit card debt. But this is not 
exactly a hard-luck case, by the way. She was a commercial airline 
pilot who earned $11,500 per month and paid $3,100 per month for a 
mortgage on a $385,000 home. Some have cast a skeptical eye on her 
decision to buy a $50,000 Mercedes just before declaring bankruptcy in 
order to replace the recently repossessed $90,000 Mercedes. If that is 
what happened, it just plain is not right.
  When somebody obtains 36 credit cards, runs up $283,075 in bills, and 
then tries to discharge that debt through a chapter 7 filing--as I 
understand was the case of one gentleman in California--it is not 
enough to sit back and blame aggressive marketing by credit card 
companies. We have heard that old saw year after year. Frankly, there 
is a lot of abuse out there.
  One person in Miami sought to discharge $163,744 in unsecured debt 
even though he had the means to purchase $232 in lottery tickets every 
month.
  Then there is the case of a Tampa couple who had a combined monthly 
income of $7,000 and a monthly budget of $6,756. Included in that 
budget was a car payment of $965 a month. In addition to their secured 
debt, they owed $350,000 in unsecured debt. This consisted of $200,000 
in credit card debt and $150,000 in personal loans. They attempted a 
chapter 7 filing. This couple was bringing in more than they were 
spending, but they wanted to walk away from it all. Yet a review of 
their banking records showed that one spouse withdrew hundreds of 
dollars every month at ATM machines at local casinos. They had money to 
play blackjack but not pay back there debts. Something, it seems to me, 
is just not right about that.
  We are a compassionate nation, but we should not be fools. A 
discharge of debt is serious business, but for sound public policy 
reasons, the United States has decided to allow it in certain 
circumstances. We want to give our neighbors who get in over their 
heads a chance to get out of their financial troubles.
  Frankly, I suspect that for a majority of those individuals who file 
for bankruptcy, it must be their worst nightmare, but for some, as I 
just described, it is a way to avoid responsibility. We do not want to 
encourage bankruptcy for anyone. When a person takes on a debt, that 
person makes a promise to pay, and they ought to pay it if they have 
the capacity to do so.
  There is something inherently unfair in denying full restitution to 
creditors. That being said, as a matter of longstanding public policy, 
we have decided to allow some people a fresh start and the opportunity 
to discharge their debts through a chapter 7 liquidation. But many fear 
that in some instances, our lax policing of those who attempt a chapter 
7 filing actually encourages additional bankruptcies.
  As a matter of public policy, we must say that those relatively high-
income debtors, those capable of paying back their substantial debts, 
should at least pay something back, and that is all we are requiring 
here. From now on, those who are capable of financial reorganization, 
rather than outright liquidation, will have to keep their promises or 
at least some of their promises.
  Some opponents of this legislation minimize these abuses. They deride 
the means test we devised to solve this problem. The fact is, 80 
percent of people filing for bankruptcy will be automatically removed 
from the means test because their incomes fall below the safe harbor of 
the median State income. Only 20 percent are asked to answer this 
rather reasonable question: After medical expenses, schooling expenses, 
health care premiums, living expenses, and a regular budget, do you 
have an ability to pay back some of your debt?
  That is all. Only 10 percent of the people currently filing for 
bankruptcy will be moved into chapter 13 under this test. Contrary to 
the image of a crippling lifetime commitment to one's debtors, those 
repayment plans are only between 3 and 5 years.
  Who passes the means test of this bill? Eighty percent are excluded 
for falling below the State median income. Another 10 percent are 
excluded after taking into account school, health, and living expenses. 
So only 10 percent of bankruptcy filers will ever be moved into 
repayment plans. I do not think it is too much to ask that these 
relatively high-income debtors, who can afford to pay their debts, pay 
back some of what they owe.
  To the extent that our current Bankruptcy Code encourages some 
bankruptcies, I am hopeful that this reform will discourage some of 
them. The experts and data tell us there are some with high salaries, 
profligate spending habits, and the ability to pay back their debts. 
Our laws should not be to just allow them to walk away.
  The fact that this type of misconduct is occasionally prevented does 
not undo the need for permanent systemic reform of our laws. For every 
one person who is discovered in an abuse of the system, it is likely 
there are many others whose abuses never see the light of day. There is 
a culture of abuse in our bankruptcy system that should be addressed.
  I am told that in Kentucky one debtor filing for chapter 7 protection 
failed to mention that he had transferred his one-half interest in a 
Florida house to his son approximately 7 years before filing for 
bankruptcy. How convenient. He also failed to mention his transfer of 
stock to his daughter within 1 year of filing. He was unable to account 
for the disappearance of $1.125 million in assets, including $300,000 
in personal property and even $400,000 in race horses. His hope was to 
discharge almost $1.8 million in unsecured debt and $795,175 in secured 
debt.
  While this may be an outlier case, the underlying problem of abuse is 
too frequent an occurrence. The point is not that this person is an 
average filer; the point is that the system is such a mess that someone 
would even contemplate making this type of a case.
  Unfortunately, this misconduct is all too often encouraged by a 
bankruptcy bar that ushers people into chapter 7 without ever fully 
considering the client's ability to repay.
  The U.S. trustees had to pursue 653 actions seeking disgorgement of 
debtors' attorney's fees in fiscal year 2002. At the same time, they 
pursued 243 other actions for attorney misconduct that resulted in 
$533,813 in sanctions. Over 75 attorneys were referred to State bar 
associations or other disciplinary boards.
  In the Eastern District of Pennsylvania, a U.S. trustee review 
discovered that in bankruptcy filings it was common to have boilerplate 
information entered without regard to the individual debtor's 
circumstances, internally inconsistent information, and missing 
financial information.

[[Page S1844]]

  These are bankruptcy factories that appear to attempt to get as many 
as possible into chapter 7 without so much as a cursory look at the 
filer's ability to repay his or her loans or debts.
  For the most part, I am proud of our bankruptcy laws. When a debtor 
gets in over his or her head, we do not ask why. We do not cast blame. 
Instead, we attempt to help that person pay back the debts. Bankruptcy 
protection gives Americans the ability to pause, to reorganize, to 
start over. Bankruptcy offers those with unsustainable debts an 
opportunity for a fresh start. No one here wants to change this 
fundamental guarantee. No one wants to alter this basic framework. Yet 
people are taking advantage of this system. Abuses are increasingly 
rampant and well documented.
  When some people game the system to walk away from debts that they 
are perfectly able to repay, an injustice occurs that has ramifications 
for our entire economy. And guess who has to pay for their dishonesty. 
You and I and everybody else because we pay an average of $400 a year 
for this bankruptcy system. This bill will help to bring it into a 
forceful, reasonable purpose.

  It was estimated that in 1997 alone more than $44 billion of debt was 
discharged through bankruptcy. This amounts to a loss of $110 million 
per day. Someone has to pay for this. The American people, you and I 
and everybody else, end up paying the bill for at least these dishonest 
people.
  According to one estimate, as I have said, these losses translate 
into a $400-a-year tax on every household in the country. That might 
not seem like a lot to some, but for many families $400 is a mortgage 
or a rent payment.
  The cost of bankruptcy to taxpayers: $44 billion in debt discharged 
per year, or $110 million every day, a $400 yearly bankruptcy tax on 
every household in the country.
  For all the reasons I have laid out, I urge my colleagues to support 
S. 256. This is a good bill. We have been at this legislation too long 
to allow this commonsense reform to fail.
  By the way, this very same bill, with the Schumer amendment, passed 
with 83 votes. Without the Schumer amendment, the bill that President 
Clinton pocket-vetoed was basically the same as this, and it passed 
with 70 votes, meaning a bipartisan passage.
  I will make a few comments on the Durbin amendment that seeks to 
address some potential problems relating to debt carried by members of 
our military. We all honor our military for their sacrifices, no 
question about it. While I am supportive of the intent of the 
underlying Durbin amendment, the fact is, only about 20 percent of 
those filing for bankruptcy will ever be subject to a means test. Only 
about half of those will end up having to repay some of their 
obligations under the means test. That means that only about 10 percent 
of those filing for bankruptcy will ever have to actually pay back some 
of their past debts with future earnings.
  I suspect the 1 in 10 fraction will be smaller, perhaps much smaller, 
for those serving in the military. So when my friend from Illinois 
calls the means test an onerous test, he is overstating the case.
  The purpose of the means test is simple. We are trying to determine 
which debtors can afford to pay a portion of their past debts from 
their future earnings. The Durbin amendment has several problems, but 
its goals are well intentioned and I commend him for his efforts. For 
example, it is my understanding that under the definition of ``service 
member,'' all of those employed as commissioned officers of the Public 
Health Service and the National Oceanic and Atmospheric Administration 
will qualify for this special treatment. There are few, if any, greater 
supporters of the commission core of the Public Health Service, but I 
do not understand why a public health service officer, working side by 
side with a career civil servant member at the Department of Health and 
Human Services, should receive any special consideration during 
bankruptcy proceedings. If a member of the PHS or NOAA is able to pay, 
as determined by this new means test, which is estimated to affect only 
1 in 10 of those filing for bankruptcy today, he or she should pay like 
any other civil servant or member of the public.
  They are well paid. They do not have to go off and borrow beyond 
their means. They do not have to live beyond their means. They should 
not have any breaks any better than the regular citizens.
  I think the distinguished minority whip has raised and will continue 
to raise very important points, and I look forward to working with him 
and the entire Senate to address those points.
  If bad actors are preying on our military personnel through nefarious 
payday loans or other questionable practices, then I encourage Senators 
Shelby and Sarbanes, the head of our Banking Committee in the Senate, 
to look into the issue. If there are other social issues that face our 
military personnel, then we as Members of Congress have an obligation 
to examine those issues indepth and find the right fixes.
  The Durbin amendment also has an additional problem. This involves 
his creation of a broad exemption to the delicate homestead compromise 
already so painstakingly embodied in this bill. We have gone over and 
over it and have finally come to this compromise that does not please 
everybody, or anybody for that matter, but it is an important 
compromise and an important aspect of this bill.
  We know the Senators from the States of Florida and Texas have made 
it clear that this issue is important to them. This is an area where we 
have tried to defer wherever possible to the States, even though other 
Senators view some of the States' exemptions with skepticism. We should 
all recognize that opening the door on the homestead provision could 
work to unravel this bill.
  This is also the case with Senator Feingold's amendment on the 
homestead exemption. This issue is not new. We have debated it year 
after year, and we have come to a plausible compromise that has passed 
year after year. This question has been debated over and over again. We 
have achieved a compromise on the homestead exemption that has 
demonstrated the ability to win overwhelming support in both Chambers. 
Both the Durbin amendment and the Feingold amendment tend to upset the 
balance that has been achieved on this important issue.
  As I look at and examine the Durbin amendment, I have identified a 
few additional concerns. For example, under the terms of the amendment 
both ``real or personal property that the debtor or dependent of the 
debtor uses as a residence,'' what does this language mean? How could 
personal property be used as a residence?

  The bottom line is this amendment has many ambiguities. In addition, 
several of its principal components come into tension with long-settled 
provisions of this bill such as the homestead and the means test
  As all of my colleagues know, there is a right way and a wrong way of 
doing things. Indeed, many Members of the minority and some of the 
majority have made that very point with regard to how the USA PATRIOT 
Act was put together. Senator Durbin has raised some important issues 
we must take the time to explore properly, and I believe Senator 
Sessions has appropriately and adequately addressed the central concern 
of the Senator from Illinois, which is to allow the facts and 
circumstances of military personnel to be considered in bankruptcy 
proceedings.
  I support S. 256, the bankruptcy bill, and I hope others will as 
well. We have come very far with this bill, after 8 tough years of 
work, after repeatedly passing it by overwhelming votes, and then 
having it shot down because of a killer amendment that gets put on by 
our colleagues who claim they are working in support of it. We should 
pass this bill. We should pass it in as clean a form as possible.
  Let me say with regard to credit card debt, I think it is a nice, 
populist appeal here, to blame all the credit card companies for the 
problems everybody has in our society today. Look, we have an 
intelligent society, a highly educated society, and I think everybody 
knows when they take those credit cards and they accrue debt, they are 
supposed to repay that debt. Frankly, we have far too many people 
taking advantage of credit cards and not paying their debt.
  Where there is fraud, we should go after any credit card company that

[[Page S1845]]

commits fraud or abuse against our fellow citizens. But this bill does 
not fail to resolve these issues.
  Could we improve this bill? Yes, I think we could improve it. But if 
we did, some on the other side would say that is too tough of an 
improvement. Could others on this side improve it? I suppose so. Could 
some on that side improve it? I would hope so, but so far we have 
accepted an awful lot of what the other side has wanted. This bill has 
been passed by overwhelming votes over the last 8 years, at least four 
times, as I recall it. At one time it passed through both Houses of 
Congress and was pocket vetoed by President Clinton.
  I would like to make one last point. Unfortunately I have to oppose 
the Feingold amendment on the homestead matter. I think the purported 
purpose of the amendment is well intentioned, but I am concerned that 
it may act to upset the delicate balance and painfully negotiated 
provisions relating to homestead exemptions. This amendment by Senator 
Feingold is, I know, well intentioned. But this amendment confuses an 
important and bipartisan issue, namely the care of the elderly, in a 
way that could sink this important legislation.
  I have worked tirelessly to make sure there are provisions in this 
bill to protect the elderly, along with women and children, and I think 
every one of my colleagues who has worked with me on this bill 
recognizes that fact. The simple truth is this amendment and others 
like it could kill this bill. The reason has nothing to do with a 
hostility to the elderly or to any other class of persons, but because 
the homestead provisions have taken years to negotiate and are the 
result of painful choices and compromises. They are not totally 
satisfactory to me, either. But the fact of the matter is, it is the 
best we can do.
  There are many Members of this body who would like to see the 
homestead provisions changed in some fashion, but to accommodate them 
any further than what presently exists in this bill would force other 
Senators who are strong supporters of this legislation to oppose it.

  My opposition to this amendment has nothing to do with the elderly 
and I would not object if every State in the Nation passes laws that 
would put a similar floor or a higher floor under their respective 
homestead laws, but that choice belongs to the States and not to the 
Federal Government. There is a long history in bankruptcy law of 
deference to States on this issue. Nearly every State in the country 
has vehemently defended their homestead laws.
  I must say I think some States wish to change their laws. If they do, 
that is their prerogative. The purpose of this bill and the purpose of 
the current homestead provisions is to curb fraud and abuse. The 
current provisions impose a 10-year look back for fraud. They impose a 
2-year domiciliary requirement that is designed to prevent wealthy 
debtors from moving from States with low homestead exemptions to States 
with high or unlimited exemptions and then filing for bankruptcy. These 
provisions are a compromise, a balance of States rights and Federal 
imperatives under bankruptcy law and we must let the provision stand as 
written. I oppose the Feingold amendment and I hope my colleagues on 
the floor will oppose these amendments as well.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Martinez). The Senator from Alabama is 
recognized.
  Mr. SESSIONS. Mr. President, I see the Senator from Illinois is here. 
At this point I ask unanimous consent that immediately following this 
consent it be in order that I offer a first-degree amendment relating 
to the matter in the Durbin amendment, provided further that there be 
60 minutes for debate equally divided on both amendments concurrently; 
provided further that at the expiration of that debate the Senate 
proceed to a vote in relation to the Sessions amendment, to be followed 
by a vote in relation to the Durbin amendment, with no second-degree 
amendment in order to either amendment prior to the votes.
  The PRESIDING OFFICER. Is there objection? Without objection, it is 
so ordered.
  Mr. DURBIN. Mr. President, if I could, I ask the Senator from Alabama 
if I could make a unanimous consent request. I ask unanimous consent 
that Senators Bill Nelson, Edward Kennedy, John Kerry, and Hillary 
Rodham Clinton be added as cosponsors to my amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Alabama.


                            Amendment No. 16

  Mr. SESSIONS. Mr. President, the Senator from Illinois has raised 
questions concerning the position of military personnel in bankruptcy. 
I believe his language is overly broad and I believe the concerns he 
has do not justify the language of his amendment. I cannot support it. 
I think I will take a minute to discuss his amendment and then discuss 
the amendment I will offer, which I believe would be more appropriate 
under the circumstances.
  The amendment Senator Durbin has proposed would create a gaping hole 
in the means test and in the homestead language--it would exempt 
certain individuals from those provisions and violate certain 
principles that have been part of this bankruptcy legislation. As I 
pointed out earlier today, many of the concerns that are raised here 
are covered by the Servicemembers Civil Relief Act which we passed in 
2003 to modify the Soldiers' and Sailors' Civil Relief Act passed in 
1940. The combined acts allow military members to suspend or postpone 
civil financial obligations during their period in the military 
service.
  Specifically, this act provides as follows. There is an interest rate 
cap of 6 percent on all debts incurred before the commencement of 
active-duty service. In other words, before active duty you have a 
certain rate of income and if you sign up for a note that carries a 10-
percent interest, you can have that interest rate reduced to 6 percent 
while you are activated, on active duty for the United States of 
America.
  There are protections from eviction from your home. It provides for a 
delay of all civil court proceedings, including bankruptcy and 
foreclosures of your home; a prohibition on entering default judgments 
against active-duty personnel members, and the ability to reopen a 
default judgment if one were to be entered; the ability to terminate 
property, residential, and automobile leases at will, if you are 
activated; the continuation of life insurance of at least $250,000 
without requiring premiums to be paid; and the tolling of statutes of 
limitation. In other words, if you are activated and you have a cause 
of action against someone and you are interrupted in your ability to 
file that and the time may have otherwise run, the statute of 
limitations, the time in which you can file a lawsuit, would have run, 
then you can extend that while you are on active duty.
  There is temporary relief for mortgage payments for people on active 
duty, credit rating protection, penalties for landlords and creditors 
who violate the act involving fines of up to $100,000 and/or 
imprisonment. These are a lot of broad protections that indicate to me 
we are at a point where it would not be necessary or wise to frustrate 
or undermine or go against the guiding principles that are in this 
bankruptcy bill. We hammered it out. And I have not agreed with all of 
them that have been set forth. This is not, in my view, a justification 
for a very significant carve out to the means test and homestead 
provisions for those on active duty.
  I would have to oppose this Durbin amendment. I believe, however, 
that we can be more explicit in the legislation and make sure that 
soldiers, certain persons with medical conditions, and veterans with 
low income can qualify under the safe harbor of the bill. I am offering 
an amendment which clarifies that these individuals who may fall under 
the special circumstances provisions of the bill are explicitly allowed 
to be covered under the special circumstances provisions of the bill to 
give them certain advantages. It would deal primarily with the concern 
that some would be required to pay back a portion of their debt, and 
this would deal with that.
  My amendment includes protections for the following three categories 
of individuals: those called or ordered to active duty in the Armed 
Forces, low-income veterans, and individuals with serious medical 
conditions. These are all situations that we want to make sure the 
bankruptcy bill's special circumstances clause includes. My

[[Page S1846]]

amendment does not create a gaping loophole in our legislation. 
Instead, it makes clear that people capable of paying back their debt 
should do so, at least in part, but those incapable of paying back 
their debt due to military service or a serious medical condition may 
not be required to do so. I hope my colleagues can support this 
amendment.
  I will just say with regard to the homestead exemption included in 
the Durbin amendment that this would go against a lot of consensus we 
finally reached on homestead. Senator Hatch referred to it earlier. The 
fact is we have decided as a Senate and after debate three different 
times in passing this legislation on this floor by a overwhelming vote 
each time that we were not going to overrule the States' definition of 
homestead.
  The State of Florida has a high homestead. In my view, it is too 
high, but it is in Florida law, and the Senator from Florida may well 
believe that he needs to defend that law. Many of our Senators say: 
This is our State's law, and I am not going to vote for a bill with an 
amendment which overrides my State's law on what the homestead should 
be. I have a personal belief that it is a necessary provision for us to 
take, but that has been the consensus, so I have to live with it even 
though I have been concerned on some of the issues.
  We have been consistent in not overruling the State definition of 
homestead. I note that any State legislature could change their 
homestead any time they want. They can create a separate homestead 
rule. If they choose for the military, they could raise it or lower it, 
they can cap it or put a floor on it--whatever they choose. We have 
decided, as this bill has been through the Congress several times now, 
to defer to the States on that issue. I believe it would be 
inappropriate for us to now carve out this exemption to it.
  I yield the floor and reserve the remainder of the time.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. Mr. President, I thank my colleague from Alabama.
  Let me make a couple comments.
  First, his amendment, which I will oppose and urge all of my 
colleagues to oppose, puts servicemen and servicewomen in the category 
in this bill where they are presumed to be abusers in bankruptcy. That 
is right. The presumption in his amendment is that if you served in the 
military and file for bankruptcy, that you are abusing the bankruptcy 
process. He adds language which says that, and, therefore, we want the 
judge to take a look at these presumed abusers of the bankruptcy 
process and consider the fact that they happen to be in the military.
  The Senator's amendment is entirely opposite of what we are trying 
achieve with the Durbin amendment. We are trying to presume the 
obvious. The men and women serving our country overseas who have been 
activated in the Guard and Reserve, taken away from their families and 
their businesses, should be presumed not to be abusive of the process 
but be presumed to be some of our most important citizens. Why do we 
want to throw them into the presumption of abusing the bankruptcy 
process? What I want to do is exactly the opposite. If you are serving 
our country and you face bankruptcy, we want you to walk into that 
courtroom and, frankly, get a better shake under the law than you 
currently get.
  First, we don't want you to have to go through the hoops that have 
been created by the credit card industry and big banks for people who 
supposedly abuse bankruptcy. No. You put your life on the line for 
America. You were activated to serve in Iraq, and you risk your life 
every day for us. You lost your business at home, your family went 
bankrupt, and yet we are giving you a break in the bankruptcy court, 
unlike the Sessions amendment, which presumes you are an abuser of the 
process if a serviceman walks into the bankruptcy court.
  The second thing we say is military servicemen don't get to pick the 
States they live in; they are transferred by the military to different 
places. But while these transfers of their families are going on, they 
could go bankrupt. If they go bankrupt, why do you have to make this 
some sort of roulette game as to what laws apply?
  You are in the military and you file for bankruptcy. Then you ought 
to be able to count on several things:
  First, the Federal exemptions on personal property. You know you can 
always turn to that. That means the things that you can keep in your 
family, in your household, even if you go through bankruptcy.
  Second, the homestead exemption. If you happen to be in a State that 
is tough and doesn't allow you to protect any part of your equity in 
your home and you have been transferred there in the military, why use 
that against men and women who are serving this country? Why wouldn't 
you say, as our bill does, that we will protect up to $75,000 of your 
homestead?
  Some will say: They may live in a State where it has zero homestead 
exception. That is true. I plead guilty to the charge that I am 
favoring the men and women in uniform who file for bankruptcy. I am. 
Unlike Senator Sessions' amendment, which presumes them to be abusive 
of bankruptcy, I presume the opposite, that men and women in the 
military don't go into bankruptcy just because it is an interesting 
thing to do. I think they have proven that they are responsible people 
when they raise their hand and swear an oath to the United States and 
are willing to risk their lives for our country. That is the 
presumption of responsibility that should be given to the men and women 
in uniform--exactly the opposite of the presumption of Senator 
Sessions. His presumption is that they are abusing the process and we 
will take a second look at it and we will let them come up with more 
documentation to prove they are not abusing the process.
  The last thing my amendment does is to go after the most abusive 
creditors of the military men and women in America today. I showed the 
illustrations earlier. Can you imagine that a loan company would 
actually say to a sailor, airman, a marine, or soldier, we will loan 
you the money, but we want you to pledge as collateral for the loan 
your military retirement pay or your disability pay for your injury 
overseas serving America? They do it. Maybe they are not supposed to. 
They do it. And they charge these men and women in uniform the most 
outrageous interest rates in America. It ought to make the credit card 
companies blush. These pay day lenders charge 100 percent, 200 percent, 
400 percent for these soldiers who are trying to keep their families 
together while they are serving America. My bill, quite honestly, says 
we are not going to give those creditors a day in court. Those 
creditors who charge over 36 percent a year in terms of loans to the 
military cannot collect them in bankruptcy.

  I think that, frankly, is fair to these families because once you get 
into this ``juice loan'' racket that these payday loan companies come 
up with, there is no end in sight. You are sunk. Mr. President, $3,000 
in debt turns into $20,000 before you can blink an eye.
  Let me tell you a difference between what has been offered by Senator 
Sessions and what I am offering on this floor. The fact is, these 
groups support my amendment: the Military Officers Association of 
America, the Air Force Sergeants Association, the National Consumer Law 
Center, the National Association for the Uniformed Services, the 
Enlisted Association of the National Guard of the United States, and 
many other individual leaders in the Guard and Reserve across our 
country.
  They are not supporting the Sessions amendment. I can understand why. 
They do not think our service men and women should be presumed abusive 
of the process. Let me tell you why we need this amendment.
  In 1999, 16,000 members of the military in America filed for 
bankruptcy. Since then, there has been a massive activation of troops, 
Guard and Reserve, across America. Now we have men and women serving 
for long periods of time they did not anticipate, with dramatic losses 
in pay. This cutback in income for these individuals is creating a 
great hardship.
  Thirty percent of all military families report a loss of family 
income when the spouse is deployed. But listen to the numbers for the 
National Guard and Reserve. Mr. President, 41 percent of Guard and 
Reserve families lost income when a spouse was deployed. How do they 
keep it together? Some of them

[[Page S1847]]

rely on relatives. Mom and dad step in. They are proud of their son or 
daughter serving in the military, they say: We will try to keep the 
wife, for example, who stayed home, and the children, together, while 
you are overseas. Do not worry about us. Just come home safely.
  They make great sacrifices. Some of them walk away from a business. 
Those are the ones who get hit especially hard, such as reservists who 
own their own business and who are activated.
  Fifty-five percent of self-employed reservists lost money when they 
were activated. And the average loss was $6,500. For some people, 
$6,500 may not mean much. But for these families, it may tip them over 
the edge. You find them making sacrifices for America, and all I am 
asking is, if the worst outcome occurs, if service to our country leads 
to an economic catastrophe for a family, and they have nowhere to turn 
but to bankruptcy court, for goodness' sake, should not this Senate say 
to these men and women in bankruptcy, We are going to give you a 
helping hand; you reached out your hand to help America; we are going 
to help you in the bankruptcy court?
  But, no, not with the Sessions amendment. The Sessions amendment does 
not give them the helping hand. The Sessions amendment presumes that 
they abuse bankruptcy and says to the judge: Take that into 
consideration if you want to let them off the hook and want to let them 
try again to file for bankruptcy. That is cold comfort, cold comfort to 
the men and women in uniform, risking their lives for America, who 
know, back home, the terrible economic circumstances their families are 
facing.
  Some people think I am making this up, but I am not. The anecdotal 
evidence that we received from all over the United States, as well as 
the reports that we have had from the military groups that are 
supporting my amendment, tell me a lot of families are right on the 
edge. They may not be able to survive this situation. I talked about 
this gentleman, Mr. Korizon, from Schaumberg, IL, activated for the 
Persian Gulf war, who left behind a construction company with 26 
people. After he had been activated for 6 months, he had to file 
bankruptcy. He served his country. He kept his word. He kept his 
promise. He risked his life for America. He lost his business. He filed 
for bankruptcy. Does he deserve any special consideration in court? The 
other side of the aisle says no. Get in line. Just another one of those 
bankruptcies. I think he does.
  You take a look at SGT Patrick Kuberry, who owned a restaurant in 
Denver. His partner in the restaurant was also in the military. They 
were both activated. Before it was over--both of them activated--they 
lost their restaurant and filed for bankruptcy. They served our country 
after 9/11. They protected us, the Members of the Senate, and our 
families. And they paid a heavy price. They lost the only business they 
had. Should they get a break in bankruptcy court? Of course they 
should. I think most Americans would agree they should.
  The list goes on and on. I think the list tells the story. We have to 
be sensitive to the fact that this amendment, which I have proposed, is 
an amendment which addresses the most basic and fundamental need here.
  Let me tell you something else. Senator Hatch of Utah came to the 
floor earlier. Do you know what he said? He said: I can't understand 
why so many more people are filing bankruptcy today. Well, he is 
unlikely to read this book, but I wish he would. It is called ``The 
Two-Income Trap,'' by Elizabeth Warren and her daughter Amelia Warren 
Tyagi. She analyzes why people are filing bankruptcy. And it is not 
because they are immoral. People are filing bankruptcy because: Since 
the 1970s, the number of involuntary job losses is up 150 percent. 
Since the 1970s, wage earners missing work due to illness or disability 
are up 100 percent, divorce is up 40 percent, people losing health 
insurance is up 49 percent, wage earners missing work to care for a 
sick child or elderly family member is up 1,000 percent-plus.
  Now, add to these circumstances the possibility that you just 
received notice that your Guard unit has been activated, and you have a 
sick parent at home and you wonder: How in the heck am I going to keep 
this together? I was here working my job, trying to be a good son, a 
good daughter, trying to take care of my parent. What is going to 
happen? How am I going to meet this need?

  These are real family circumstances of people who serve in the 
military. All I am asking is to make sure that if the worst thing 
happens, if they have to go to bankruptcy court, not that they get off 
the hook--they are not asking for that--but only that they get fair 
treatment. I knew the credit industry would oppose this amendment. I 
knew they would oppose it because I went after the payday loans and 
these ``juice loan'' rackets that are taking advantage of the military. 
They all gather together when you go after one of their own. The 
predators are treated just like those who are supposed to be 
respectable. And that is a shame.
  I think the credit industry should sit down and have a balanced bill. 
And I think they ought to sit down at night and thank their lucky stars 
that men and women in this country step forward every single day and 
volunteer to keep us safe, to protect our homes and protect our Nation. 
Is it too much to ask the credit card industry and this big bank lobby 
that is behind this bill to give them a break in bankruptcy court if 
the bottom falls out while they are serving America? I cannot imagine 
it is.
  Mr. President, I yield the floor and reserve the remainder of my 
time.
  The PRESIDING OFFICER. The Senator from Alabama.
  Mr. SESSIONS. Mr. President, I just want to say how strongly I value 
the contribution of our men and women in uniform. When I was in the 
Army Reserve I had the opportunity and the honor to call employers of 
service men and women whom we believed may have been discriminated 
against because they were fulfilling a military obligation. When I was 
a U.S. attorney, I filed a lawsuit against a business that terminated 
someone I believed, and the jury agreed, had been terminated at least 
in part because of them being a member of the Guard and Reserve.
  We need to make sure our military men and women are protected and 
that they cannot be taken advantage of. I was in Iraq in January, and I 
met with soldiers there. One told me about his house. He was not able 
to keep up the payments. I asked him if he knew about the Soldiers and 
Sailors Relief Act, and he said yes, that was protecting him. Under 
that act his house could not be foreclosed on. And JAG officers, back 
there, helped him deal with that. But he was sharing with me one of his 
frustrations. He also told me he planned to re-enlist.
  But I must react adversely to my colleague's statement that the 
amendment I offer, which expands protections and guarantees certain 
protections for military personnel over the present language in the 
statute, presumes military people who file bankruptcy to be abusers. 
Now, that is not so.
  Look. This is the deal. Let's be real frank about it. What he is 
raising fundamentally is simply whether a person ought to be handled 
under chapter 13 or under chapter 7. If a military person's income 
falls below that of the median income in America, he can file chapter 7 
and wipe out every debt he has--zilch, zero, walk away free--just like 
any other American can. And that has not been changed. And as Senator 
Hatch has indicated, probably close to 90 percent of American 
individuals who file for bankruptcy relief will be falling in that 
category.
  Mr. DURBIN. Will the Senator from Alabama yield for a question on my 
time?
  Mr. SESSIONS. All right.
  Mr. DURBIN. I just want to ask the Senator a question.
  Is it not true that you have amended page 12, section (B)(I) of S. 
256, which reads in part: ``In any proceeding brought under this 
subsection, the presumption of abuse may only be rebutted by 
demonstrating special circumstances'' such as being called to active 
duty in the Armed Forces?
  So when I say you are presuming that they are abusing bankruptcy, 
these are the exact words of your amendment.
  Mr. SESSIONS. Well, look, this is the deal. My amendment does not 
presume abuse. The bill already does that if you file for Chapter 7 and 
you have above median income. My amendment only

[[Page S1848]]

adds language to give examples of what a ``special circumstance'' could 
be.
  This is what we are saying here. The way this statute is written, 
what it says is if you make above median income in America and you can 
pay back a portion of your debts, you should not be allowed to go under 
chapter 7 and wipe them all out. I don't think most military people 
want to be treated differently from that. If they have come back from 
active duty and are making $200,000 a year or $75,000 or $100,000 and 
they have a small amount of debt that they can pay back--it may be 
substantial--but an amount they can pay back, they will be able to go 
under chapter 13 and during that period of time the court would decide 
how much of the debt they should pay back based on their income. And if 
they have extraordinary circumstances, special circumstances as a 
result of their military duty, the court can exempt them from going 
into chapter 13, if it feels that is appropriate.
  But fundamentally, this bill says if you are making a higher income 
and you can pay back part of it, why should you not? Not all of it. It 
is over 5 years. And the way they do it, the money goes to the court. 
Certain debts on a percentage basis are paid. And at the end of a 
maximum of 5 years you are wiped out. They don't make you pay for any 
more than 5 years. So you pay back a portion of what you owe over a 
period of 5 years.
  This is not abusing people. These are people who have incurred debts, 
and they can pay some of it back. And they pay it. Most people under 
this legislation will fall in the other category as exists today, and 
they will wipe out all of their debts. So this is not abusive 
legislation. That is important to state.
  It also specifically protects veterans who are defined by statute 
today as low-income veterans. They would be covered by this. There are 
people with medical expenses. That was defined explicitly as a special 
circumstance, and active-duty personnel.
  As one businessman and fellow Senator indicated, we also have to be 
careful that if we provide too many special protections for service 
personnel, we could actually drive up their interest rates when they go 
out to borrow money because a lender may feel they are a greater risk 
than otherwise would be the case.
  I believe we need to give our servicemen special protections. The 
Servicemember Civil Relief Act does that. It provides that you cannot 
foreclose your home while you are on active duty. It provides that your 
interest rate is reduced if you incurred debts before you go on active 
duty. You can't exceed 6 percent. They can't take a default judgment 
against you while you are away. Your statute of limitation is tolled so 
you can file any action you have that might otherwise be fileable while 
you are away. You can come back and still have time to do it.
  I think we ought to continue to look at it. If there are additional 
things such as loans and other matters that are important for 
protection of our military, we need to look at it. But credit card, 
bank interest rates, those matters are not to be dealt with on a 
bankruptcy court reform bill. Those pieces of legislation are more 
appropriately and properly under the jurisdiction of the Banking 
Committee. That is where they need to be decided and debated.
  Mr. BIDEN. Mr. President, I appreciate the sentiment behind Senator 
Durbin's amendment, but the fact of the matter is that it is not 
needed. In the first instance, it is simply not the case that the means 
test in this bill will prevent our men and women in uniform from 
receiving the full protection of our bankruptcy laws.
  The means test will not apply to any one in military service under 
the median income in their State. The median income in Delaware for a 
family of four is $72,680. If a staff sergeant at Dover Air Force Base 
in Delaware had to file for bankruptcy, he would automatically be 
exempt, at his pay scale of $34,319. So there is no way, under the 
means test in this bill today, that he would be denied the full 
protection of chapter 7. That is precisely why I insisted on that safe 
harbor in the means test two Congresses ago.
  So the very assumption behind the amendment, that we need to exempt 
service men and women from the means test, is wrong. And if a pilot at 
Dover, who might well fall above the median income, were to file, he 
would only be subject to movement to chapter 13 if, and only if, he had 
enough income after deducting all of his normal expenses, to continue 
to pay some of his bills. And under chapter 13, he could keep his house 
and other assets, something filers under chapter 7 cannot do.
  As Senator Hatch pointed out earlier, and Senator Sessions, too, 
special protections exist in current law--the Soldiers and Sailors 
Relief Act--that prevent foreclosure on a house, that cap interest 
payments. The extra protections sought by the Durbin amendment are 
already in place.
  On the point of the payday loans, I agree that is an abuse that 
should be halted. Truly unscrupulous lenders that take advantage of 
anyone, in uniform or not, should be put out of business. But that is 
in fact a matter for banking regulations, not bankruptcy law. This 
amendment is closing the barn door after the horse is already gone.
  Under the bankruptcy reform bill before us, the test to determine a 
filer's ability to pay specifically allows for the ``special 
circumstances'' that could reduce their ability to pay. The Sessions 
amendment, that we just passed, makes it crystal clear that those 
special circumstances include service in the armed forces--if that 
service puts you into a situation where you are unable to pay your 
legal debts. That can happen to someone called up in the reserves, and 
it is precisely why that category of special circumstances was put into 
the bill in the first place.
  I could not support this bill if I did not belief that it is already 
fundamentally fair. This is a bill that received 82 votes the last time 
the Senate voted on it. I would never call those Senators callous or 
indifferent to the difficult circumstances our servicemen and women 
face. They are not. The Durbin amendment assumes all 82 of us got it 
wrong last time. I do not agree.
  With the additional clarification of the Sessions amendment, I am 
convinced that the concerns raised by Senator Durbin are fully 
addressed.
  Mr. LEAHY. Mr. President, I stand to voice my support for the 
amendment offered by my friend and colleague, Senator Durbin, which 
will protect our military servicemembers from attempts to penalize them 
by making it tougher for them to file for bankruptcy, even when the 
reason they lost all their income is because they answered the call of 
duty to serve America. I am proud to join my colleague as a cosponsor 
of this amendment.
  We cannot have a thorough debate on bankruptcy reform without 
considering the economic hardships faced by servicemembers and their 
families. Calls to serve their country in Iraq, Afghanistan, or 
elsewhere can cause loss of family income, the closing of a family 
business, or unexpected expenses. Unfortunately, it is not uncommon for 
servicemembers and their families to be forced into filing for 
bankruptcy relief. We need to protect those who are fighting for us.
  I support Senator Durbin's efforts to protect our soldiers, 
particularly young recruits and junior officers, from sales of 
inappropriate insurance and investment products on military bases. It 
is crucial that servicemen and women who sacrifice for their country 
not be exploited or taken advantage of through dishonest business 
practices. It is our duty to ensure that America's military personnel 
are offered first-rate financial products so they can provide for their 
families and invest in their futures.
  I commend Senator Durbin for his leadership on this issue, and I urge 
my colleagues to accept his amendment so we can remedy the financial 
hardships faced by servicemembers who serve our nation and their 
families.


                            Amendment No. 23

  Mr. SESSIONS. Mr. President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Alabama [Mr. Sessions] proposes an 
     amendment numbered 23.

  Mr. SESSIONS. Mr. 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:

[[Page S1849]]

 (Purpose: To clarify the safe harbor with respect to debtors who have 
serious medical conditions or who have been called or ordered to active 
           duty in the Armed Forces and low income veterans)

        On page 12, line 10, insert after ``special 
     circumstances'' the following: ``, such as a serious medical 
     condition or a call or order to active duty in the Armed 
     Forces, to the extent such special circumstances''.
       On page 18, line 4, insert after ``debtor'' the following: 
     ``, including a veteran (as that term is defined in section 
     101 of title 38),''.

  Mr. SESSIONS. Mr. President, how much time remains?
  The PRESIDING OFFICER. The Senator from Alabama has 15 minutes.
  (Disturbance in the Visitors' Galleries.)
  The PRESIDING OFFICER. The Sergeant at Arms will restore order in the 
gallery.
  The Senator from Alabama.
  Mr. SESSIONS. I thank the Chair.
  I do not believe our service men and women should be insulted or are 
being insulted by the amendment I offered to ensure that they have 
certain special categories of protection under this act. I think they 
will welcome the amendment. I do not believe, however, that we need to 
change the overall idea and concept of the legislation, that homestead 
should be decided by the States and not by this Federal legislation. 
And if a serviceman is unable to pay his debts, he will be able to file 
bankruptcy against those. He will be able to wipe out all those debts. 
If he is able to pay back a portion, like any other citizen, he would 
be required to pay back that portion under this legislation. I think 
that is fair.
  We need to be careful that they are not in any way adversely impacted 
by being overseas defending the interests of this country. I do not 
believe they are under this legislation.
  I reserve the remainder of my time.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. Mr. President, I thank the Senator from Alabama. This 
exchange is a rare and a good occurrence. As I said before, it is 
dangerously close to debate which we occasionally have in the Senate. I 
thank the Senator from Alabama for being here, even though we are on 
polar opposite sides of the debate. There should be more conversation 
and dialog on the floor such as this, a competition of ideas.
  Nothing I said about his amendment reflects on him or his respect for 
the military. He has served in the military. I have not. I have great 
respect for him for having done that. But what I am trying to do with 
this amendment is to show what I think is appropriate respect to the 
men and women serving in uniform.
  The point I made earlier was that the section of the underlying bill 
where people are presumed to have abused bankruptcy--in other words, 
they can pay their debts, but they try to get discharged from 
bankruptcy from their debt--that section is what the Senator from 
Alabama amended. So he puts into that section the requirement that the 
court take a look at the fact that the person filing bankruptcy may be 
in the military. That is all. That is the only point I am trying to 
make. I do not question his respect for the military in any way at all.
  His amendment misses the point completely. Instead of presuming that 
the men and women who serve our country are abusing the bankruptcy laws 
when they go to file bankruptcy, I say stick to the current law. The 
current law allows a bankruptcy judge to make this determination. The 
new proposal by Senator Sessions, the one we are about to vote on, 
would require the service man or woman to file copious documents, incur 
additional legal costs, and then, if they are presumed to be abusing 
bankruptcy, to go through it all over again. What I am trying to do is 
spare them from that, and maybe it is soft on my part. Maybe I am not 
tough enough. I am trying to spare them because they are sparing me the 
worry about the safety of this country. They are serving this country 
in uniform. They are risking their lives. Yes, maybe I am going a 
little further than some would. I don't think it is an unreasonable 
leap. We understand the economic hardships that activation in the 
military can lead to.
  Let me say a word about what used to be known as the Soldiers and 
Sailors Relief Act, now the Servicemembers Civil Relief Act.
  The Senator from Alabama continues to return to it, saying this is 
their protection. Well, there is some protection in this law as it 
currently exists, but not nearly enough. This law, as currently 
written, does not apply to debts incurred after military service 
begins. So if you are in the military service and have debts that are 
incurred because you are overseas--your family debts that could lead 
you into bankruptcy--there is no protection from the Servicemembers 
Civil Relief Act. The protections are not automatic. You have to go to 
court and fight for them, too. Imagine that, fighting for your country 
overseas and being worried about fighting legal battles back home for 
lien enforcement on autos and other personal property being taken by 
self-help repossession. It doesn't fully protect servicemembers' 
spouses or dependents. These protections are not absolute.
  If the creditor can show that the proceedings he instituted do not 
materially affect the serviceman, they can go forward. This bill, as 
written, doesn't stop debt collection harassment. This bill, as 
written, is providing protection that is only temporary at best and not 
long-term solutions to financial problems.
  A member of my staff is active military and he is on detail to my 
office. I always go to him and ask him about these ideas, because he 
sees it from the eyes of a serviceman. He sent me a little note about 
Senator Sessions' amendment. He says it keeps the troops subject to the 
means test, but would allow a call or order to active duty in the armed 
services, to the extent that such special circumstances justify 
additional expenses or adjustments of current monthly income. This puts 
the service member at the mercy of someone else's opinion as to what 
was justified, what was reasonable. He gives an example, and a good 
one:

       Suppose a soldier decides to keep his family in their home 
     rather than move them in with his parents while he is 
     deployed. You can understand why he might--the comfort of 
     their home, schools the kids are used to. Instead of picking 
     them up and saying I am going overseas and you are moving in 
     with mom and dad, he says stay in the home. Senator Sessions' 
     amendment would force that soldier to justify his decision to 
     keep the family in their home, made under circumstances that 
     few outside the military can appreciate. What may seem like a 
     reasonable alternative--picking up the wife and kids and 
     sending them to mom's and dad's house to live in the 
     basement, or in an extra bedroom, may not be reasonable in 
     that soldier's eyes.

  What I am asking my colleagues in the Senate is, when you look at 
this Bankruptcy Code, join me in saying if we are going to give special 
consideration and help to the men and women in uniform--I don't think 
that is an unreasonable thing to do; I think we owe it to them--they 
ought to have a chance to go to court and be spared from this harsh 
means test and everything included in this bill to prove up where you 
stand. The judge, the trustee in bankruptcy, and others are going to 
make the ultimate decision as to whether you receive your bankruptcy.
  Secondly, moving these soldiers all around the United States--at 
least if they file for bankruptcy, give them an option to choose an 
exemption under Federal law for personal protections and a $75,000 
homestead exemption.
  Finally, let me say this to these predatory lenders, the payday loan 
companies. The argument is if you treat them harshly in bankruptcy 
court, they may not be able to offer these 100-percent, 200-percent, 
400-percent interest loans. I hope they go out of business tomorrow, to 
be honest. A lot of them are snaring these unsuspecting soldiers and 
marines and sailors into debt they can never get out from under. I 
think it is horrendous that men and women who serve our country should 
be subjected to that. I don't think a 36-percent a year annual interest 
rate, which we allow in the Durbin amendment, is unreasonably low. I 
think it is a reasonable return for a loan in most circumstances. It is 
far more than people pay for cars or homes today. They may pay that 
much on credit cards, if they are not careful. But to say the payday 
loan lenders are not going to have their day in court to exploit the 
men and women in uniform, I think, is a reasonable conclusion. It is a 
conclusion, frankly, that was joined in by a number of military groups 
that have endorsed this amendment.

[[Page S1850]]

  For those colleagues following this debate, let me say that, to my 
knowledge, the Sessions amendment has no support from military families 
and support groups. It may have the support of the payday loan 
companies and some of the credit card companies and banks. But 
supporting my legislation are the Military Officers Association of 
America, Air Force Sergeants Association, National Association for the 
Uniformed Services, and the Enlisted Association of the National Guard 
of the United States. I will stand with my supporters and ask my 
colleagues to join me in that effort.
  Mr. President, at this time I will yield the floor and reserve the 
remainder of my time. We are under a unanimous consent request, and I 
note that Senator Leahy of Vermont has come to lay down an amendment.
  If I may get the attention of the Senator from Alabama for a moment. 
Senator Leahy is here to lay down an amendment. I would appreciate it 
if we can amend our unanimous consent request to give the Senator 7 
minutes and protect and preserve the time we have remaining in debate.
  Mr. SESSIONS. That is acceptable to me.
  Mr. DURBIN. Mr. President, I ask unanimous consent that Senator Leahy 
be allowed to lay down his amendment and to speak for 7 minutes, and 
that we return to debate and the previous unanimous consent request.
  The PRESIDING OFFICER (Mr. Thune). Without objection, it is so 
ordered.


                            Amendment No. 26

  Mr. LEAHY. Mr. President, I thank the Senator from Illinois and the 
Senator from Alabama for their usual courtesies. I ask unanimous 
consent that it be in order to set aside, under our understanding, the 
pending amendment so I might introduce an appropriately referred 
amendment for myself, Senator Snowe, and Senator Cantwell.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Vermont [Mr. Leahy], for himself, Ms. 
     Snowe, and Ms. Cantwell, proposes an amendment numbered 26.

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

    (Purpose: To restrict access to certain personal information in 
                         bankruptcy documents)

        On page 132, between lines 5 and 6, insert the following:

     SEC. 234. PROTECTION OF PERSONAL INFORMATION.

       (a) Restriction of Public Access to Certain Information 
     Contained in Bankruptcy Case Files.--Section 107 of title 11, 
     United States Code, is amended by striking subsection (b), 
     and inserting the following:
       ``(b) On request of a party in interest, the bankruptcy 
     court shall, and on the bankruptcy court's own motion, may, 
     protect a person with respect to a trade secret or 
     confidential research, development, or commercial 
     information.
       ``(c) The bankruptcy court, for cause, may protect an 
     individual, with respect to--
       ``(1) any means of identification (as defined in section 
     1028(d) of title 18) contained in a paper filed, or to be 
     filed, in a case under this title; or
       ``(2) information contained in a paper described in 
     paragraph (1) that could cause undue annoyance, 
     embarrassment, oppression, or risk of injury to person or 
     property.''.
       (b) Security of Social Security Account Number of Debtor in 
     Notice to Creditor.--Section 342(c) of title 11, United 
     States Code, is amended--
       (1) by inserting ``last 4 digits of the'' before ``taxpayer 
     identification number''; and
       (2) by adding at the end the following: ``If the notice 
     concerns an amendment that adds a creditor to the schedules 
     of assets and liabilities, the debtor shall include the full 
     taxpayer identification number in the notice sent to that 
     creditor, but the debtor shall include only the last 4 digits 
     of the taxpayer identification number in the copy of the 
     notice filed with the court.''.

  Mr. LEAHY. Mr. President, the reason for this amendment--and I 
realize we will not vote on it today and we may vote on it tomorrow, 
although it may well be accepted--is one of the facts we have today.
  The bankruptcy process requires the submission of many documents 
containing highly personal information. But we must be careful that our 
efforts to require documentation for accuracy and accountability do not 
inadvertently create problems for privacy and security.
  We are in an age where personal information can be easily digitized 
and shared, and when it falls into the wrong hands, easily abused.
  Identity theft is one danger. We have only to look to the recent 
debacle of Choicepoint selling the personal data of 145,000 individuals 
to scam artists. Many of these individuals have already become victims 
of identity theft, and they are not alone. Last year alone, 9.3 million 
people were victimized by identity theft. Another danger is tracking or 
harassing a former battered spouse. We need to minimize these 
possibilities, while still allowing for accountability.
  We took an important first step by ensuring privacy protections for 
databases of personal information that become assets in bankruptcy. I 
was pleased to work closely with my colleagues in providing this 
protection.
  But our responsibilities didn't end there. We also need to ensure 
reasonable privacy protection for personal information that is 
submitted by the debtors. I am submitting an amendment that will do 
just that by enhancing the court's discretion to protect personal 
information, and by requiring truncation of social security numbers in 
publicly filed documents. The Judicial Conference supports this 
amendment and I will ask unanimous consent that the Judicial Conference 
letter supporting the amendment be printed in the Record.
  I am pleased that my colleagues Senator Snowe and Senator Cantwell 
have agreed to co-sponsor this amendment. They have been leaders on 
privacy issues, and I appreciate their support.
  First, the amendment addresses court discretion in several ways. It 
allows the court, for cause, to protect personal identifiers, including 
the debtor's or other person's name, social security account number, 
date of birth, driver's license number, passport number, employee or 
taxpayer identification number, and unique biometric data. The personal 
identifiers protected under this provision are the same ones defined as 
``means of identification'' under the Identity Theft Assumption 
Deterrence Act of 1998. This definition is codified as Section 1028(d) 
of Title 18 of the criminal code.
  The amendment also allows the court, for cause, to seal or redact 
``information that could cause undue annoyance, embarrassment, 
oppression or risk of injury to person or property.'' This standard is 
drawn from the current civil procedure discovery rules--Fed. Rule of 
Civ. Procedure 26--and would replace the existing standard in 
bankruptcy court, which only protects individuals against ``scandalous 
or defamatory matter.'' This change would allow the court to protect 
information, such as the home or employment address of a debtor, 
because of a personal security risk, including fear of injury by a 
former spouse or stalker. It would also allow the court to protect 
other information normally considered private, such as medical 
information.
  The amendment would also provide persons the opportunity to request 
protection of sensitive information not only after it is filed with the 
court, but prior to filing as well. This protection is particularly 
important in an electronic filing environment, where information once 
filed is immediately available to the public.
  In addition to enhancing court discretion, the amendment also 
protects social security numbers. Currently, the bankruptcy code 
requires debtors to include their tax payer identification numbers, 
which for individuals is almost uniformly his or her social security 
number, on any notice the debtor gives to creditors.
  Because these notices are also filed with the court, the court's 
files routinely include unredacted social security numbers, creating 
the potential for abuse by those accessing public court records.
  The amendment would simply allow debtors to limit disclosure to only 
a part of his or her social security number in notices that it files 
with the court. Specifically the notice to the court would include only 
the last four digits. The amendment still protects creditors where 
necessary, and specifies that creditors who are on the

[[Page S1851]]

schedule of assets and liabilities should receive the full tax payer 
identification number in the notices sent specifically to the creditor.
  The idea of truncation isn't new. Just last year, we passed the Fair 
and Accurate Credit Transactions Act of 2003, and that Act required 
truncation of credit card and debit card numbers on receipts given to 
cardholders. Under that law, only the last 5 digits of credit card and 
debit card numbers can be printed.
  Requiring truncation for social security numbers is similarly 
reasonable. It provides protection against abuse, but still allows for 
important information sharing to take place.
  The bankruptcy process requires submission of many documents 
containing highly personal information. I spoke about this on the floor 
yesterday. We must be careful that our efforts to require documentation 
for accuracy and accountability do not inadvertently create problems 
for privacy and security.
  We are in an age where personal information can be easily digitized 
and shared, and when it falls into the wrong hands, easily abused. We 
know what happens with identity theft. Look at the totally 
irresponsible, outrageous, unbelievable debacle of Choicepoint, selling 
the personal data of 145,000 individuals to scam artists. It is hard to 
think of anything being done more irresponsibly than the executives at 
Choicepoint, unless it is the executives of Bank of America, who ship 
the data of their customers by commercial airplane--the same kind of 
flight we have all taken, and all of us have lost luggage. I said 
yesterday maybe their executives fly by private planes and they don't 
know what it is like to fly commercial. The point is their 
irresponsibility.
  Many of the individuals who have had data stolen become victims of 
identity theft. There were 145,000 individuals whose data was 
compromised with Choicepoint that we know of now. Some have already 
become victims of identity theft. Last year alone, 9.3 million people 
were victimized by identity theft. Another danger is tracking or 
harassing a former battered spouse. I want to make sure we keep 
accurate information and that people have to say who they are, but we 
don't want to allow somebody to go into electronic court files and get 
Social Security numbers and names and addresses and everything else, 
and then use that information for identity theft or worse. We need to 
minimize these possibilities, while still allowing for accountability.
  We took an important first step by ensuring privacy protections for 
databases of personal information that become assets in bankruptcy. I 
was please to work with my colleagues in providing this protection. But 
our responsibilities did not end there. We also need to ensure 
reasonable privacy protection for personal information submitted by the 
debtors. This amendment will do that by enhancing the court's 
discretion to protect personal information, and by requiring truncation 
of social security numbers in publicly filed documents.
  I have a letter from the Judicial Conference of the United States, 
Chief Justice Rehnquist presiding, in which they support this 
amendment. They strongly support this amendment. These are the courts 
that are going to have to enforce this.
  I ask unanimous consent that the Judicial Conference letter 
supporting the amendment be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:
                                               Judicial Conference


                                         of the United States,

                                Washington, DC, February 25, 2005.
     Hon. Patrick J. Leahy,
     Ranking Democrat, Committee on the Judiciary,
     U.S. Senate, Washington, DC.
       Dear Senator Leahy: I am writing today to express the 
     Judicial Conference's support of two proposed amendments to 
     the ``Bankruptcy Abuse Prevention and Consumer Protection Act 
     of 2005'' (S. 256). Both amendments to the bill would amend 
     the Bankruptcy Code to effect the Judicial Conference's 
     privacy policy and protect confidential or sensitive 
     information from public disclosure. Your support of these 
     amendments to pending bankruptcy reform legislation would be 
     greatly appreciated.


                   Section 107 of the Bankruptcy Code

       This amendment would implement Judicial Conference policy 
     regarding protection of certain information contained in 
     bankruptcy case files from public disclosure by means of four 
     revisions to section 107 of the Bankruptcy Code. First, the 
     amendment would transform former subsection (b)(1) regarding 
     protection of trade secret or confidential research, 
     development, or commercial information into a new subsection 
     (b). No substantive change would be made to this provision.
       Second, the amendment would create a new subsection (c) to 
     allow the court for cause to authorize the redaction of 
     personal identifiers to protect a debtor, creditor, or other 
     person from identity theft or other harm. The amendment 
     incorporates by reference section 1028(d)(7) of title 18, 
     United States Code, a provision of the ``Identity Theft and 
     Assumption Deterrence Act of 1998,'' with regard to the types 
     of personal identifiers that may be redacted. These include 
     the debtor's or other person's name, social security account 
     number, date of birth, driver's license number, alien 
     registration number, government passport number, employee or 
     taxpayer identification number, unique biometric data, unique 
     electronic identification number, electronic address or 
     routing code, and telecommunication identifying information 
     or access device. The amendment would also permit the court 
     to exercise its discretion to protect personal identifiers by 
     means other than redaction where appropriate in the 
     circumstances of the case.
       Third, this provision would allow the protection of 
     information under subsection ( c) ``contained in a paper 
     filed, or to be filed,'' in a bankruptcy case. This provision 
     is intended to provide persons the opportunity to request 
     protection of the information not only after it is filed with 
     the court, but prior to filing as well. This authority would 
     be especially useful in an electronic filing environment, 
     where information once filed is immediately available to the 
     public.
       Finally, this new subsection (c) would have the effect of 
     striking from the current provision ``scandalous or 
     defamatory matter'' as a basis for protection of a person and 
     instead allow the court for cause to seal or redact 
     ``information that could cause undue annoyance, 
     embarrassment, oppression or risk of injury to person or 
     property.'' This language is drawn from Federal Rule of Civil 
     Procedure 26 regarding the issuance of protective orders in 
     the course of discovery. This new provision would expand the 
     authority of the bankruptcy court to allow the court to 
     protect information, such as the home or employment address 
     of a debtor, because of a personal security risk, including 
     fear of injury by a former spouse or stalker. It would also 
     allow the court to protect other information normally 
     considered private, such as medical information which, if 
     publicly) disclosed, could result in untoward consequences to 
     the debtor or others.


                 Section 342(c) of the Bankruptcy Code

       This amendment to the bill would amend section 342(c) of 
     the Bankruptcy Code to implement Judicial Conference policy 
     that social security account numbers be protected from public 
     disclosure in court documents.
       Section 342(c) of title 11, United States Code, currently 
     requires a debtor to include his or her taxpayer 
     identification number, which for an individual is almost 
     uniformly his or her social security account number, on any 
     notice the debtor gives to his or her creditors. Debtors are 
     required to give such notice in various contexts, including 
     the filing of adversary proceedings, such as a complaint to 
     determine the dischargeability of a debt, or contested 
     matters, such as a motion to avoid a lien impairing an 
     exemption.
       As a copy of such notice is required to be filed with the 
     court, court files routine include unredacted social security 
     account numbers of debtors. By requiring only the last four 
     digits of a taxpayer identification number to appear an the 
     notice, the debtor's fun social security account number will 
     no longer appear in the court file and thus be protected from 
     public disclosure.
       The amendment also adds a provision to section 342(c) to 
     require that adequate notice of the bankruptcy filing is 
     given to a creditor who is added to the case after the 
     initial notice of the case has been sent. The taxpayer 
     identification number would be treated in the same manner in 
     the notice to a newly added creditor as the number was 
     treated in the initial notice to the original creditors. The 
     debtor is directed to send to the newly added creditors a 
     notice of the bankruptcy filing containing the debtor's full 
     taxpayer identification number, but to include only the last 
     four digits of the number in the copy of the notice filed 
     with the court.
       Thank you far your consideration of these proposed 
     amendments. If you have any questions or concerns, please 
     have your staff contact Michael W. Blommer, Assistant 
     Director, at (202) 502-1700.
                                            Leonidas Ralph Mecham,
                                                        Secretary.

  Mr. LEAHY. Mr. President, I am pleased my colleague from Maine, 
Senator Snowe, and my colleague from Washington State, Senator 
Cantwell, have agreed to cosponsor this amendment. They both have been 
leaders of privacy issues. I appreciate their support.
  Here is what the amendment does: It addresses court discretion in 
several ways. It allows the court for cause to protect personal 
identifiers, including the debtor's or other person's name,

[[Page S1852]]

Social Security account number, date of birth, driver's license number, 
passport number, employee or tax identification number, and unique 
biometric data. The personal identifiers protected under this provision 
are the same ones defined as ``means of identification'' under the 
Identity Theft Deterrence Act of 1998. This definition is codified in 
Section 1028(d) of Title 18 of the criminal code.
  The amendment also allows the court, for cause, to seal or redact 
``information that could cause undue annoyance, embarrassment, 
oppression or risk of injury to person or property.'' This standard is 
drawn from the current civil procedure discovery rules. This change 
would allow the court to protect information, such as the home or 
employment address of a debtor because of a personal security risk. 
Unfortunately, many times that risk is from a former spouse or a 
stalker. It would also allow the court to protect other information 
normally considered private, such as medical information.
  The amendment would provide persons the opportunity to request 
protection of sensitive information not only after it is filed with the 
court, but prior to filing as well. This protection is particularly 
important in an electronic filing environment, where information once 
filed is immediately available to the public.
  In addition to enhancing court discretion, the amendment also 
protects Social Security numbers. Currently, the bankruptcy code 
requires debtors to include their tax payer identification numbers 
(which for individuals is almost uniformly his or her social security 
number) on any notice the debtor gives to creditors. Because these 
notices are also filed with the court, the court's files routinely 
include unredacted social security numbers, creating the potential for 
abuse by those accessing public court records.
  This amendment would simply allow debtors to limit disclosure to only 
a part of his or her social security number in notices filed with the 
court. Specifically the notice to the court would include only the last 
four digits.
  This amendment still protects creditors where necessary, and 
specifies that creditors who are on the schedule of assets and 
liabilities should receive the full tax payer identification number in 
the notices sent specifically to the creditor. What it means is 
somebody cannot get on line, get all this information, sell it, or do 
whatever they want to.
  The idea of truncation isn't new. Just last year, we passed the Fair 
and Accurate Credit Transactions Act of 2003, and the Act required 
truncation of credit card and debit card numbers on receipts given to 
cardholders. Under that law, only the last 5 digits of credit card and 
debit card numbers can be printed. Requiring truncation for social 
security numbers is similarly reasonable. It provides protection 
against abuse, but still allows for important information sharing to 
take place.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time? The Senator from Alabama.
  Mr. SESSIONS. Mr. President, I note that with regard to, I believe 
the new name for it is the Servicemembers Civil Relief Act, which is 
the updated Soldiers and Sailors Relief Act, is a good piece of 
legislation. It provides tremendous protection for our men and women 
who have been called to active duty and sent around the world to defend 
our interest. It is very important legislation. We updated it not too 
long ago, in 2003. Maybe it needs to be updated again.
  A bill structuring the rules of procedure for a bankruptcy in America 
is not the place to enter into debate about the refined procedures that 
might be necessary to give greater protection than we give today to our 
service men and women.
  I suggest very strongly that to those who disagree there are enough 
protections, let's consider that. Let's look at that and see if we can 
do a better job of providing relief. The danger we get into is this: If 
we start amending what homestead is and having a Federal law dominate 
state homestead laws, which has not been done in our history, is not 
the current law, and we have rejected time and again in many different 
ways, I think we jeopardize the bipartisan consensus we had that led to 
a vote that passed this legislation last time without the Sessions 
amendment, which I think provides additional benefits for servicemen. 
We passed it 83 to 15. I think one time it passed with 97 to 1 votes; 
another time 78 votes. This is legislation that has had four markups in 
the Judiciary Committee. We debated it there. We have had long debates 
on the floor. As a matter of fact, as I recall, we spent 2 weeks on it 
every time it has been before the Senate, and it is projected we might 
go 2 weeks again on this legislation.
  I know my friend from Illinois is concerned about soldiers. I also 
know he does not support the bill, or at least has not been a supporter 
of it. I expect it would not hurt his feelings if this amendment, which 
would upset the agreements we reached on homestead, led to the defeat 
of the bill. It would not hurt him at all. We had a Schumer amendment 
last time on a very discrete issue, a very controversial issue that 
ended up blocking final passage of the bill. We do not need to do that 
this time.
  I believe there are strong protections for our service men and women. 
I do not think, as a matter of principle, that a serviceman should be 
exempt from the means test. The means test is not harsh. It does not 
mean ``mean;'' it means ``means,'' income, how much is your income, and 
if your income is above the median income in America and you can pay 
back some of those debts, I think anybody ought to do that, if they 
can. That is the principle of the bill.
  We proceed at some risk when we start carving out exceptions. Senator 
Feingold wants to change the homestead exemption for those over 62. I 
see the Chair, a distinguished new Senator with a young family. There 
are a lot of young people out here who bought a house. If we change the 
homestead law, why just do it for seniors? Why not for everybody? Maybe 
a family with two or three kids needs protection more than somebody who 
is 62. I don't know. I am saying, we have dealt with those issues. We 
have decided we would allow the States to set the homestead limit. That 
was a good decision, a defensible decision. That is one as a Senate, 
each time it has come forward, that we have reached that agreement, and 
I believe we ought to stay with it.
  I do not think it reflects any diminishment or lack of respect for 
the men and women in uniform. I respect them. I care about them. We 
have done many things for them and I want to do more. I was proud to 
sponsor the legislation that increased the death benefits from $12,000 
to $100,000 and increased the servicemen group life from $250,000 to 
$400,000. The President has submitted that as part of the supplemental. 
I hope we get that done. We need to do a lot of things for our 
military, but altering the bankruptcy bill under the guise of helping 
our military in a way that could actually jeopardize a bipartisan 
consensus would be the wrong approach.
  I am concerned about it. For that reason I have to object to the 
Durbin amendment and suggest the amendment I have offered will do the 
things he wants to see done or needs to be done without jeopardizing 
our consensus.
  I yield the floor and reserve the remainder of my time.
  Mr. DURBIN. Mr. President, how much time is remaining in the debate?
  The PRESIDING OFFICER. There is 2 minutes 34 seconds remaining in 
debate.
  Mr. DURBIN. On which side?
  The PRESIDING OFFICER. On the Senator's side, and 7\1/2\ minutes for 
the Senator from Alabama.
  Mr. DURBIN. If only 2\1/2\ minutes remain on our side, if I can get 
the attention of the Senator from Alabama, if he is prepared to close 
the debate--I ask the Senator from Alabama, it is my understanding he 
has 7\1/2\ minutes remaining; I have 2\1/2\ minutes remaining, and 2\1/
2\ minutes is all I need to close. I do not know if the Senator from 
Alabama wants to use up more of his time and even it out.
  Mr. SESSIONS. In my litigation experience, the plaintiff gets the 
final word. So the Senator should use his time and I will finish. I may 
yield back some of that time.
  Mr. DURBIN. Fine. Let me do that, then. I ask unanimous consent that 
before we vote on the Durbin amendment, we have 4 minutes equally 
divided to explain our positions on the Durbin amendment.

[[Page S1853]]

  The PRESIDING OFFICER. Is there objection?
  Mr. SESSIONS. I do not have any objection.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DURBIN. The first vote for my Senate colleagues will be on the 
Sessions amendment. The Sessions amendment changes S. 256, the 
bankruptcy bill, in the section where the bill establishes a 
presumption that people are abusing bankruptcy. In other words, they 
are not entitled to bankruptcy. The Sessions amendment says that the 
judge should consider whether the person who has filed for bankruptcy 
is in the active military service and is therefore a special 
circumstance. So Senator Sessions leaves the military men and women in 
the section of this bill where one presumes to be abusing the law. I do 
not approach it in that way at all, and that is the reason why the 
military groups and families are supporting my amendment and not the 
Sessions amendment.
  As I said earlier, Senator Sessions certainly respects the military, 
but we can show our respect for the military by saying if they are 
activated to serve this country, if they are removed from their family, 
removed from their job, removed from their business, and terrible 
things happen and the business fails or their family goes into 
bankruptcy and they have to go back to America with their life and 
limbs intact and file in bankruptcy court, we are going to give them 
special consideration. They did something special for America; we are 
going to do something special for them. We are not going to make them 
jump through all the hoops that have been created by this new 
bankruptcy law that are expensive, time consuming, and loaded with 
documents that need to be filed. We are going to protect their home for 
$75,000 worth at least, wherever they happen to be assigned in the 
military. We are going to protect their basic possessions that they can 
have after the bankruptcy is over, and we are not going to protect 
those creditors and lenders which abused them by charging interest 
rates which were sky high. We will not give them their day in court.
  The PRESIDING OFFICER. The time of the Senator from Illinois has 
expired.
  Mr. DURBIN. I urge my colleagues to oppose the Sessions amendment and 
support the Durbin amendment, which has the endorsement of the military 
groups and families.
  The PRESIDING OFFICER. The Senator from Alabama.
  Mr. SESSIONS. Mr. President, I will make a few general points. This 
is not a harsh bill. People who make below median income can use the 
same bankruptcy procedures they always have. Spouses and children are 
going to have a tremendously better position in this bankruptcy bill 
vis-a-vis their alimony and child support payments than we have ever 
given them before. There are a lot of good things in this bill.
  I reject the suggestion that this is a bill written by credit card 
companies to meet their special interests. What we have is a bankruptcy 
court system that is not working well. It is being abused in a lot of 
different ways.
  I do not know how we came up with the idea to use the language--and 
the Senator is correct, it does say abusing the system. It could just 
as well as have said people who make above median income will not be 
guaranteed not to pay back some of their debts because, as a matter of 
policy, the Congress has decided that if they make above median income 
and can pay some of their debts back over a period of up to 5 years, if 
the Court so declares, then they ought to pay some of that back. I do 
not think that is harsh or mean. And all other debts are being wiped 
out. People cannot sue you, creditors cannot call on you. Your phones 
cannot be stopped. People can be fined if they harass you for the 
collection of those debts. That is not a harsh thing.

  The way it was written, it uses that word ``abusive,'' that we 
consider it an abuse if you file to wipe out all of your debts when you 
have a higher income. It might have been better to have said we just do 
not think you ought to not pay something back if you make above median 
income. That is the way lawyers write language and that is the way we 
stuck with it, but it should not be taken in any personal way. It is 
just a statement of policy of the Congress about who ought to pay back 
their debts.
  There is talk like it is a credit card company's fault that someone 
takes their card and goes out and runs up $3,000 or more in debts on 
that card, and it is their fault if someone does not pay it back, that 
they deserve what they get and they gave away $3,000. Who pays for 
that? It is the consumers in the long run who pay for that.
  It has been said that they send credit cards to children. Under 
American law, if a young person receives a credit card and actually 
goes out and uses it and it is in his or her name, they do not ever 
have to pay a dime back. A minor is not bound by such a contract as 
that. The credit card company would be the total loser in that 
arrangement.
  They are bringing all these issues up about credit cards. They bring 
the issues up about health care and insurance and people who do not 
have insurance or do have insurance. They raise the question of the 
military. They raise the question of old people. But I just point out 
that we have considered all of that. We have considered that for 8 
years now in great detail, and we have hammered out a bill that I 
believe is fair and just and has received 83 votes in this body last 
time for final passage. I believe we will see another big vote this 
time.
  The amendment I have offered is a fair solution to the concern of our 
military men and women. If it is not, we ought to look at the Soldiers 
and Sailors Relief Act and see if we can make it stronger if that is 
the right step. Let us keep the bankruptcy law, the court procedures of 
the Federal bankruptcy system, consistent and harmonious with the 
philosophy we started with and have carried on with this bill.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. Mr. President, I ask unanimous consent that Senator 
Mikulski be added as a cosponsor to my amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SESSIONS. Mr. President, I believe the Sessions amendment is 
before the body. I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  Does the Senator from Alabama yield back his remaining time?
  Mr. SESSIONS. I yield back the remainder of my time.
  The PRESIDING OFFICER. All time is yielded back.
  The question is on agreeing to amendment No. 23.
  The yeas and nays have been ordered. The clerk will call the roll.
  The legislative clerk called the roll.
  Mr. McCONNELL. The following Senators were necessarily absent: the 
Senator from Minnesota (Mr. Coleman), the Senator from Texas (Mr. 
Cornyn) and the Senator from Virginia (Mr. Warner).
  Further, if present and voting, the Senator from Minnesota (Mr. 
Coleman) and the Senator from Texas (Mr. Cornyn) would have voted 
``yea.''
  Mr. DURBIN. I announce that the Senator from Minnesota (Mr. Dayton) 
and the Senator from Hawaii (Mr. Inouye) are necessarily absent.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 63, nays 32, as follows:

                      [Rollcall Vote No. 12 Leg.]

                                YEAS--63

     Alexander
     Allard
     Allen
     Baucus
     Bennett
     Biden
     Bond
     Brownback
     Bunning
     Burns
     Burr
     Byrd
     Carper
     Chafee
     Chambliss
     Coburn
     Cochran
     Collins
     Conrad
     Craig
     Crapo
     DeMint
     DeWine
     Dole
     Domenici
     Ensign
     Enzi
     Feinstein
     Frist
     Graham
     Grassley
     Gregg
     Hagel
     Hatch
     Hutchison
     Inhofe
     Isakson
     Johnson
     Kohl
     Kyl
     Lincoln
     Lott
     Lugar
     Martinez
     McCain
     McConnell
     Murkowski
     Nelson (FL)
     Nelson (NE)
     Roberts
     Santorum
     Sessions
     Shelby
     Smith
     Snowe
     Specter
     Stevens
     Sununu
     Talent
     Thomas
     Thune
     Vitter
     Voinovich

                                NAYS--32

     Akaka
     Bayh
     Bingaman
     Boxer
     Cantwell
     Clinton
     Corzine
     Dodd
     Dorgan
     Durbin
     Feingold
     Harkin
     Jeffords
     Kennedy
     Kerry
     Landrieu
     Lautenberg
     Leahy

[[Page S1854]]


     Levin
     Lieberman
     Mikulski
     Murray
     Obama
     Pryor
     Reed
     Reid
     Rockefeller
     Salazar
     Sarbanes
     Schumer
     Stabenow
     Wyden

                             NOT VOTING--5

     Coleman
     Cornyn
     Dayton
     Inouye
     Warner
  The amendment (No. 23) was agreed to.
  The PRESIDING OFFICER. The Democratic leader.
  Mr. REID. Mr. President, would the suggestion of an absence of a 
quorum be in order?
  The PRESIDING OFFICER. It would.
  Mr. REID. 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. FRIST. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Chambliss). Without objection, it is so 
ordered.
  Mr. FRIST. Mr. President, for the information of Senators, this will 
be the last rollcall vote tonight. We will be coming in tomorrow at 
9:15. We will have 1 hour of morning business. After that morning 
business, we will have two rollcall votes in all likelihood. So we need 
people back early in the morning. After that, another amendment will be 
introduced, and we may well have another vote prior to lunch tomorrow. 
I have talked to the Democratic leader and the managers on both sides, 
and that is agreeable. This will be the last rollcall vote tonight.


                     Amendment No. 16, As Modified

  The PRESIDING OFFICER. There are 4 minutes evenly divided. Who yields 
time?
  The Senator from Alabama.
  Mr. SESSIONS. Mr. President, the Senator from Illinois has suggested 
that I go first on his amendment. I know he would like to do the 
closing argument. He is very good at that.
  The Senator from Illinois suggests that we are accusing military 
persons who file for bankruptcy as abusers if they qualify for the 
means test. That is an incorrect statement of what we are about with 
the amendment we just passed and what the bankruptcy bill is about. 
This legislation provides that if a bankruptcy filer makes above median 
income--this explains a lot about the bill--then absent special 
circumstances, a filer can be required to pay back at least a part of 
the debts they owe, only if they make above median income. It also 
provides that if their income falls below median income, they can stay 
in chapter 7 and wipe out all their debts just as they always have. If 
a debtor's income is above median income and special circumstances 
apply, they still may be eligible to avoid chapter 13, wipe out all 
their debts under chapter 7.
  The amendment I just offered and just passed explicitly states that 
when one is called to active military duty in the Armed Forces, that 
can be a special circumstance that could protect them and provide an 
additional opportunity to not go into chapter 13.
  An expert testified at the committee last week that about 80 percent 
of the people who file are below median income and that about 7 percent 
in addition will qualify under the special circumstances. The amendment 
we just passed protects our servicemen and guarantees they will be 
considered under special circumstances.
  We should vote down this amendment because it also sets a homestead 
limit in violation of State law and contrary to the philosophy of this 
bill.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. Mr. President, I ask unanimous consent that Senator 
Corzine be added as a cosponsor of the Durbin amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DURBIN. I yield 30 seconds to the Senator from Massachusetts, Mr. 
Kennedy.
  The PRESIDING OFFICER. The Senator from Massachusetts.
  Mr. KENNEDY. Mr. President, we are having a difficult time enough now 
in meeting our goals for the Reserve and the Guard. Unless we pass the 
Durbin amendment, we are going to have a much more difficult time. If 
you support the Guard and the Reserve and support our troops, you will 
support the Durbin amendment.
  Mr. DURBIN. Mr. President, I thank the Senator from Massachusetts.
  How many of us have seen men and women going off to serve our country 
to risk their lives knowing that they are leaving behind families and 
their businesses and knowing the economic hardship they will face? Some 
of them are going to be forced into bankruptcy. We have case after case 
where it has happened. All the Durbin amendment says is, if you have to 
file bankruptcy after this new bankruptcy reform bill were to become 
law, the bankruptcy system will consider the fact that you have served 
our Nation by exempting you from certain aspects of this new bill. We 
will not push you into a means test, but we will consider your 
individual circumstances.
  We will give you a homestead exemption of $75,000 regardless of where 
you have been assigned for military duty. We will protect your personal 
assets with the Federal personal exemption regardless of where you have 
been assigned to duty and where you have to file bankruptcy.
  There are those who say this is a special favor for the armed 
services. It is, and I believe it should be. They risk their lives for 
us. They should not risk their home and their finances as well. We 
ought to stand behind them. Yes, you can vote for the Sessions 
amendment and for the Durbin amendment as well. They are not 
inconsistent.
  The PRESIDING OFFICER. The question is on agreeing to the Durbin 
amendment No. 16, as modified.
  Mr. DURBIN. I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The clerk will call the roll.
  The assistant legislative clerk called the roll.
  Mr. McCONNELL. The following Senators were necessarily absent: the 
Senator from Minnesota (Mr. Coleman) and the Senator from Texas (Mr. 
Cornyn).
  Further, if present and voting, the senator from Minnesota (Mr. 
Coleman) and the senator from Texas (Mr. Cornyn) would have voted 
``nay.''
  Mr. DURBIN. I announce that the Senator from Minnesota (Mr. Dayton) 
and the Senator from Hawaii (Mr. Inouye) are necessarily absent.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 38, nays 58, as follows:

                      [Rollcall Vote No. 13 Leg.]

                                YEAS--38

     Akaka
     Bayh
     Bingaman
     Boxer
     Cantwell
     Clinton
     Conrad
     Corzine
     Dodd
     Dorgan
     Durbin
     Feingold
     Feinstein
     Harkin
     Jeffords
     Kennedy
     Kerry
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     Mikulski
     Murray
     Nelson (FL)
     Obama
     Pryor
     Reed
     Reid
     Rockefeller
     Salazar
     Sarbanes
     Schumer
     Specter
     Stabenow
     Wyden

                                NAYS--58

     Alexander
     Allard
     Allen
     Baucus
     Bennett
     Biden
     Bond
     Brownback
     Bunning
     Burns
     Burr
     Byrd
     Carper
     Chafee
     Chambliss
     Coburn
     Cochran
     Collins
     Craig
     Crapo
     DeMint
     DeWine
     Dole
     Domenici
     Ensign
     Enzi
     Frist
     Graham
     Grassley
     Gregg
     Hagel
     Hatch
     Hutchison
     Inhofe
     Isakson
     Johnson
     Kyl
     Lott
     Lugar
     Martinez
     McCain
     McConnell
     Murkowski
     Nelson (NE)
     Roberts
     Santorum
     Sessions
     Shelby
     Smith
     Snowe
     Stevens
     Sununu
     Talent
     Thomas
     Thune
     Vitter
     Voinovich
     Warner

                             NOT VOTING--4

     Coleman
     Cornyn
     Dayton
     Inouye
  The amendment (No. 16) was rejected.
  Mr. SESSIONS. I move to reconsider the vote.
  Mr. GRASSLEY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I am glad we are now finally considering 
S. 256, the Bankruptcy Reform Act of 2005. Although a few amendments 
were accepted during the Judiciary Committee markup a couple weeks ago, 
and we did that to accommodate Democratic Members, this bill is 
practically identical to the conference report that both the House and 
Senate conferees signed

[[Page S1855]]

in the 107th Congress, minus the poison pill abortion amendment.
  Many of my colleagues know I have been working on this bill for quite 
some time now and that there has always been strong bipartisan support 
for passing bankruptcy reform. I started working on bankruptcy issues 
in the mid-1990s, and I did that with my colleague, then-former Senator 
Heflin of Alabama. We served together as either chairman or ranking 
member of the Administrative Oversight Subcommittee for a period of, I 
believe, 12 years.
  During this period of time, we created what became known as the 
National Bankruptcy Review Commission. We held numerous hearings in the 
subcommittee on various topics dealing with the subject of bankruptcy 
reform.
  In the 105th Congress, Senator Durbin and I passed out of the Senate 
a bankruptcy bill by a vote of 98 to 1, but it never got to conference.
  In the 106th Congress, Senator Torricelli and I worked closely and 
negotiated many compromises. We were able to vote out of the Senate a 
Grassley-Torricelli bill by a vote of 83 to 14. The Senate then 
approved the bankruptcy conference report by a vote of 70 to 28. Mr. 
President, 53 Republican Senators and 17 Democratic Senators voted for 
that conference report, but President Clinton pocket-vetoed the bill, 
and although we had the votes to override it, we were, unfortunately, 
not to have that opportunity. That is what a pocket veto is all about.
  In the 107th Congress, I introduced, with Senator Biden, the same 
language of the conference report agreed to by both the House and 
Senate in the previous 106th Congress.
  We passed the bankruptcy bill by a strong bipartisan vote of 85 to 
13, with further changes made to address concerns of Democratic Party 
members. We went to conference with the House and reached an agreement 
on a conference report. During that conference committee, numerous 
amendments were negotiated with Democrats who opposed the bill. We 
negotiated in good faith, but the inclusion of what has become known as 
the Schumer abortion language ultimately proved to be unacceptable to 
the House and we were not able to get to the finish line.
  The Senate tried to address the bankruptcy bill in the 108th 
Congress. The House passed the conference report language without the 
abortion provisions, but the Senate never took it up. In addition, the 
House amended a Senate bill with a bankruptcy bill and requested a 
conference, but Senate Democrats denied us the ability to have a 
conference on that bill.
  So after three Congresses, we are here again in the 109th Congress 
trying to pass bankruptcy reform. My Democratic colleagues, Senator 
Carper and Ben Nelson, have joined me, as well as Senators Hatch, 
Sessions, and others, on this bill, S. 256, the Bankruptcy Reform Act 
of 2005. The bill continues in the tried and true spirit and tradition 
of this bill being bipartisan, so we do have that bipartisan support on 
its introduction, and from the votes we have had on amendments today, 
it looks like that bipartisanship is still going to hold. So I hope my 
colleagues will not be fooled when longstanding opponents to this bill, 
even though they may never number more than 15, vociferously claim that 
the bankruptcy bill is really controversial and really unnecessary 
because those statements, made by the very small number of people in 
this body who do not think we need to do anything on bankruptcy reform, 
everything they are saying is far from the truth.
  I note that throughout the years, we really bent over backward in 
trying to accommodate Democratic Senators' concerns with the bill's 
process, even in this Congress. I do not think that it is any surprise 
to anyone that my position is that the bankruptcy bill is still very 
much simply unfinished business after all of these compromises 
throughout now the fourth Congress. This bill has passed both the House 
and the Senate a total of 11 times between these two Houses of 
Congress. It is about time that we get the job done now. Hence, simply 
unfinished business, even though some of my colleagues will try to make 
this be a totally brand-new debate, just like we were starting over 
with the purest bill that I would prefer, but because purest bills 
never get through the Senate, it takes bipartisanship.
  We are where we are because of compromise and unfinished business, 
and hopefully we will move this bill to the House and to the President, 
somewhat I hope a repeat of what we did 3 weeks ago with the class 
action tort reform bill. That is why at the beginning of this Congress 
I reintroduced the bipartisan conference report that was arrived at in 
the 107th Congress with only one change, and that change is to leave 
the poison pill of the Schumer abortion language out of it.
  Remember that this compromise that I introduced in this year, the 
107th Congress, minus the Schumer amendment, otherwise is exactly the 
same language negotiated when the Democrats had a majority. It was two 
Congresses ago when Senator Jeffords changed from being a Republican to 
an Independent, sitting with the Democrats. They took over the 
Congress, and it is that Democratic Senate that negotiated this 
agreement for the Senate. That is the bill we are working on now as the 
underlying provision.
  The Schumer abortion language that tanked the bill in the House, in 
the 107th Congress, is left out. Other than that, the bill was 
basically the exact same language that Senate Members, both Republican 
and Democrats, have supported.
  The reason I did this is because we had reached many carefully 
crafted compromises and had a good bipartisan product. I did not think 
that we had to go through committee this time because this bill had 
been done so many times before, but Majority Leader Frist insisted that 
it go through regular order. The Judiciary Committee held a hearing and 
markup on this bill.
  So my colleagues are clear, the committee accepted five amendments to 
further accommodate Democratic members. The committee also defeated a 
number of other amendments that were clearly offered to open issues and 
weaken the bill.
  I would like to make my position crystal clear. We have all 
cooperated and compromised at great length in order to enact this 
legislation that fixes an unfair bankruptcy regime, provides new 
consumer protections, helps children in need of child support, and 
makes other necessary reforms to a system that is often open to abuse. 
I do not believe there is any need to reopen this bill and to disrupt 
those many compromises we have already reached with our Democratic 
colleagues, and more importantly with the House of Representatives.
  I hope this clarification on the history and procedural process of 
the bill will show that, one, the bill is a bipartisan effort; two, 
that we have been working on bankruptcy reform for too long and have 
gone over all the fine points of the bill in great detail; and, three, 
that we have bent over backward to allow a fair process to move forward 
with this bill.

  I discussed the merits of this bankruptcy reform bill. There is broad 
public support for reforming our bankruptcy system. The vast majority 
of people believe that individuals who file for bankruptcy protection 
should be required to pay back some of their debt if they have the 
ability to do so, and that is precisely what this bankruptcy bill 
attempts to do.
  Most people think it should be more difficult for individuals to file 
for bankruptcy. Most Americans are tired of paying for high rollers who 
game the current bankruptcy system and its loopholes to get out of 
paying their fair share. Most people recognize that too many people are 
filing for bankruptcy. Too many people are gaming the system, and the 
numbers are up in historically high proportions in recent years that 
prove that. Bankruptcy filings were at an alltime high even during the 
boom years of our economy. Opponents to the bill act as if there is 
nothing to worry about, but the fact is we have a bankruptcy crisis on 
our hands.
  I want to visit with my colleagues about how this bill will change 
the way bankruptcy is being treated. Simply put, bankruptcy is a court 
proceeding where people get their debts wiped away. Every time a debt 
is wiped away through bankruptcy, somebody loses money. Of course, that 
is common sense, and when somebody who extends credit has their 
obligations wiped away in bankruptcy, they are forced to make a 
decision. Should this loss simply be

[[Page S1856]]

swallowed as the cost of doing business or are prices raised for other 
customers to make up for another's losses?
  Presently, when individuals file for bankruptcy under chapter 7, a 
court proceeding takes place and their debts are simply erased. But 
every time a debt is wiped away through bankruptcy, someone loses 
money. When someone loses money in this way, he or she has to decide to 
either assume that loss as a cost of business or raise the price for 
other customers to make up for that loss.
  When bankruptcy losses are infrequent, lenders maybe are able to 
swallow that loss. But when they are frequent, lenders need to raise 
prices for other consumers to offset their losses. These higher prices 
translate into higher interest rates for future borrowers. The result 
of the bankruptcy crisis is that hard-working, law-abiding Americans 
have to pay higher prices for goods and services because somebody else 
did not make good on their obligations to pay. This bill would make it 
harder for individuals who can repay their debt to file for bankruptcy 
under chapter 7. This would lessen, then, the upward pressure on 
interest rates and prices. It is only fair to require people who can 
repay their debts to pull their own weight. But under current 
bankruptcy law, an individual can get full debt cancellation in chapter 
7 with no questions asked.
  The Bankruptcy Reform Act of 2005 asks the very fundamental question 
of whether repayment is possible by an individual. It is this simple: 
If repayment is possible, then he or she will be channeled into chapter 
13 of the Bankruptcy Code which requires people to repay a portion of 
their debt as a precondition for limited debt cancellation. In other 
words, people who have the ability to pay will not get off scot-free 
anymore.
  This bill does this by providing for a means-tested way of steering 
people who are filers, who can repay a portion of their debts, away 
from chapter 7 bankruptcy. This test employs a legal presumption that 
chapter 7 proceedings should be dismissed or converted into chapter 13 
whenever the filers earn more than the State median income and can 
repay at least $6,000 of his or her unsecured debt over a 5-year period 
of time.
  In calculating a debtor's income, living expenses are deducted as 
permitted under IRS standards for the State and locality where the 
debtor lives. Legitimate expenses such as food, clothing, medical, 
transportation, attorney's fees, and charitable contributions are taken 
into account in this analysis, as provided under Internal Revenue 
Service guidelines.
  Moreover, a debtor may rebut the presumption by demonstrating special 
circumstances. So the means test takes into account a debtor's income, 
a debtor's expenses, and allows a debtor to, even beyond that, show 
special circumstances which would justify adjustments to the means 
test.
  In this way, the bankruptcy reform bill preserves the principle of a 
fresh start for people who have been overwhelmed by medical debts or 
sudden, unforeseen emergencies. As stated by the Government Accounting 
Office, the bill allows for the 100-percent deductibility of medical 
expenses before examining repayment ability. The bill preserves fair 
access, then, to bankruptcy for those people who are truly in need.
  So that I am crystal clear, people who do not have the ability to 
repay their debt can still use the bankruptcy system as they would have 
before. This bill clearly provides that people of limited income can 
still file under chapter 7 and get that fresh start. There is a 
specific safe harbor built in for these individuals, so their debts can 
be wiped away, as is done right now.
  I point this out because so often during this debate it is going to 
be pointed out to you, inaccurately, that somehow poor people are not 
getting that opportunity for a fresh start. So I want to repeat: There 
is a safe harbor for poor people. But the free ride is over for people 
who have higher incomes, and who can repay their debt.

  Personal responsibility has been one of the main themes of the 
bankruptcy reform bill, going back to my first introduction. But even 
before that, since 1993, the number of Americans who declared 
bankruptcy has increased, would you believe it, over 100 percent. While 
no one knows all the reasons underlying the bankruptcy crisis, the data 
shows that bankruptcies increased dramatically during the same 
timeframe when unemployment was low and real wages were at an all-time 
high.
  I believe the bankruptcy crisis is, in fact, a moral crisis. People 
have to stop looking at bankruptcy as a conventional financial planning 
tool, where honest Americans have to foot the bill for those who do not 
pay their honest debt. It is clear to me that our lax bankruptcy system 
must bear some of the blame for the bankruptcy crisis. A system where 
people are not even asked whether they can pay off their debts 
obviously contributes to the fraying of the moral fiber of America. Why 
should people pay their bills when the system allows them to walk away 
with no questions asked? Why should people honor their obligations when 
they can take the easy way out through bankruptcy?
  I think the system needs to be reformed because it is fundamentally 
unfair. This bill will promote personal responsibility among borrowers 
and create a deterrence for those hoping to cheat the system. This bill 
does more than provide for a flexible means test that gives judges 
discretion to consider the individual circumstances of each debtor in 
order to determine whether they truly belong in chapter 7. It also 
contains tough new consumer protections. But the opponents of this bill 
do not seem to realize that. So I want them to pay attention as I 
describe new procedures to prevent companies from using threats to 
coerce debtors into paying debts which could be wiped away once they 
are in bankruptcy.
  The bill requires the Justice Department to concentrate law 
enforcement resources on enforcing consumer protection laws against 
abusive debt collection practices. It contains significant new 
disclosures for consumers, mandating that credit card companies provide 
key information about how much they owe and how long it will take to 
pay off their credit card debts by only making the minimum payment. 
That is a very important consumer education for every one of us.
  Consumers will also be given a toll-free number to call where they 
can get information about how long it will take to pay off their own 
credit card balances if they only pay the minimum payment. This will 
educate consumers and improve consumers' understanding of what their 
financial situation is.
  Credit card companies that offer credit cards over the Internet will 
be required for the first time ever to fully comply with the Truth In 
Lending Act, so claims that this bill is unbalanced are off base.
  Moreover, the bill makes changes which will help particularly 
vulnerable segments of our society. Child support claimants are given a 
higher priority status when the assets of a bankruptcy estate are 
distributed to creditors.
  Here again, I make crystal clear that the bankruptcy bill makes 
significant improvements for child support claimants. This bankruptcy 
bill does not hurt them, as opponents of the bill are trying to claim. 
In fact, the organization, the very organization that specializes in 
tracking down deadbeat dads, feels this bill will be a tremendous help 
in collecting child support.
  The people on the front lines say the bankruptcy bill is good for 
collecting child support. An example: The bill provides that parents 
and State child support enforcement collection agencies are given 
notice when a debtor who owes child support or alimony files for 
bankruptcy. Bankruptcy trustees are required to notify child support 
creditors of their right to use child support enforcement agencies to 
collect outstanding amounts due.
  In addition, the bill requires creditors to provide the last known 
address of debtors owing support obligations upon the request of the 
custodial parent.
  The bill goes further--requiring that the identity of minor children 
be protected in bankruptcy proceedings.
  Concerns expressed by opponents to the bill about this being a flawed 
part of it just don't hold water.
  The bill also makes great strides in cracking down on very wealthy 
individuals who abuse the bankruptcy system. If you listen to our 
critics, you might get the impression that the homestead exemption is a 
giant loophole that this bill does not deal with, and that we are busy 
protecting the rich.

[[Page S1857]]

  The GAO looked at the question of how frequently the homestead 
exemption is abused by wealthy people in bankruptcy. The GAO found that 
less than 1 percent of bankruptcies filed in States where there are 
unlimited homestead exemptions involve homesteads over $100,000. That 
means 99 percent of bankruptcy filings were not abusive.
  This is not a loophole at all. In fact, the provision in this bill 
with respect to homestead is a significant improvement from current 
law. There is a Federal cap on homestead exemptions in current law.
  Under the current bankruptcy law, the debtors living in certain 
States can shield from their creditors virtually all of the equity in 
their home. Consequently, some debtors relocate to these States to take 
advantage of the mansion loophole provisions that are, in most cases, 
in their constitution. This bill would take a strong stand against this 
abuse by requiring that a person be a resident in a State for 2 years 
before he can claim the State's homestead exemption. Current 
requirements can be as little as 91 days.
  The bill further reduces the intent for abuse by requiring a debtor 
to own the homestead for at least 40 months before he can use State 
exemption law. Current law doesn't have any such requirement.
  Furthermore, the bill would prevent individuals who have violated 
security laws or individuals who have engaged in criminal conduct from 
shielding their homestead assets from those whom they have defrauded or 
injured. Specifically, if a debtor was convicted of a felony, violated 
a security law, or committed a criminal act intentionally, or engaged 
in reckless misconduct that caused serious physical injury or debt, the 
bill overrides State homestead exemption laws and caps the debtor's 
homestead at $125,000 as the amount that would be protected.
  To the extent that the debtor's homestead exemption was obtained 
through the fraudulent conversion of nonexempt assets during the 10-
year period preceding the filings of the bankruptcy case, this bill 
requires such exemption to be reduced by the amount attributable to the 
fraud.
  These homestead provisions were delicately compromised between those 
who believe that the homestead should be capped through Federal law--I 
am one of those--or others who are uncomfortable with a uniform Federal 
cap which may violate their own State constitution.
  So, please, tomorrow when this debate is conducted on changing this 
provision that has been so carefully worked out over a period of at 
least two Congresses, don't believe it when people say we have a gaping 
loophole. The homestead provisions in the bankruptcy bill will 
substantially cut down on the abuses that might be referred to.
  I would like to talk about another thing this bankruptcy bill does 
which is so important for those of us who represent agricultural 
States. This bill makes chapter 12 of the Bankruptcy Code, which gives 
essential protections to family farmers, a permanent chapter in the 
Bankruptcy Code. The bill enhances these protections. It makes more 
farmers eligible for chapter 12. The bill lets farmers in bankruptcy 
avoid capital gains tax. This is very important because it will free up 
resources to be invested in farming operations that otherwise would go 
down the black hole of the Internal Revenue Service. Farmers need this 
chapter 12 safety net.
  In addition, the bankruptcy bill will for the first time create badly 
needed protections for patients in bankruptcy hospitals and nursing 
homes. Let me provide an example of what could happen right now without 
the patient protections contained in this bill.
  At a hearing I held on nursing home bankruptcies, I learned about a 
situation in California where a bankruptcy trustee just showed up at a 
nursing home on a Friday evening and evicted the residents of that 
nursing home. The bankruptcy trustee didn't provide any notice 
whatsoever that this was going to happen. There was absolutely no 
chance for the nursing home residents to be relocated. The bankruptcy 
trustee literally put these elderly people out on the street and 
changed the locks on the doors so that they couldn't get back into the 
nursing home. The bankruptcy bill will prevent this from ever happening 
again. These are protections that we will be giving these deserving 
senior citizens for the first time.
  The truth is that bankruptcies hurt real people. It isn't fair to 
permit people who can repay to skip out on their debts. Yes, we must 
preserve fair access to bankruptcy for those who truly need a fresh 
start. This bill does not in any way compromise that century-old 
principle of our Bankruptcy Code.

  This bankruptcy reform act does that--it guarantees a fresh start. It 
lets those people who can pay their debts live up to their 
responsibilities as well.
  Let us restore the balance. Let us pass this bill. This bill is a 
product of much negotiation and compromise over three Congresses. It is 
fair, it is balanced, but, more importantly, it is a bill that once got 
to President Clinton and he pocket-vetoed it. This bill that passed by 
overwhelming majorities of both Houses of Congress is long overdue 
legislation.
  I urge my colleagues to support this legislation but, more 
importantly, help us defeat amendments that are opening all of the 
carefully crafted compromises that we worked on over the last 3 to 4 
years.
  I yield the floor. I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Thune). The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. McCONNELL. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________




[Pages S1834-S1857]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2005

  The PRESIDING OFFICER. The Senator from Hawaii is recognized.


                            Amendment No. 15

  Mr. AKAKA. Mr. President, I rise to speak on amendment No. 15, which 
I will offer to S. 256.
  I thank Senators Durbin, Leahy, and Sarbanes for working with me on 
this legislation, the Credit Card Minimum Payment Warning Act, and for 
cosponsoring the amendment.
  Mr. President, during all of 1980, only 287,570 consumers filed for 
bankruptcy. As consumer debt burdens have ballooned, the number of 
bankruptcies have increased significantly. From January through 
September of 2004, approximately 1.2 million consumers filed for 
bankruptcy, keeping pace with last year's record level. The growth in 
use of credit cards can partially explain this surge. Revolving debt, 
mostly compromised of credit card debt, has risen from $54 billion in 
January 1980 to more than $780 billion in November 2004. A U.S. Public 
Interest Research Group and Consumer Federation of America analysis of 
Federal Reserve data indicates that the average household with debt 
carries approximately $10,000 to $12,000 in total revolving debt.
  We must make consumers more aware of the long-term effects of their 
financial decisions, particularly in managing their credit card debt, 
so that they can avoid financial pitfalls that may lead to bankruptcy.
  While it is relatively easy to obtain credit, not enough is done to 
ensure that credit is properly managed. Currently, credit card 
statements fail to include vital information that would allow 
individuals to make fully informed financial decisions. Additional 
disclosure is needed to ensure that individuals completely understand 
the implications of their credit card use and the costs of only making 
the minimum payments as required by credit card companies.
  S. 256 includes a requirement that credit card issuers provide 
additional information about the consequences of making minimum 
payments. However, this provision fails to provide the detailed 
information for consumers on their billing statement that our amendment 
would provide. Section 1301 of the bankruptcy bill would allow credit 
card issuers a choice of disclosures that they must provide on the 
monthly billing statement.
  The first option included in the bankruptcy bill would require a 
``Minimum Payment Warning'' stating that it would take 88 months to pay 
off a balance of $1,000 for bank card holders or 24 months to pay off a 
balance of $300 for retail card holders. It would require a toll-free 
number to be established that would provide an estimate of the time it 
would take to pay off the customer's balance. The Federal Reserve Board 
would be required to establish a table that would estimate approximate 
number of months it would take to pay off a variety of account 
balances.
  There is a second option that the legislation permits. The credit 
card issuer could provide a general minimum payment warning and provide 
a toll-free number that consumers could call for the actual number of 
months to repay the balance.
  Both of these options are inadequate. They do not require the issuers 
to provide their customers with the total amount they would pay in 
interest and principal if they chose to pay off their balance at the 
minimum payment rate. The minimum payment warning included in the first 
option underestimates the costs of paying a balance off at the minimum 
payment. Since the average household with debt carries a balance has 
approximately $10,000 to $12,000 in total revolving debt, a warning 
based on a much smaller balance, $1,000 or under in this case, will not 
be helpful. If a family has a credit card debt of $10,000, and the 
interest rate is a modest 12.4 percent, it would take more than 10\1/2\ 
years to pay off the balance while making minimum monthly payments of 4 
percent.
  As we make it more difficult for consumers to discharge their debts 
in bankruptcy, we have a responsibility to provide additional 
information so that consumers can make better informed decisions. Our 
amendment will make it very clear what costs consumers will incur if 
they make only the minimum payments on their credit cards. If this 
amendment is adopted, the personalized information they will receive 
for each of their accounts will help them to make informed choices 
about the payments that they choose to make towards reducing their 
outstanding debt.
  This amendment requires a minimum payment warning notification on 
monthly statements stating that making the minimum payment will 
increase the amount of interest that will be paid and extend the amount 
of time it will take to repay the outstanding balance. The amendment 
also requires companies to inform consumers of how many years and 
months it will take to repay their entire balance if they make

[[Page S1835]]

only the minimum payments. In addition, the total cost in interest and 
principal, if the consumer pays only the minimum payment, would have to 
be disclosed. These provisions will make individuals much more aware of 
the true costs of their credit card debts. The amendment also requires 
that credit card companies provide useful information so that people 
can develop strategies to free themselves of credit card debt. 
Consumers would have to be provided with the amount they need to pay to 
eliminate their outstanding balance within 36 months.
  Finally, our amendment would require that creditors establish a toll-
free number so that consumers can access trustworthy credit counselors. 
In order to ensure that consumers are referred from the toll-free 
number to only trustworthy organizations, the agencies for referral 
would have to be approved by the Federal Trade Commission and the 
Federal Reserve Board as having met comprehensive quality standards. 
These standards are necessary because certain credit counseling 
agencies have abused their nonprofit, tax-exempt status and have taken 
advantage of people seeking assistance in managing their debts. Many 
people believe, sometimes mistakenly, that they can place blind trust 
in nonprofit organizations and that their fees will be lower than those 
of other credit counseling organizations. Too many individuals may not 
realize that the credit counseling industry does not deserve the trust 
that consumers often place in it.
  Our credit card minimum payment warning legislation has been endorsed 
by the Consumer Federation of America, Consumers Union, U.S. Public 
Interest Research Group, and Consumer Action.
  I urge my colleagues to support this amendment that will empower 
consumers by providing them with detailed personalized information to 
assist them in making better informed choices about their credit card 
use and repayment. This amendment makes clear the adverse consequences 
of uninformed choices, such as making only minimum payments, and 
provides opportunities to locate assistance to better manage their 
credit card debts.
  Mr. President, I ask unanimous consent that the pending amendment be 
set aside, and I call up amendment No. 15.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Hawaii [Mr. Akaka], for himself, Mr. 
     Durbin, Mr. Leahy, and Mr. Sarbanes, proposes an amendment 
     numbered 15.

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

  (Purpose: To require enhanced disclosure to consumers regarding the 
consequences of making only minimum required payments in the repayment 
              of credit card debt, and for other purposes)

        On page 473, strike beginning with line 12 through page 
     482, line 24, and insert the following:

     SEC. 1301. ENHANCED CONSUMER DISCLOSURES REGARDING MINIMUM 
                   PAYMENTS.

       (a) Disclosures Regarding Outstanding Balances .--Section 
     127(b) of the Truth in Lending Act (15 U.S.C. 1637(b)) is 
     amended by adding at the end the following:
       ``(11)(A) Information regarding repayment of the 
     outstanding balance of the consumer under the account, 
     appearing in conspicuous type on the front of the first page 
     of each such billing statement, and accompanied by an 
     appropriate explanation, containing--
       ``(i) the words `Minimum Payment Warning: Making only the 
     minimum payment will increase the amount of interest that you 
     pay and the time it will take to repay your outstanding 
     balance.';
       ``(ii) the number of years and months (rounded to the 
     nearest month) that it would take for the consumer to pay the 
     entire amount of that balance, if the consumer pays only the 
     required minimum monthly payments;
       ``(iii) the total cost to the consumer, shown as the sum of 
     all principal and interest payments, and a breakdown of the 
     total costs in interest and principal, of paying that balance 
     in full if the consumer pays only the required minimum 
     monthly payments, and if no further advances are made;
       ``(iv) the monthly payment amount that would be required 
     for the consumer to eliminate the outstanding balance in 36 
     months if no further advances are made; and
       ``(v) a toll-free telephone number at which the consumer 
     may receive information about accessing credit counseling and 
     debt management services.
       ``(B)(i) Subject to clause (ii), in making the disclosures 
     under subparagraph (A) the creditor shall apply the interest 
     rate in effect on the date on which the disclosure is made.
       ``(ii) If the interest rate in effect on the date on which 
     the disclosure is made is a temporary rate that will change 
     under a contractual provision specifying a subsequent 
     interest rate or applying an index or formula for subsequent 
     interest rate adjustment, the creditor shall apply the 
     interest rate in effect on the date on which the disclosure 
     is made for as long as that interest rate will apply under 
     that contractual provision, and then shall apply the adjusted 
     interest rate, as specified in the contract. If the contract 
     applies a formula that uses an index that varies over time, 
     the value of such index on the date on which the disclosure 
     is made shall be used in the application of the formula.''.
       (b) Access to Credit Counseling and Debt Management 
     Information.--
       (1) Guidelines required.--
       (A) In general.--Not later than 1 year after the date of 
     enactment of this Act, the Board of Governors of the Federal 
     Reserve System and the Federal Trade Commission (in this 
     section referred to as the ``Board'' and the ``Commission'', 
     respectively) shall jointly, by rule, regulation, or order, 
     issue guidelines for the establishment and maintenance by 
     creditors of a toll-free telephone number for purposes of the 
     disclosures required under section 127(b)(11) of the Truth in 
     Lending Act, as added by this Act.
       (B) Approved agencies.--Guidelines issued under this 
     subsection shall ensure that referrals provided by the toll-
     free number include only those agencies approved by the Board 
     and the Commission as meeting the criteria under this 
     section.
       (2) Criteria.--The Board and the Commission shall only 
     approve a nonprofit budget and credit counseling agency for 
     purposes of this section that--
       (A) demonstrates that it will provide qualified counselors, 
     maintain adequate provision for safekeeping and payment of 
     client funds, provide adequate counseling with respect to 
     client credit problems, and deal responsibly and effectively 
     with other matters relating to the quality, effectiveness, 
     and financial security of the services it provides;
       (B) at a minimum--
       (i) is registered as a nonprofit entity under section 
     501(c) of the Internal Revenue Code of 1986;
       (ii) has a board of directors, the majority of the members 
     of which--

       (I) are not employed by such agency; and
       (II) will not directly or indirectly benefit financially 
     from the outcome of the counseling services provided by such 
     agency;

       (iii) if a fee is charged for counseling services, charges 
     a reasonable and fair fee, and provides services without 
     regard to ability to pay the fee;
       (iv) provides for safekeeping and payment of client funds, 
     including an annual audit of the trust accounts and 
     appropriate employee bonding;
       (v) provides full disclosures to clients, including funding 
     sources, counselor qualifications, possible impact on credit 
     reports, any costs of such program that will be paid by the 
     client, and how such costs will be paid;
       (vi) provides adequate counseling with respect to the 
     credit problems of the client, including an analysis of the 
     current financial condition of the client, factors that 
     caused such financial condition, and how such client can 
     develop a plan to respond to the problems without incurring 
     negative amortization of debt;
       (vii) provides trained counselors who--

       (I) receive no commissions or bonuses based on the outcome 
     of the counseling services provided;
       (II) have adequate experience; and
       (III) have been adequately trained to provide counseling 
     services to individuals in financial difficulty, including 
     the matters described in subparagraph (F);

       (viii) demonstrates adequate experience and background in 
     providing credit counseling;
       (ix) has adequate financial resources to provide continuing 
     support services for budgeting plans over the life of any 
     repayment plan; and
       (x) is accredited by an independent, nationally recognized 
     accrediting organization.

  The PRESIDING OFFICER (Mr. Chambliss). The Senator from 
Massachusetts.
  Mr. KENNEDY. Mr. President, we have a lot of urgent problems pressing 
the Nation and this Congress. We have urgent problems with joblessness. 
We have urgent problems with the coverage of health care and the costs 
of health care. We have urgent problems with education. We have urgent 
problems dealing with poverty. We have problems that go to the heart of 
fairness and opportunity in this Nation. These are real problems of 
real people, and they test whether our commitment to America's core 
values is as important to us as we say it is. But we are not spending 
this month on any of those issues. We are spending most of the time 
between now and the March recess on a bill that does nothing about any 
of these problems, that does nothing for Americans facing job problems,

[[Page S1836]]

health problems, and education challenges. We are spending our time on 
a bill that was written by the credit card industry for the benefit of 
the credit card industry. We are spending our time on changes in the 
bankruptcy law which were opposed by the two distinguished national 
commissions which studied those laws during the 1970s and 1990s.
  This is a bill which is opposed by a long list of organizations 
representing many millions of real people, organizations representing 
workers, retired Americans, consumers, women's organizations, civil 
rights organizations, a large group of distinguished law professors and 
bankruptcy judges, 1,700 prominent doctors around the country, and even 
some financial service organizations that are truly responsible lenders 
and care about their customers. I am talking about people such as the 
CEO of ING Direct, the sixth largest thrift institution in the Nation; 
people like the CEO of the second largest credit union in the U.S., the 
North Carolina State Employees' Credit Union.
  This is what the CEO of ING Direct told the committee about the bill:

       The one-sided provisions of this bankruptcy legislation are 
     bad news for consumers, but they are also bad news for the 
     financial service industry. Consumers are our customers. By 
     creating a form of debt imprisonment, this bill will hobble 
     the most important player in the world economy, the American 
     consumer.

  Jim Blaine, the CEO of the North Carolina State Employees' Credit 
Union, had this to say about the bill:

       This bird is a turkey.

  So why are we here? Why are we spending our time on this supposed 
resolution to a nonexistent problem rather than addressing the real 
problems the Nation faces? It cannot be because the credit card 
industry needs help. The credit card industry is doing just fine, thank 
you. The profits of the credit card industry rose from $6.4 billion in 
1990 to $20 billion in 2000. By last year, those profits had increased 
another 50 percent to over $30 billion. Let me say that again. Credit 
card company profits have gone from $6.4 billion in 1990 to $30.2 
billion last year. Why are we spending our time on legislation designed 
to further enrich what is already one of the most profitable industries 
in America at the expense of middle-income Americans in financial 
distress, in most cases through no fault of their own?
  This is supposed to be a bill about spendthrifts, about people who 
abuse the credit system and abuse the bankruptcy system. If that were 
really what this bill was about, maybe there would be some reason for 
us to be here. If this were a bill that dealt with the truly incredible 
abuses of the bankruptcy system that we have seen in the Enron case, in 
the WorldCom case, in the Adelphia case, and the Polaroid case in my 
own State, then maybe there would be reason to be spending our time 
working on this bill.

  Look at the Polaroid case in my home State of Massachusetts. Polaroid 
filed for bankruptcy in 2001. In the months leading up to the company's 
filing, the corporation made $1.7 million in incentive payments to its 
chief executive Gary DiCamillo on top of his $840,000 base salary. The 
company also received bankruptcy court approval to make $1.5 million in 
payments to senior managers to keep them on board. These managers 
collectively received an additional $3 million when the company's 
assets were sold off.
  By contrast, just days before Polaroid filed for bankruptcy, it 
canceled health and life insurance for more than 6,000 retirees and 
canceled health insurance coverage for workers on long-term disability. 
It also stopped certain benefits for thousands of workers who were 
recently laid off. Polaroid workers had been required to pay 8 percent 
of their pay in the company's employee stock ownership plan, the ESOP 
programs. When the company declined, their retirement savings were 
virtually wiped out. Now, that is a real abuse of the bankruptcy 
system.
  But this bill is not about consumers who abuse the system. It is not 
about corporate executives who have exploited the system to line their 
own pockets. This is a bill for which the credit card industry hopes to 
squeeze a few extra dollars a month out of Americans who are out on 
their luck, people who have been hit hard by medical disasters, 
guardsmen and reservists who have suddenly been called to duty to serve 
their Nation, forcing them to leave their families and their businesses 
behind, people who were fired after years of hard work because their 
employer sent their jobs abroad. This is not what the Senate should be 
doing. This legislation is not worthy of the Senate. Our time should be 
spent helping, not hurting, the working families most in need.
  This bill does nothing to protect those hard-working Americans who 
did everything they could to stave off bankruptcy but were left with no 
other choice after exhausting their own resources. Yet this Republican 
bill actually makes it more difficult for good citizens such as these 
to get the fresh start that the bankruptcy laws are intended to offer.
  The idea of a fresh start lies at the heart of our bankruptcy law. In 
1833, Supreme Court Justice Joseph Storey, one of the great legal 
scholars in our history, explained why. He said that bankruptcy laws 
were intended to divide debtors' remaining assets among their creditors 
when they could not pay all of their debts, but the purpose was also to 
relieve unfortunate and honest debtors from perpetual bondage to their 
creditors. He said that bankruptcy legislation should relieve the 
debtor from a slavery of mind and body which robs his family of the 
fruits of his labor.
  One hundred years later, the Supreme Court emphasized Justice Story's 
views. The Bankruptcy Act, it said, is intended to:

     relieve the honest debtor from the weight of oppressive 
     indebtedness, and permit him to start afresh free from the 
     obligations and responsibilities consequent upon business 
     misfortunes.

  The power to earn a living, the Court said, is a ``personal 
liberty,'' and:

     from the viewpoint of the wage-earner there is little 
     difference between not earning at all and earning wholly for 
     a creditor.

  In short, the same fundamental values which led this Nation to 
abolish debtors' prisons, also led us to offer debtors a fresh start. 
They would be required to use their available assets to pay as much of 
their debt as they could, but no more. They would have full rights to 
their own future earnings, so that they would not have to live in 
perpetual bondage to their past debtors.
  That is the essence of our free enterprise system. We encourage 
entrepreneurs. People can borrow money for a car to go to work, for 
equipment to start a small business, for a tractor to run a farm, for a 
boat to start a fishing business. When decent people run into financial 
trouble, we don't write them off forever. We help them get back on 
their feet so they can provide for their families and contribute to our 
economy once again. Otherwise, few in America take the risks that our 
free enterprise depends on. There is a safety net to stop a free fall.
  Yet this legislation turns its back on that spirit of American 
entrepreneurship. It tells our citizens that they cannot get that fresh 
start unless they can maneuver through a maze of procedural obstacles 
created by the credit card companies and debt collection agencies. It 
imposes paperwork burdens that bankrupt Americans can not afford. It 
forces them to pay for credit counselors, who may be predatory 
themselves. It forces them to miss work to go to audits of their meager 
assets. It requires them to hire a lawyer to mitigate this maze, but 
then tells the lawyer that any error will make the lawyer personally 
liable.
  In short, this bill does everything the mind of the purveyors of 
predatory plastic could think up to make their cardholders pay in full, 
and prevent them from getting the ``fresh start'' that bankruptcy 
offers them. Its purpose is to keep the credit card payments rolling 
in, and prevent that money from being used to feed their children or 
pay their hospital bills or make their mortgage payments. It labels 
them as abusers of the system.
  Just listen to the words in the summary of the key standard for the 
``means test'' that lies at the heart of this bill. According to this 
summary, prepared by the Congressional Research Service, you are 
presumed to be an abuser of the system:

     if current monthly income, excluding allowed deductions, 
     secured debt payments, and priority unsecured debt payments, 
     multiplied by 60, would permit a debtor to pay

[[Page S1837]]

     not less than the lesser of (a) 25 percent of nonpriority 
     unsecured debt or $6000 (or $100 a month), whichever is 
     greater, or (b) $10,000.

  Maybe some people can figure that out--most cannot. But that 
convoluted paragraph determines whether your debts can be discharged in 
bankruptcy, or not.
  This bill is flawed from top to bottom. That is why, since it was 
first presented to Congress by the credit card industry, it has been 
opposed by bankruptcy judges, legal scholars, consumer advocates, labor 
unions, and civil rights groups. They all recognize that its harsh and 
excessive provisions will have a devastating effect on working 
families.
  It allows credit card companies to put their profits ahead of the 
well-being of our troops serving in Iraq and Afghanistan. Since 9-11 
about half a million reservists arid members of the National Guard have 
been called to active duty, half a world away from their homes and 
businesses. Many of their families are suddenly facing economic 
hardship, and their creditors keep calling. They are serving far away, 
and the small businesses they ran are running into trouble. This bill 
does nothing to protect the men and women who are fighting for us.
  When one reservist left home, his wife had to start leading his 
construction company, and the company ran into trouble. Their family 
income plummeted by 80 percent. They lost their savings, lost their 
credit, and the business is on the rocks--all because a soldier served 
his country. The troubles of families like that will be even more 
serious under this bill. Instead of helping to ease the burden, it 
treats that family like tax evaders or defrauders.
  This Republican bill also penalizes innocent victims of today's 
economy. We are stil1 recovering from the 2001 recession. Nearly 8 
million Americans are still unemployed. One in five of those workers 
has been out of work for more than 6 months. The unemployment insurance 
safety net they rely on has not been updated to meet today's demands. 
Jobs in health care, financial services, and information technology are 
being shipped overseas.
  Workers who lose their jobs today have great difficulty finding a new 
job with comparable wages, benefits, hours, and overall quality. Part-
time jobs don't begin to provide the same financial stability--yet 
today's companies are relying more and more on part-time workers to cut 
costs. The average part-time worker earns $4 an hour less than a 
regular full-time worker. Few part-time workers have a health insurance 
plan or a pension plan.
  Huge numbers of working families are being squeezed hard by the 
current economy. Their ability to live the American dream is 
increasingly out of reach with each passing year. They find it harder 
and harder to earn a living--to pay the mortgage, pay the rent, pay 
their medical bill, pay their food bill, pay their gasoline bill, pay 
the college bill. Yet the cost of getting by continues to rise faster 
than family income.
  Healthcare costs are out of reach. Health insurance premiums have 
soared 59 percent in the past 4 years. Drug costs have soared 65 
percent.
  Housing costs rose 33 percent in the last 4 years. Child care can 
often cost up to $10,000 a year for one child--more than the cost of 
tuition at a public college. College costs are rising at double-digit 
rates. Tuition at public colleges has risen 35 percent in the last 4 
years.
  Today, hardworking families are balancing on a precarious tower of 
bills that keep piling. Inevitably, many topple over. They go into debt 
just to get by. The average family now spends 13 percent of its income 
to pay debts--the highest percentage since 1986. The average household 
now has more than $8,000 in credit card debt. More than half of all 
Americans acknowledge they have too much debt. Three-quarters of that 
debt is a major reason it's harder to achieve the American dream today. 
It is no wonder so many families face bankruptcy.
  This year, more people will end up in bankruptcy than suffer a heart 
attack. More people will file for bankruptcy than graduate from 
college. More children will grow up in families facing bankruptcy than 
in families facing divorce.
  Many of us feel the Bush administration is bankrupt in more ways than 
one. Its reckless policies are bankrupting the economy and literally 
bankrupting millions of families. Bankruptcy is up 33 percent since 
President Bush took office. An American now goes bankrupt every 19 
seconds. In Massachusetts, there is a bankruptcy every half hour.
  One of the greatest weaknesses of this bill is its failure to address 
the issue of bankruptcies caused by serious illness or injury. Illness 
is bankrupting millions of Americans who have done everything right. 
They have worked hard, played by the rules, earned a good salary, saved 
their money, even purchased health insurance--only to find all that is 
not enough.
  More than half of all families facing bankruptcy today are facing it 
because of overwhelming medical costs. They are not irresponsible 
spendthrifts who bought too much at the mall, or were enticed to go in 
over their heads in debt by a credit card solicitation they couldn't 
say no to. They are facing bankruptcy because of a sudden serious 
illness or a severe injury that caused a mountain of debt they couldn't 
afford.

  The average American facing a serious illness is burdened with more 
than $13,000 of out-of-pocket expenses, even though they have health 
insurance. If you have cancer, it is $35,000. That is money you have to 
pay out of your own pocket for expenses not covered by your health 
insurance.
  If the bill before us passes, those fellow citizens will be penalized 
twice--once by the failure of the health care system and a second time 
by the failure of the bankruptcy laws. This bill will only make the 
second failure even worse.
  We need to make sure that bankruptcy continues to be available as a 
safety net for those Americans--men and women who have spent down their 
savings on a serious injury or illness, who face huge doctor and 
hospital bills their insurance didn't cover, who are unable to go back 
to work after suffering serious medical problems.
  They are people such as April Wetherell, a 50-year-old woman from 
Toms River, NJ, who went back to school after raising her children and 
received her master's degree in social work. She was serving as a 
visiting nurse 2 years ago, when she suffered a stroke while recovering 
from knee surgery. The stroke left her unable to speak, work, or care 
for her own needs. At the time, April still owed $25,000 in student 
loans. She had been making payments faithfully on her student loans 
until her illness left her unable to return to her job. Her health 
insurance did not cover all her medical costs, and she was left with 
more than $20,000 in unpaid medical bills. At the time of her stroke, 
she had about $7,000 in credit card debt, which she had been paying off 
on time. Even though she had done all the right things, she was forced 
into bankruptcy because of her serious, incapacitating illness.

  Walton Pinkney of Frederick, MD, has been an electrician for more 
than 10 years. He changed jobs in 2000, and his new employer did not 
provide health benefits for the first 90 days of employment. Sadly, 
Walton suffered heart failure during his first month on his new job. 
His new health plan had not yet taken effect, and he was responsible 
for more than $45,000 in medical expenses for his heart condition. He 
tried to return to work, but his employer said his health was too 
uncertain for him to return. Faced with large medical bills he could 
not pay after he lost his job, he had to file for bankruptcy in 2003.
  Zoraya Marrero is a single mother with three children from 
Woodbridge, VA. Her oldest child suffers from spina bifida. She 
received State disability benefits and medical coverage for her child 
due to the illness. After moving to another State 5 years ago, she no 
longer qualified for new benefits, and she also had to pay back $60,000 
for benefits she had already received. She has been fighting the 
$60,000 claim and paying her own medical expenses while working in a 
doctor's office. She cannot afford private insurance, and cannot afford 
to pay for her son's costly medical care. Overwhelmed by debt, she 
filed for bankruptcy.
  These people had no intention of seeking relief in bankruptcy. They 
were not ``gaming'' the system to avoid their responsibilities. They 
and millions of other Americans in similar circumstances filed for 
bankruptcy, but

[[Page S1838]]

only after they had exhausted all the other options--not because they 
wanted to but because they had to.
  In fact, before declaring bankruptcy, they had spent at least 2 
years, on average, making very real sacrifices in a futile effort to 
pay for their health care and make ends meet. One in five went without 
food. Almost one-third had their electricity shut off.
  I am talking about individuals who went into bankruptcy as a result 
of medical expenses, even though about 65 percent of them had health 
insurance before they actually went into bankruptcy. That is what they 
did, according to the Elizabeth Warren report from the Harvard Law 
School.
  One in five went without food, almost a third had their electricity 
shut off, almost half lost their phone service, many went without 
needed medical care, and some even moved their elderly parents to less 
comfortable nursing homes.
  As this chart indicates, here is what has happened to the lavish 
lifestyle of our fellow citizens. These are half of all the 
bankruptcies at the present time. How did they live, and what did they 
do for 2 years before filing for bankruptcy? They went without needed 
medical care, 61 percent; without doctors, 50 percent; utilities turned 
off, 30 percent; without food, 22 percent; and 70 percent moved their 
elderly parents to cheaper care facilities.
  These are our fellow Americans whom we want to punish with this 
bankruptcy bill? If you want to go after the spendthrifts, let us do 
that. But do you think we are going after corporate America in this 
bankruptcy bill? Read today's newspaper. Here it is: Former WorldCom 
chief executive, once hailed as one of the most brilliant 
telecommunications executives, told the packed courtroom, ``I don't 
know about technology; I don't know about finance; also, I don't know 
about accounting.''
  There it is. The corporate CEOs will be able to escape.
  But do you think these hard-working Americans are going to be able to 
escape anything with this bill at all to deal with WorldCom, Enron, 
Polaroid? There is absolutely nothing in here. Yet there is the result 
of what this legislation does.
  Generally around here, we have legislation that is reasonably 
balanced. Not this piece of legislation. The most profitable industry 
in the country, 100-percent profits in the last 5 years, and they are 
out there trying to squeeze some additional money ought of these hard-
working Americans. I would have thought at least a majority who were 
going to write this legislation here in the Senate would have tried to 
do something about corporate bankruptcies. But, no, no. They are 
letting those individuals alone, and most of those--we come back a 
little later to discuss how they profited--a number of them even 
profited after they went into bankruptcy. There is even one individual 
who profited after he was convicted of larceny. But we are not dealing 
with those particular issues.
  We often talk in America about safety nets. Social Security is a 
safety net to guarantee financial security for senior citizens. Poverty 
programs are safety nets for children and families. Our bankruptcy laws 
are a safety net for millions of families, too.
  Americans who live responsibly, do everything right, and still 
suddenly fall on hard times deserve a second chance, and the bankruptcy 
laws give them that chance. They can make a fresh start and pull 
themselves back up. They have renewed hope for the future.
  Unexpected financial setbacks for families should not mean the end of 
their American dream. They should not lose all hope for themselves and 
their children. It's the old ``cowboy up'' philosophy--when you fall 
off your horse, you pick yourself up, dust yourself off, and start all 
over again.
  When disaster strikes, when storms buffet a community, Americans 
respond. We see the images on television and immediately we send a 
donation to help out. That's the American spirit.
  But when financial disaster strikes a family--when a business 
collapses, when medical bills pile up, when a reservist is called up 
for extended active duty, when workers lose their jobs because of a 
plant closing or outsourcing--the economic catastrophes can be hidden 
from view. That is where our bankruptcy laws come in. We got rid of 
debtors' prisons almost two centuries ago for a reason. It is the 
American spirit to help these families through financial disasters.
  But this bill will destroy that financial safety net for many, many 
citizens who deserve help.
  This legislation is a bonanza for banks and credit card companies, 
and a nightmare for millions of average Americans. It rewrites the 
bankruptcy laws in a way that kicks average families while they're 
down, in order to pad the already high profits of the credit card 
industry and other lenders. It is greed, pure and simple.
  Predatory credit card companies are doing all they can to urge 
unsuspecting citizens to pile up huge debts on their credit cards. They 
especially target the elderly, college students, and the working poor. 
They advertise nationwide. They send out billions of solicitations 
every year to entice more people to sign up for their cards. The bold 
type talks about the minimum monthly payments--but you have to read the 
fine print to see the exorbitant interest payments that inevitably 
result.
  You cannot go to any college campus, any sporting event, or your 
mailbox without being solicited for another credit card, no matter how 
many you already have. Young students, still in their teens, are 
greeted with a deluge of offers from credit card companies. Before they 
buy books and find the cafeteria, they see credit card offers with 
credit lin1its in the thousands of dollars.
  So, in many cases, the very same companies that have been trying to 
get a bill like this passed for decades and had their lobbyists write 
this bill for them in 1997, are the ones who caused the indebtedness 
that they now complain about.
  Does this bill do anything abut that? Absolutely not.
  A lot has changed since the Senate last looked at this bill 4 years 
ago. Health costs are way up, health insurance protection is less 
obtainable and less affordable, hundreds of thousands of families have 
suffered economically from military callups, unemployment insurance has 
not been updated.
  The economy is still working its way out of a serious downturn. 
Corporate mismanagement and fraud have become a way of life in the 
highest echelons of corporate America.
  So I say to each of our colleagues, please consider who wrote this 
bill and why. Please think about your hard-working constituents who 
will be dealt a double whammy by this bill if they fall on hard times. 
Please think about what has happened since we last considered the bill. 
Please keep an open mind as we discuss the serious problems with this 
bill and the need for many substantial revisions and additions before 
it is ready to even be considered for adoption by this body.
  We do not work for the credit card companies; we work for our 
constituents. We can do better than this bill for our constituents, and 
we must do better than this bill for those we represent.
  Mr. President, I will unanimous consent to have printed in the Record 
some of the letters opposing the bill. I will not include all of the 
letters, but I am going to quote from some of them at this time.
  First of all, I refer to a letter from ING Direct to the American 
Bankers Association urging them to reconsider their support for the 
bill:

       As a member of the American Bankers Association, ING Direct 
     urges you to reconsider your wholesale support for the 
     Bankruptcy Reform Bill currently before the United States 
     Senate. . . . Yet this legislation has not received a 
     thorough review in the last 4 years. It has simply been 
     reproposed without careful thought. . . . It actually 
     encourages further bad lending decisions by removing an 
     important market discipline--the possibility of a clean 
     bankruptcy. Without important changes, millions of consumers, 
     who might otherwise be encouraged into debt by aggressive 
     credit card companies and other lending. They will be unable 
     to clear their names, even if they fall into debt because of 
     an illness or an economic downturn that costs them their 
     employment.
       We at ING Direct believe this country is still willing to 
     give working Americans--the engine of our economy, a second 
     chance when debt overwhelms them. This bill seriously limits 
     that second chance. The one-sided provisions of this 
     bankruptcy legislation are bad news for most Americans. But 
     they are also bad news for the financial services industry. 
     By creating a form of debt imprisonment, this bill will 
     hobble the most important player in the world economy--the

[[Page S1839]]

     American working family. For all these reasons, we ask you to 
     reconsider the ABA's support of this bill in its current 
     incarnation.

  This is written by Arkadi Kuhlmann who is the president of the 
company. It is the sixth largest thrift savings company in the country.
  The second letter is from the Consumers Union:

       Much evidence suggests that rising consumer bankruptcies 
     are tied to abusive lending practices by creditors. Yet this 
     bill does nothing to address this fundamental problem. 
     Instead, the bill protects predatory lenders who offer 
     credit, with abusive repayment terms, to high-risk consumers. 
     It also provides creditors with additional opportunities to 
     employ strong-arm collection tactics, threatening debtors 
     with new, costly litigation.

  Furthermore, the bill protects credit card companies who fail to 
disclose the true cost of credit they provide to college students and 
others, who may quickly find themselves trapped in serious debt, 
ruining their credit ratings for years to come.
  This is what they are pointing out.
  Furthermore, the bill protects credit card companies who fail to 
disclose the true cost of credit they provide to college students and 
others who may quickly find themselves trapped in serious debt, ruining 
their credit rating for years to come.
  I will include those sections. The list goes on. I have a number of 
letters and communications from consumer groups, from women's groups, 
children's groups, and from the doctors association that has been 
formed to bring focus and attention to the impact of this legislation 
and medical bills on families. I will also include in the Record a 
letter from one of the largest credit unions in the country from North 
Carolina. I ask unanimous consent that several of these letters be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                  National Women's Law Center,

                                Washington, DC, February 23, 2005.
     Re: Oppose S. 256, The Bankruptcy Act of 2005

       Dear Senator: The National Women's Law Center is writing to 
     urge you to oppose S. 256, a bankruptcy bill that is harsh on 
     economically vulnerable women and their families, but that 
     fails to address serious abuses of the bankruptcy system by 
     perpetrators of violence against patients and health care 
     professionals at women's health care clinics.
       This bill would inflict additional hardship on over one 
     million economically vulnerable women and families who are 
     affected by the bankruptcy system each year: those forced 
     into bankruptcy because of job loss, medical emergency, or 
     family breakup--factors which account for nine out of ten 
     filings--and women who are owed child or spousal support by 
     men who file for bankruptcy. Contrary to the claims of some 
     proponents of the bill, low- and moderate-income filers--who 
     are disproportionately women--are not protected from most of 
     its harsh provisions, and mothers owed child or spousal 
     support are not protected from increased competition from 
     credit card companies and other commercial creditors during 
     and after bankruptcy that will make it harder for them to 
     collect support.
       The bill would make it more difficult for women facing 
     financial crises to regain their economic stability through 
     the bankruptcy process. S. 256 would make it harder for women 
     to access the bankruptcy system, because the means test 
     requires additional paperwork of even the poorest filers; 
     harder for women to save their homes, cars, and essential 
     household items through the bankruptcy process; and harder 
     for women to meet their children's needs after bankruptcy 
     because many more debts would survive.
       The bill also would put women owed child or spousal support 
     who are bankruptcy creditors at a disadvantage. By increasing 
     the rights of many other creditors, including credit card 
     companies, finance companies, auto lenders and others, the 
     bill would set up an intensified competition for scarce 
     resources between mothers and children owed support and these 
     commercial creditors during and after bankruptcy. The 
     domestic support provisions in the bill may have been 
     intended to protect the interests of mothers and children; 
     unfortunately, they fail to do so.
       Moving child support to first priority among unsecured 
     creditors in Chapter 7 sounds good, but is virtually 
     meaningless; even today, with no means test limiting access 
     to Chapter 7, fewer than four percent of Chapter 7 debtors 
     have anything to distribute to unsecured creditors. In 
     Chapter 13, the bill would require that larger payments be 
     made to many commercial creditors; as a result, payments of 
     past-due child support would have to be made in smaller 
     amounts and over a longer period of time, increasing the risk 
     that child support debts will not be paid in full. And, when 
     the bankruptcy process is over, women and children owed 
     support would face increased competition from commercial 
     creditors. Under current law, child and spousal support are 
     among the few debts that survive bankruptcy; under this bill, 
     many additional debts would survive. But once the bankruptcy 
     process is over, the priorities that apply during bankruptcy 
     have no meaning or effect. Women and children owed support 
     would be in direct competition with the sophisticated 
     collection departments of commercial creditors whose 
     surviving claims would be increased.
       At the same time, the bill fails to address real abuses of 
     the bankruptcy system. Perpetrators of violence against 
     patients and health care professionals at women's health 
     clinics have engaged in concerted efforts to use the 
     bankruptcy system to evade responsibility for their illegal 
     actions. This bill does nothing to curb this abuse.
       The bill is profoundly unfair and unbalanced. Unless there 
     are major changes to S. 256, we urge you to oppose it.
           Very truly yours,
     Nancy Duff Campbell,
       Co-President.
     Marcia Greenberger,
       Co-President.
     Joan Entmacher,
       Vice President and Director, Family Economic Security.
                                  ____



                            National Consumer Law Center Inc.,

                                    Boston, MA, February 28, 2005.
       Dear Senator: The National Consumer Law Center, on behalf 
     of its low income clients, writes to express our strong 
     opposition to S. 256, the ``Bankruptcy Abuse and Consumer 
     Protection Act of 2005.'' This bill would hurt many Americans 
     who are facing financial problems due to job loss, transition 
     to lower paying jobs, divorce, child-rearing, lack of medical 
     insurance, or predatory lending practices. Although the 
     economy has improved recently for some American families, 
     there are millions of other families that continue to 
     struggle. In fact, real incomes have declined since 1989 for 
     the lowest 60 percent of the American population--including 
     especially single parent households. S. 256 contains a 
     shocking number of provisions which would have a severe 
     impact on families who desperately need to preserve their 
     homes from foreclosure and their cars from repossession, or 
     to focus their income on reasonable and necessary support for 
     dependent children. Here are just a few things the bill's 
     sponsors have failed to discuss:
       The key cause of the increase in bankruptcies is surely 
     that more families owe more money. The amount of consumer 
     credit outstanding increased from 789 billion dollars in 1990 
     to 1.7 trillion dollars in 2001. During this time, there was 
     a steady increase in the amount of debt payments American 
     families made as a percentage of their disposable income. 
     Although the total number of bankruptcies has increased, the 
     number of bankruptcies in relation to the amount of credit 
     outstanding has actually gone down.
       A big part of the equation is that some segments of the 
     credit industry, such as credit card companies, make huge 
     profits from lending to American families who cannot afford 
     to pay big card balances and who therefore pay interest on 
     those balances at rates of 29 percent or higher. It is not 
     surprising that when the credit industry sends three billion 
     credit card solicitations each year, they reach some 
     significant portion of American families who will ultimately 
     have financial problems.
       The journal Health Affairs recently published a path-
     breaking joint study by researchers at Harvard Law School and 
     Harvard Medical School that reveals alarming information 
     about the medical causes of bankruptcy. The researchers found 
     that illness and medical bills contributed to at least 46.2 
     percent, and as many as 54.5 percent of all bankruptcy 
     filings. Families with children were especially hard hit--
     about 700,000 children lived in families that declared 
     bankruptcy in the aftermath of serious medical problems.
       Cutting down the number of bankruptcy filings will not 
     result in savings for the credit industry or for other 
     consumers. The vast majority of debt discharged in bankruptcy 
     would not be paid back in any event, since the debtors 
     involved simply cannot afford to pay. A number of studies 
     have shown that the ``means test'' will raise little in new 
     money for creditors.
       S. 256 contains a variety of poorly conceived provisions 
     which are discussed in more detail in our paper entitled, 
     ``What's Wrong with S. 256, Let Us Count the Ways . . .'', 
     available at: http://www.nclc.org/. If enacted, S. 256 would:
       Subject debtors to a ``means test'' that fails to screen 
     for abuse and instead penalizes honest debtors by imposing 
     additional costs and filing burdens.
       Create a ``safe harbor'' from the means test for low-income 
     debtors, but still subject them to increased costs and filing 
     requirements.
       Require stricter scrutiny of low-income debtors' expenses 
     in chapter 13 than higher income debtors and make some 
     debtors too rich for chapter 7 and too poor for chapter 13.
       Erode bankruptcy's fresh start by making more debts 
     nondischargeable in both chapters 7 and 13.
       Promote predatory lending by encouraging creditors to take 
     liens on household goods of nominal value.
       Create new creditor opportunities for reaffirmation abuses 
     by weakening current debtor protections and giving creditors 
     safe harbor from liability.

[[Page S1840]]

       Undermine debtors' ability to save homes and cars in 
     chapter 13.
       Drastically reduce fundamental protections afforded debtors 
     under the automatic stay.
       Provide vast new opportunities for identity theft and other 
     privacy invasion by making public tax returns and sensitive 
     financial documents of consumers who file bankruptcy.
       As an organization which represents poor people, the 
     National Consumer Law Center vehemently disputes the credit 
     industry position that S. 256 will not hurt low-income 
     debtors. It is precisely those debtors who would be hurt the 
     most. The myriad new procedural requirements together with 
     the dozens of provisions which give creditors an opportunity 
     to pursue new types of litigation against debtors will raise 
     the cost of bankruptcy for all debtors. Other provisions will 
     take away important rights under current bankruptcy law to 
     save homes from foreclosure and evictions, and to challenge 
     predatory lending practices. Now is not the time to cut back 
     on the availability of a system which provides a second 
     chance to the unfortunate in the form of a fresh financial 
     start.
           Sincerely,
     Willard P. Ogburn,
       Executive Director.
     John Rao,
       Attorney.
                                  ____

         A National Health Program, Selected Massachusetts 
           Physician Co-Signers,
                                   Chicago, IL, February 14, 2005.
       Dear Senator Kennedy: We write, as physicians, to urge 
     rejection of Senate Bill 256, which would make bankruptcy 
     filing more difficult and punitive for millions of Americans 
     driven to financial ruin by medical problems. As health costs 
     spiral upward and insurance coverage shrinks, more and more 
     of our patients find that illness results in financial 
     catastrophe and bankruptcy. Only universal, comprehensive 
     health insurance coverage under a national health insurance 
     plan can really solve this problem. But pending such 
     solution, many families' only chance for financial recovery 
     lies in the limited protections available through the 
     bankruptcy courts.
       Last year one million Americans filed for bankruptcy in a 
     last-ditch effort to deal with the fallout from a serious 
     medical problem. Unfortunately, the very week that a Harvard 
     Medical/Law School study documented this fact, legislation 
     was re-filed that would greatly reduce the bankruptcy 
     protections available to the medically bankrupt. S. 256 would 
     drive up costs for every family filing for bankruptcy, 
     regardless of whether the reason is too many trips to the 
     mall or a visit to the emergency room. S. 256 would also 
     narrow bankruptcy protection for all families, increasing the 
     ability of creditors to collect from their debtors after 
     bankruptcy regardless of the reason for bankruptcy, and 
     causing many more families to lose their homes and their cars 
     because of medical problems.
       We are particularly worried that more punitive bankruptcy 
     laws will further erode access to care for many families 
     under financial duress and result in preventable suffering 
     and even death. Already, families who file for medical 
     bankruptcy suffer severe privations. According to the Harvard 
     study: 61 percent of medical bankrupts didn't seek medical 
     treatments they needed; 50 percent failed to fill a 
     prescription; 22 percent went without food; 7 percent moved 
     their elderly parents to cheaper care facilities.
       We make a plea for the one million sick and injured people 
     who turned to the bankruptcy system for relief last year. 
     Please reject S. 256.
           Sincerely,

                                     Julius B. Richmond, M.D.,

                           Past U.S. Surgeon General and Professor
     Emeritus, Harvard Medical School.
                                  ____

                                                February 14, 2005.

  Harvard Study Shows Legislation a Danger to Millions Bankrupted by 
                             Medical Bills


               Physicians Urge Congress to Reject S. 256

       On the heels of a major Harvard University study showing 
     that half of all personal bankruptcies are due to illness or 
     medical bills, more than 1,700 American physicians signed a 
     letter released today opposing legislation that would remove 
     protection from patients financially ruined by medical costs.
       Bankruptcy law currently offers some protection to the 
     millions of Americans affected by medical bankruptcies each 
     year. If passed, the bill would effectively close bankruptcy 
     as an option and allow creditors to take the homes, cars and 
     other assets of families who suffer a serious illness or 
     injury.
       ``It's a sad fact that bankruptcy courts have become the 
     last line of defense for the victims of our broken health 
     system,'' said Dr. David Himmelstein, an Associate Professor 
     of Medicine at Harvard Medical School and lead author of the 
     study. ``For many families affected by a costly illness, the 
     limited protections of bankruptcy are the only chance to get 
     back on their feet.''
       In the letter to the leaders of the Senate Judiciary 
     Committee, which is currently considering the bill, the 
     doctors expressed concern that the new bankruptcy rules would 
     further restrict the ability of patients suffering from 
     medical costs to get needed care for themselves and their 
     families.
       ``Medical debtors' access to care is already severely 
     compromised: more than 60 percent go without a needed doctor 
     visit and half don't fill a prescription because of the 
     costs,'' said Dr. Steffie Woolhandler, who is also an 
     Associate Professor of Medicine at Harvard and co-author of 
     the study. ``For those unable to seek relief from their 
     debts, the situation will undoubtedly get worse,'' she said.
       The epidemic of medical bankruptcies, which affect 2 
     million Americans (including 700,000 children) every year, 
     emphasizes the need for comprehensive health insurance 
     coverage under a national health insurance plan according to 
     the signers, who include former U.S. Surgeon General Julius 
     Richmond.
       ``Current insurance policies offer paltry protection for 
     the average American,'' said Dr. Quentin Young, National 
     Coordinator of Physicians for a National Health Program. 
     ``Most of those who are bankrupted by medical bills are 
     middle class people who had coverage but were mined by the 
     massive holes in their policies. Rejecting this new 
     bankruptcy legislation is just the first step we need to take 
     in healing our sick health system. We need a system of 
     universal, comprehensive Medicare for all.''
                                  ____

                                                February 28, 2005.
     Re: Letter from Responsible Lenders in Opposition to S. 256, 
         The Bankruptcy Abuse Prevention and Consumer Protection 
         Act

     Hon. William Frist, 
     Majority Leader, U.S. Senate.
     Hon. Harry Reid,
     Minority Leader, U.S. Senate.

       Dear Majority Leader Frist and Senator Reid: The 
     undersigned financial institutions and associations write in 
     opposition to S. 256. We believe that S. 256 
     disproportionately harms vulnerable debtors while rewarding 
     creditors who provide excess credit or who impose unfair 
     terms on borrowers. Further, we are concerned that the 
     changes to the bankruptcy code proposed in S. 256 are likely 
     to make more homeowners vulnerable to abusive lending and 
     fraudulent credit counseling practices.
       Bankruptcy is first and foremost a means to enable 
     overburdened families to get a fresh start. Nearly all 
     families in the bankruptcy system are there not because they 
     want to evade their obligations, but because they have had a 
     sudden decline in their economic fortunes. More than 90 
     percent of debtors file for bankruptcy due to unemployment or 
     underemployment, an illness or accident, or divorce. The bulk 
     of the remainder suffered from other legitimate difficulties, 
     including activation for military service, being a victim of 
     crime or natural disasters, or a death in the family.
       Abusive lending practices, especially by credit card 
     lenders, are a larger problem than debtor abuse of the 
     bankruptcy system. Growth in the bankruptcy filing rate tends 
     to increase with an increase in the ratio of household debt 
     to household disposable income. Given this fact, the 
     unfettered increase in available credit likely has 
     contributed significantly to the rise in bankruptcy filings 
     in recent years. For example, in 2000 the credit card 
     industry offered almost $3 trillion in credit--more than 
     three times the $777 billion of credit offered in 1993. 
     Excessive credit extension by unscrupulous lenders makes it 
     more difficult for responsible lenders to monitor their 
     debtors and preserve healthy lending portfolios.
       Some creditors seem to want to have it both ways: keep 
     interest rates high and underwriting standards loose, while 
     amending the bankruptcy laws to decrease losses resulting 
     from questionable extensions of credit. S. 256 unnecessarily 
     serves the interests of these credit card lenders--who are 
     experiencing record profits--at the expense of the vast 
     majority of families who declare bankruptcy for legitimate 
     reasons. Credit card lenders already cover losses by charging 
     extremely high interest rates at a time of historically low 
     rates, and they are able, should they choose, to limit losses 
     further by tightening underwriting standards. Irresponsible 
     lenders need to be reined in, not rewarded with 
     legislation that further harms suffering families.
       S. 256 will effectively deny bankruptcy protection to tens 
     of thousands of innocent lawabiding families who suffer 
     significant setbacks. Many of these families will lose 
     everything they own to creditors while remaining indefinitely 
     subject to their unsecured creditors, unable to ever get back 
     on their feet. Furthermore, by discouraging those who truly 
     need bankruptcy relief from seeking it, S. 256 may increase 
     the number of families that turn instead to unscrupulous 
     lenders and dubious credit counselors who do more harm than 
     good.
       First, S. 256 inflexibly forces more borrowers to file 
     under Chapter 13 of the Bankruptcy Code, notwithstanding the 
     fact that an independent academic study on the subject found 
     that less than four percent of debtors who filed under 
     Chapter 7 (where unsecured debt is discharged) couldn't 
     possibly repay any of their unsecured debt under Chapter 13. 
     Some families need to file under Chapter 7 because they 
     cannot afford to meet their housing, car, and student loan 
     obligations (which they generally have to pay under Chapter 
     7), pay their short-term unsecured debt, and still have money 
     left over for basic household needs. Forcing these people to 
     file under Chapter 13 threatens to exacerbate their suffering 
     without significantly benefiting creditors; you cannot 
     extract blood from a stone. Despite the good-faith

[[Page S1841]]

     repayment efforts of many debtors, historically nearly two-
     thirds of all Chapter 13 debtors fail to complete their 
     repayment plans even before additional Chapter 7 debtors, who 
     would be even less likely to complete Chapter 13 plans, are 
     forced to enter Chapter 13. Adding insult to injury, S. 256 
     makes it extremely difficult for borrowers to file a Chapter 
     7 bankruptcy once a Chapter 13 repayment plan fails, leaving 
     these borrowers entirely unprotected.
       Second, S. 256 creates so many disadvantages to filing 
     bankruptcy that severely strapped borrowers may forego filing 
     altogether and instead try to solve their problems by 
     borrowing money on abusive and unfair terms. For instance, S. 
     256 makes it harder for debtors to save their cars in 
     bankruptcy, makes it easier for creditors to take basic 
     household goods from debtors, and requires additional 
     procedures that delay initiation of a bankruptcy. Desperate 
     borrowers who should be seeking bankruptcy protection may 
     attempt to solve their problems by responding to 
     solicitations from unscrupulous lenders who push abusive home 
     refinance loans, dishonest credit counselors who bilk debtors 
     rather than help them, payday lenders who profit from 
     families caught in a debt trap, or a host of other bad 
     actors.
       While as financial institutions and associations we are 
     well aware that there are problems with our bankruptcy 
     system, current judicial discretion is far preferable to the 
     unbalanced bill before you. We therefore urge you to oppose 
     S. 256 and to revisit the issue of bankruptcy in a manner 
     that equitably meets the interests both of lenders and of 
     vulnerable borrowers.
           Sincerely,
       Martin Eakes, CEO, Self-Help Credit Union.
       Jim Blaine, State Employees' Credit Union, North Carolina.
       Terry D. Simonette, President & CEO, NCB Development 
     Corporation.
       Calvin Holmes, Executive Director, Chicago Community Loan 
     Fund.
       Elsie Meeks, Executive Director, First Nations Oweesta 
     Corporation.
       Ceyl Prinster, Executive Director, Colorado Enterprise 
     Fund.
       Bill Edwards, Executive Director, Association of Enterprise 
     Organizations.
       Mark Pinsky, National Community Capital Association.
       John Herrera, Board Chair, Latino Community Credit Union.
       Fran Grossman, Executive Vice President, ShoreBank 
     Corporation.
       Kerwin Tesdell, CEO, Community Development Venture Capital 
     Association.


                            Amendment No. 16

  Mr. KENNEDY. Mr. President, I want to speak for a few more moments 
about the excellent amendment that has been offered by my friend and 
colleague from Illinois, Senator Durbin, which I strongly support. 
Yesterday, in Massachusetts, I had an opportunity to have a meeting 
with a number of veterans. They actually were disabled veterans. We 
have 34 Massachusetts young men who have been killed primarily in Iraq. 
I think we had two killed in Afghanistan, but primarily Iraq. And we 
have had a number of wounded veterans.
  We had a very good meeting about their reentry into the community and 
what we can do to help them in terms of education, training, and 
employment. A number of the large companies in Massachusetts have made 
important commitments to employ veterans, and particularly the disabled 
veterans. I will mention one: Home Depot, a national company, employed 
10,000 veterans last year. They expect to exceed that number this year. 
It is a very impressive record.
  These young people are looking for how they are going to be able to 
live and have useful, productive, constructive, valuable lives. There 
is a lot that has to be done, obviously, by the VA and by the various 
organizations in the State and in the private sector, as well as at the 
national level, to help them in these ways. We can all be extremely 
involved and helpful in that endeavor.
  One of the central concerns they mentioned during the course of the 
discussion had to do with the times they heard from a number of their 
friends and colleagues who were in the Guard and Reserve serving in 
Iraq. We have 1,000 at the present time serving from Massachusetts and 
many more in the regular services. They are in the Guard and Reserve. 
But they told me of the concern their families have in terms of the 
dangers of bankruptcy and what would happen to these families. I do not 
think it is enough to say, well, we'll defer this to another day, or 
the existing laws are going to take care of it. We have a good 
opportunity to address that. And if we are serious about addressing it, 
we ought to accept the Durbin amendment. We are either going to be 
serious about doing this or we are not. The Durbin amendment is a 
serious effort to address this issue, and it deserves all of our 
support.
  Military families struggle financially for a number of reasons. 
Often, the low pay for newly enlisted men and women is not enough to 
support a family. Service men and women are also prey to predatory 
lending schemes that leave their families high and dry. Military 
retirees have been victims of pension schemes that destroy their 
savings. National Guard and reservists often face a loss of income when 
they are activated and deployed, and their families are left in serious 
financial distress. Veterans are not getting the federally promised 
health care benefits they need to stay healthy.
  The most recent data available show that in 2003, 20,000 active-duty 
members filed for bankruptcy. They would be considered active duty, 
even though they are in the Reserve or Guard because they are on active 
duty. That is 20,000 members of the Armed Forces whose service to their 
country resulted in financial ruin. Military service should be the 
source of pride, growth, and opportunity, not a financial crisis.
  That is why Senator Durbin's amendment is so important. It will 
ensure fair and strong bankruptcy protections for military families and 
veterans.
  The typical family who files for bankruptcy is at or near poverty at 
the time they file. It is appalling that America's service men and 
women, or any veteran, can be plunged into poverty in connection with 
their service to the Nation.
  The base pay for newly enlisted men and women is often between 
$15,000 and $20,000 a year. That is far from enough to support a family 
back home. Yet nearly half of all members of the military have 
dependents who rely on their income. The most recent data shows that 
more than 6,000 military families are forced to rely on food stamps. Do 
we hear that? We have 6,000 military families who are forced to rely on 
food stamps because of low pay. I pay tribute to our friend from 
Arizona, Senator McCain, who did so much to reduce that number. I am 
hopeful we can eliminate it during this session of Congress.

  In addition, predatory lenders often prey on service men and women. 
Payday lenders offer high-interest, short-term loans of usually $500 or 
less, and focus on the military, with their financial inexperience and 
regular paychecks. These loans result in huge interest rates and often 
leave the borrower in significant debt that can lead to bankruptcy. The 
Durbin amendment will protect military members against this shameful 
practice.
  National Guard members and reservists have other types of financial 
burdens. Since 9/11, 469,000 National Guard members and reservists from 
the Army, Navy, Marines, and Air Force have been called up for combat 
tours in Iraq or Afghanistan. That is virtually half a million. Their 
tours of duty can last for up to 2 years, and the Pentagon is currently 
considering broadening even that time limit. These deployments can 
cause extraordinary financial stress for their families.
  For example, an Army reservist medic with four teenage kids in Hot 
Springs, AR left for Iraq, leaving his family's gas station convenience 
store with no one to operate it. One month later, the family fell into 
serious financial trouble. They had no choice but to file for 
bankruptcy.
  After the bankruptcy, they couldn't pay their mortgage and had to 
give up their house. They moved in with the soldier's parents. But 
because the parents had cosigned on the loan for the store, they were 
forced to file for bankruptcy, too, or risk losing their own home. The 
grandfather is disabled, so the grandmother had to go back to work to 
keep the family financially afloat.
  Too many National Guard reservist families face this type of economic 
distress. Thirty percent of spouses of active reservists report a loss 
of household income after the reservists' mobilization. Forty percent 
of all reservists report loss of income. For those who are self-
employed, it's even worse. Half of self-employed reservists lose income 
when they are deployed.
  Of spouses who reported lost income, half had monthly decreases from 
$500 and $2,000 per month, and nearly a quarter lost over $2,000 a 
month. That's $24,000 a year in lost income that puts a heavy financial 
squeeze on these families.
  With other key expenses rising every year in the Bush administration, 
it's

[[Page S1842]]

even harder for military families to make ends meet. Since 2001, health 
insurance premiums have soared by 59 percent. Prescription drug costs 
have risen 65 percent. Housing costs are up 33 percent in the last 4 
years.
  The last thing Congress should do is make it harder for these 
families when they face bankruptcy. I urge my colleagues to support the 
Durbin amendment to protect military families.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. HATCH. Mr. President, I listened with a great deal of interest to 
my colleague's remarks with regard to the bankruptcy. I will have a few 
things to say about those remarks in just a few minutes.
  Mr. President, I rise in support of the bill, S. 256, the Bankruptcy 
Abuse Prevention and Consumer Protection Act of 2005. The essence of 
this bill is simple. This legislation is designed to make our 
bankruptcy system more fair and efficient. As well, this bill would cut 
down on the ability to abuse the current system.
  Before I detail some of the abuses of the system that is being 
abused, I want to make some other points. First, as I said yesterday, 
this bill has been in the making for 8 years. The Senate passed it 
three times already. Prior to Senate passage, the Judiciary Committee 
held an extensive set of hearings and several markups on this bill. 
This bipartisan, bicameral bill is ripe for passage. I am pleased to 
report that yesterday the White House released the following statement 
of the administration policy on the bill. It is short and to the point 
and it says the following:

       The administration supports Senate passage of S. 256 as 
     reported by the Senate Judiciary Committee. These commonsense 
     reforms to the Nation's bankruptcy laws will help curb abuses 
     of bankruptcy protections, reduce uncertainty in financial 
     markets through improved financial contract netting rules, 
     increase financial education to prevent unnecessary filings 
     and help avoid future credit problems, promote international 
     trade through coordination of cross-border insolvency cases, 
     and provide increased protection for family farmers facing 
     financial distress.

  I am pleased that the administration's SAP stressed some of the pro-
consumer aspects of the bill. While we want to see that those people 
who borrow money pay it back and that the value of personal property 
and responsibility is observed, we also want to help keep citizens out 
of bankruptcy in the first place.
  When honest people simply get over their heads financially, we want 
to give them a fair chance to have a fresh start. Where there are some 
who are clearly gaming the present system, there are many who find 
themselves in unfortunate financial circumstances. Given a chance to 
begin fresh, they can learn from their experiences and once again 
become the prudent, bill-paying consumers all of us are taught to be.
  The data tell us there is a problem and it is a growing problem. 
Bankruptcy filings are way up, and I mean way up.
  We are fortunate to live in a time of unprecedented economic growth. 
Stretching all the way back to the Presidency of Ronald Reagan, we have 
generally seen a sustained increase in economic activity. Personal 
assets and net worth have grown, when compared with individual 
liabilities. Yet, precisely at this time, bankruptcy filings have blown 
through the roof.
  These facts might help to put it in perspective. Bankruptcies doubled 
in the 1980s. They doubled again from 1990 to 2003. In 2004 alone, 
there were 1.6 million more bankruptcies than during the entire Great 
Depression. There will be more bankruptcies filed this year than in the 
entire decade of the Great Depression combined.
  What explains this dramatic rise in filings? Probably several reasons 
are at play. Certainly, one of the critical reasons behind the rising 
tide of filings under the Bankruptcy Code, as years of study document, 
are the actions of those who flagrantly abuse our generous bankruptcy 
laws.
  Many of those opposed to the bill suggest that bankruptcy filings 
were up because more and more people face economic hardship. To some 
extent, this is no doubt true. But we also know, however, that many 
bankruptcies stem from old-fashioned, outright fraud and abuse.
  This potential for abusing the system was not fully anticipated when 
Congress created our current Bankruptcy Code in 1978. A key purpose of 
this bill is to help crack down on the abuses of the system. In its 
simplest terms, our bankruptcy laws attempt to distinguish between 
those who can and those who cannot repay their debts. When a case is 
filed under chapter 7 of the Bankruptcy Code, the debtor is required to 
surrender his assets to a bankruptcy trustee for liquidation and 
distribution to creditors, except for those assets that are exempt 
under State or Federal law. Yet under this provision of law, the 
debtor's future income is protected from creditors.
  By contrast, those who file for bankruptcy under chapter 13 retain 
possession of their assets, but pay all or a portion of their debts 
through plans approved by the bankruptcy court.
  For some contemplating bankruptcy, this makes for a simple strategy: 
Do everything you can to get into chapter 7. Chapter 7 protects all of 
your future income from creditors. Once you are protected by chapter 7, 
you pay off secured creditors--such as your mortgageholder--first.
  Only then do unsecured creditors get their chance to get paid back.
  Experts tell us about 70 percent of consumer bankruptcy filings are 
chapter 7 filings, and 95 percent of those make no distribution at all 
to unsecured creditors.
  Let me repeat those statistics because they are important. About 70 
percent of consumer bankruptcy filings are chapter 7 filings, and 95 
percent of those make absolutely no distribution at all to unsecured 
creditors.
  If you are listening to this debate and you are a creditor, these 
statistics mean you have only a small chance to be repaid if you are an 
unsecured creditor.
  The problem with this is, according to the FBI, about 10 percent of 
these chapter 7 filings are fraudulent. So what if only 10 percent of 
filers are abusing the system? This represents $3 billion in costs that 
can be recovered rather than being passed along to consumers. You and I 
and everybody else pay for these abuses of the system. We all end up 
paying for it. The problem with this is, according to the FBI, about 10 
percent of these chapter 7 filings are fraudulent. One can understand 
the financial motive of a debtor running up his or her unsecured credit 
card debt to pay down his or her secured mortgage just before filing 
chapter 7, even though he or she knows full well the debts will never 
be paid back.
  The data suggest to many experts that some relatively high-income 
debtors truly belong in chapter 13 where they will have to establish a 
plan for repayment for at least some debts. In theory, our bankruptcy 
courts have the opportunity to defy chapter 7 filing because of 
``substantial abuse.'' Yet with so many bankruptcy filings, our courts 
are often overwhelmed, and in practice few people are bounced out of 
chapter 7, no matter their actual ability to repay their debts. It 
should come as no surprise, then, that a few bad apples who could 
afford to pay some of their debts actively seek to avoid chapter 13 and 
get into the often less onerous treatment of chapter 7. A key component 
of S. 256 is a means test that will help prevent such gaming of the 
system.
  Some have attempted to criticize this commonsense safeguard as 
somehow taking away bankruptcy protection. Let me be clear. The means 
test does no such thing. All it does is identify those who can repay at 
least some of their debts. It makes certain they enter into a chapter 
13 reorganization and repayment plan rather than let them simply walk 
away from their obligations, no matter how steep or outrageous. Believe 
me, there is strong evidence to support this improvement in the law.
  The U.S. Trustee Program has been challenging and documenting abuse 
now for some time. The following examples show why changes are needed 
in the current system. The primary function of the U.S. Trustee Program 
is to identify fraud and abuse in the bankruptcy system. In fiscal year 
2002, there were 1,470,430 bankruptcy case filings. With such a large 
number of filers, there will always be those who will try to game the 
system.
  Although some opponents of the bill may minimize the problem of 
abuse, consider these facts: The U.S. Trustee Program successfully 
pursued 5,000

[[Page S1843]]

chapter 7 debtors for ``substantial abuse'' of the bankruptcy system. 
The program prevented the discharge of an estimated $59 million of 
unsecured debt through fraudulent chapter 7 filings. In addition, the 
Trustee Program obtained disgorgement of more than $1.3 million in 
attorney's fees in consumer and business cases and imposed almost 
$534,000 in sanctions against attorneys. This indicates that bankruptcy 
fraud is no small problem and that reforms are in order.
  The evidence of fraud is so widespread that many believe it is no 
longer sufficient to rely on watchdogs to police these abuses after 
they have occurred. We must take proactive steps to prevent them from 
happening in the first place. That is what S. 256 does. The means test 
contained in the bill will provide a uniform standard to bankruptcy 
judges to evaluate the ability of bankruptcy filers to repay debts. 
With some people gaming the current system to avoid paying debts they 
have taken on, we must make sure that the people who file in chapter 7 
actually belong in chapter 7. We should not absolve people of their 
debts when they have the means to pay them back. Bankruptcy law has 
always meant that.
  This is no exaggeration. Just consider these examples, if you will.
  I am told one debtor in California sought to discharge $188,000 in 
unsecured debt. This person had more than $10,000 a month in expenses. 
She paid $4,500 a month on the mortgage for her house in San Juan 
Capistrano and then paid another $2,500 a month on rent for an 
apartment in Silicon Valley. This woman was spending $7,000 a month for 
two homes. The simple fact was, however, if the woman got rid of just 
one of the homes, she would likely be able to fund a chapter 13 plan 
and repay, rather than ignore her debts. This does not seem to me to be 
too much to ask. In fact, it just makes common sense.

  In another instance, a woman in Dallas filed for chapter 7 bankruptcy 
attempting to discharge $122,527 in credit card debt. But this is not 
exactly a hard-luck case, by the way. She was a commercial airline 
pilot who earned $11,500 per month and paid $3,100 per month for a 
mortgage on a $385,000 home. Some have cast a skeptical eye on her 
decision to buy a $50,000 Mercedes just before declaring bankruptcy in 
order to replace the recently repossessed $90,000 Mercedes. If that is 
what happened, it just plain is not right.
  When somebody obtains 36 credit cards, runs up $283,075 in bills, and 
then tries to discharge that debt through a chapter 7 filing--as I 
understand was the case of one gentleman in California--it is not 
enough to sit back and blame aggressive marketing by credit card 
companies. We have heard that old saw year after year. Frankly, there 
is a lot of abuse out there.
  One person in Miami sought to discharge $163,744 in unsecured debt 
even though he had the means to purchase $232 in lottery tickets every 
month.
  Then there is the case of a Tampa couple who had a combined monthly 
income of $7,000 and a monthly budget of $6,756. Included in that 
budget was a car payment of $965 a month. In addition to their secured 
debt, they owed $350,000 in unsecured debt. This consisted of $200,000 
in credit card debt and $150,000 in personal loans. They attempted a 
chapter 7 filing. This couple was bringing in more than they were 
spending, but they wanted to walk away from it all. Yet a review of 
their banking records showed that one spouse withdrew hundreds of 
dollars every month at ATM machines at local casinos. They had money to 
play blackjack but not pay back there debts. Something, it seems to me, 
is just not right about that.
  We are a compassionate nation, but we should not be fools. A 
discharge of debt is serious business, but for sound public policy 
reasons, the United States has decided to allow it in certain 
circumstances. We want to give our neighbors who get in over their 
heads a chance to get out of their financial troubles.
  Frankly, I suspect that for a majority of those individuals who file 
for bankruptcy, it must be their worst nightmare, but for some, as I 
just described, it is a way to avoid responsibility. We do not want to 
encourage bankruptcy for anyone. When a person takes on a debt, that 
person makes a promise to pay, and they ought to pay it if they have 
the capacity to do so.
  There is something inherently unfair in denying full restitution to 
creditors. That being said, as a matter of longstanding public policy, 
we have decided to allow some people a fresh start and the opportunity 
to discharge their debts through a chapter 7 liquidation. But many fear 
that in some instances, our lax policing of those who attempt a chapter 
7 filing actually encourages additional bankruptcies.
  As a matter of public policy, we must say that those relatively high-
income debtors, those capable of paying back their substantial debts, 
should at least pay something back, and that is all we are requiring 
here. From now on, those who are capable of financial reorganization, 
rather than outright liquidation, will have to keep their promises or 
at least some of their promises.
  Some opponents of this legislation minimize these abuses. They deride 
the means test we devised to solve this problem. The fact is, 80 
percent of people filing for bankruptcy will be automatically removed 
from the means test because their incomes fall below the safe harbor of 
the median State income. Only 20 percent are asked to answer this 
rather reasonable question: After medical expenses, schooling expenses, 
health care premiums, living expenses, and a regular budget, do you 
have an ability to pay back some of your debt?
  That is all. Only 10 percent of the people currently filing for 
bankruptcy will be moved into chapter 13 under this test. Contrary to 
the image of a crippling lifetime commitment to one's debtors, those 
repayment plans are only between 3 and 5 years.
  Who passes the means test of this bill? Eighty percent are excluded 
for falling below the State median income. Another 10 percent are 
excluded after taking into account school, health, and living expenses. 
So only 10 percent of bankruptcy filers will ever be moved into 
repayment plans. I do not think it is too much to ask that these 
relatively high-income debtors, who can afford to pay their debts, pay 
back some of what they owe.
  To the extent that our current Bankruptcy Code encourages some 
bankruptcies, I am hopeful that this reform will discourage some of 
them. The experts and data tell us there are some with high salaries, 
profligate spending habits, and the ability to pay back their debts. 
Our laws should not be to just allow them to walk away.
  The fact that this type of misconduct is occasionally prevented does 
not undo the need for permanent systemic reform of our laws. For every 
one person who is discovered in an abuse of the system, it is likely 
there are many others whose abuses never see the light of day. There is 
a culture of abuse in our bankruptcy system that should be addressed.
  I am told that in Kentucky one debtor filing for chapter 7 protection 
failed to mention that he had transferred his one-half interest in a 
Florida house to his son approximately 7 years before filing for 
bankruptcy. How convenient. He also failed to mention his transfer of 
stock to his daughter within 1 year of filing. He was unable to account 
for the disappearance of $1.125 million in assets, including $300,000 
in personal property and even $400,000 in race horses. His hope was to 
discharge almost $1.8 million in unsecured debt and $795,175 in secured 
debt.
  While this may be an outlier case, the underlying problem of abuse is 
too frequent an occurrence. The point is not that this person is an 
average filer; the point is that the system is such a mess that someone 
would even contemplate making this type of a case.
  Unfortunately, this misconduct is all too often encouraged by a 
bankruptcy bar that ushers people into chapter 7 without ever fully 
considering the client's ability to repay.
  The U.S. trustees had to pursue 653 actions seeking disgorgement of 
debtors' attorney's fees in fiscal year 2002. At the same time, they 
pursued 243 other actions for attorney misconduct that resulted in 
$533,813 in sanctions. Over 75 attorneys were referred to State bar 
associations or other disciplinary boards.
  In the Eastern District of Pennsylvania, a U.S. trustee review 
discovered that in bankruptcy filings it was common to have boilerplate 
information entered without regard to the individual debtor's 
circumstances, internally inconsistent information, and missing 
financial information.

[[Page S1844]]

  These are bankruptcy factories that appear to attempt to get as many 
as possible into chapter 7 without so much as a cursory look at the 
filer's ability to repay his or her loans or debts.
  For the most part, I am proud of our bankruptcy laws. When a debtor 
gets in over his or her head, we do not ask why. We do not cast blame. 
Instead, we attempt to help that person pay back the debts. Bankruptcy 
protection gives Americans the ability to pause, to reorganize, to 
start over. Bankruptcy offers those with unsustainable debts an 
opportunity for a fresh start. No one here wants to change this 
fundamental guarantee. No one wants to alter this basic framework. Yet 
people are taking advantage of this system. Abuses are increasingly 
rampant and well documented.
  When some people game the system to walk away from debts that they 
are perfectly able to repay, an injustice occurs that has ramifications 
for our entire economy. And guess who has to pay for their dishonesty. 
You and I and everybody else because we pay an average of $400 a year 
for this bankruptcy system. This bill will help to bring it into a 
forceful, reasonable purpose.

  It was estimated that in 1997 alone more than $44 billion of debt was 
discharged through bankruptcy. This amounts to a loss of $110 million 
per day. Someone has to pay for this. The American people, you and I 
and everybody else, end up paying the bill for at least these dishonest 
people.
  According to one estimate, as I have said, these losses translate 
into a $400-a-year tax on every household in the country. That might 
not seem like a lot to some, but for many families $400 is a mortgage 
or a rent payment.
  The cost of bankruptcy to taxpayers: $44 billion in debt discharged 
per year, or $110 million every day, a $400 yearly bankruptcy tax on 
every household in the country.
  For all the reasons I have laid out, I urge my colleagues to support 
S. 256. This is a good bill. We have been at this legislation too long 
to allow this commonsense reform to fail.
  By the way, this very same bill, with the Schumer amendment, passed 
with 83 votes. Without the Schumer amendment, the bill that President 
Clinton pocket-vetoed was basically the same as this, and it passed 
with 70 votes, meaning a bipartisan passage.
  I will make a few comments on the Durbin amendment that seeks to 
address some potential problems relating to debt carried by members of 
our military. We all honor our military for their sacrifices, no 
question about it. While I am supportive of the intent of the 
underlying Durbin amendment, the fact is, only about 20 percent of 
those filing for bankruptcy will ever be subject to a means test. Only 
about half of those will end up having to repay some of their 
obligations under the means test. That means that only about 10 percent 
of those filing for bankruptcy will ever have to actually pay back some 
of their past debts with future earnings.
  I suspect the 1 in 10 fraction will be smaller, perhaps much smaller, 
for those serving in the military. So when my friend from Illinois 
calls the means test an onerous test, he is overstating the case.
  The purpose of the means test is simple. We are trying to determine 
which debtors can afford to pay a portion of their past debts from 
their future earnings. The Durbin amendment has several problems, but 
its goals are well intentioned and I commend him for his efforts. For 
example, it is my understanding that under the definition of ``service 
member,'' all of those employed as commissioned officers of the Public 
Health Service and the National Oceanic and Atmospheric Administration 
will qualify for this special treatment. There are few, if any, greater 
supporters of the commission core of the Public Health Service, but I 
do not understand why a public health service officer, working side by 
side with a career civil servant member at the Department of Health and 
Human Services, should receive any special consideration during 
bankruptcy proceedings. If a member of the PHS or NOAA is able to pay, 
as determined by this new means test, which is estimated to affect only 
1 in 10 of those filing for bankruptcy today, he or she should pay like 
any other civil servant or member of the public.
  They are well paid. They do not have to go off and borrow beyond 
their means. They do not have to live beyond their means. They should 
not have any breaks any better than the regular citizens.
  I think the distinguished minority whip has raised and will continue 
to raise very important points, and I look forward to working with him 
and the entire Senate to address those points.
  If bad actors are preying on our military personnel through nefarious 
payday loans or other questionable practices, then I encourage Senators 
Shelby and Sarbanes, the head of our Banking Committee in the Senate, 
to look into the issue. If there are other social issues that face our 
military personnel, then we as Members of Congress have an obligation 
to examine those issues indepth and find the right fixes.
  The Durbin amendment also has an additional problem. This involves 
his creation of a broad exemption to the delicate homestead compromise 
already so painstakingly embodied in this bill. We have gone over and 
over it and have finally come to this compromise that does not please 
everybody, or anybody for that matter, but it is an important 
compromise and an important aspect of this bill.
  We know the Senators from the States of Florida and Texas have made 
it clear that this issue is important to them. This is an area where we 
have tried to defer wherever possible to the States, even though other 
Senators view some of the States' exemptions with skepticism. We should 
all recognize that opening the door on the homestead provision could 
work to unravel this bill.
  This is also the case with Senator Feingold's amendment on the 
homestead exemption. This issue is not new. We have debated it year 
after year, and we have come to a plausible compromise that has passed 
year after year. This question has been debated over and over again. We 
have achieved a compromise on the homestead exemption that has 
demonstrated the ability to win overwhelming support in both Chambers. 
Both the Durbin amendment and the Feingold amendment tend to upset the 
balance that has been achieved on this important issue.
  As I look at and examine the Durbin amendment, I have identified a 
few additional concerns. For example, under the terms of the amendment 
both ``real or personal property that the debtor or dependent of the 
debtor uses as a residence,'' what does this language mean? How could 
personal property be used as a residence?

  The bottom line is this amendment has many ambiguities. In addition, 
several of its principal components come into tension with long-settled 
provisions of this bill such as the homestead and the means test
  As all of my colleagues know, there is a right way and a wrong way of 
doing things. Indeed, many Members of the minority and some of the 
majority have made that very point with regard to how the USA PATRIOT 
Act was put together. Senator Durbin has raised some important issues 
we must take the time to explore properly, and I believe Senator 
Sessions has appropriately and adequately addressed the central concern 
of the Senator from Illinois, which is to allow the facts and 
circumstances of military personnel to be considered in bankruptcy 
proceedings.
  I support S. 256, the bankruptcy bill, and I hope others will as 
well. We have come very far with this bill, after 8 tough years of 
work, after repeatedly passing it by overwhelming votes, and then 
having it shot down because of a killer amendment that gets put on by 
our colleagues who claim they are working in support of it. We should 
pass this bill. We should pass it in as clean a form as possible.
  Let me say with regard to credit card debt, I think it is a nice, 
populist appeal here, to blame all the credit card companies for the 
problems everybody has in our society today. Look, we have an 
intelligent society, a highly educated society, and I think everybody 
knows when they take those credit cards and they accrue debt, they are 
supposed to repay that debt. Frankly, we have far too many people 
taking advantage of credit cards and not paying their debt.
  Where there is fraud, we should go after any credit card company that

[[Page S1845]]

commits fraud or abuse against our fellow citizens. But this bill does 
not fail to resolve these issues.
  Could we improve this bill? Yes, I think we could improve it. But if 
we did, some on the other side would say that is too tough of an 
improvement. Could others on this side improve it? I suppose so. Could 
some on that side improve it? I would hope so, but so far we have 
accepted an awful lot of what the other side has wanted. This bill has 
been passed by overwhelming votes over the last 8 years, at least four 
times, as I recall it. At one time it passed through both Houses of 
Congress and was pocket vetoed by President Clinton.
  I would like to make one last point. Unfortunately I have to oppose 
the Feingold amendment on the homestead matter. I think the purported 
purpose of the amendment is well intentioned, but I am concerned that 
it may act to upset the delicate balance and painfully negotiated 
provisions relating to homestead exemptions. This amendment by Senator 
Feingold is, I know, well intentioned. But this amendment confuses an 
important and bipartisan issue, namely the care of the elderly, in a 
way that could sink this important legislation.
  I have worked tirelessly to make sure there are provisions in this 
bill to protect the elderly, along with women and children, and I think 
every one of my colleagues who has worked with me on this bill 
recognizes that fact. The simple truth is this amendment and others 
like it could kill this bill. The reason has nothing to do with a 
hostility to the elderly or to any other class of persons, but because 
the homestead provisions have taken years to negotiate and are the 
result of painful choices and compromises. They are not totally 
satisfactory to me, either. But the fact of the matter is, it is the 
best we can do.
  There are many Members of this body who would like to see the 
homestead provisions changed in some fashion, but to accommodate them 
any further than what presently exists in this bill would force other 
Senators who are strong supporters of this legislation to oppose it.

  My opposition to this amendment has nothing to do with the elderly 
and I would not object if every State in the Nation passes laws that 
would put a similar floor or a higher floor under their respective 
homestead laws, but that choice belongs to the States and not to the 
Federal Government. There is a long history in bankruptcy law of 
deference to States on this issue. Nearly every State in the country 
has vehemently defended their homestead laws.
  I must say I think some States wish to change their laws. If they do, 
that is their prerogative. The purpose of this bill and the purpose of 
the current homestead provisions is to curb fraud and abuse. The 
current provisions impose a 10-year look back for fraud. They impose a 
2-year domiciliary requirement that is designed to prevent wealthy 
debtors from moving from States with low homestead exemptions to States 
with high or unlimited exemptions and then filing for bankruptcy. These 
provisions are a compromise, a balance of States rights and Federal 
imperatives under bankruptcy law and we must let the provision stand as 
written. I oppose the Feingold amendment and I hope my colleagues on 
the floor will oppose these amendments as well.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Martinez). The Senator from Alabama is 
recognized.
  Mr. SESSIONS. Mr. President, I see the Senator from Illinois is here. 
At this point I ask unanimous consent that immediately following this 
consent it be in order that I offer a first-degree amendment relating 
to the matter in the Durbin amendment, provided further that there be 
60 minutes for debate equally divided on both amendments concurrently; 
provided further that at the expiration of that debate the Senate 
proceed to a vote in relation to the Sessions amendment, to be followed 
by a vote in relation to the Durbin amendment, with no second-degree 
amendment in order to either amendment prior to the votes.
  The PRESIDING OFFICER. Is there objection? Without objection, it is 
so ordered.
  Mr. DURBIN. Mr. President, if I could, I ask the Senator from Alabama 
if I could make a unanimous consent request. I ask unanimous consent 
that Senators Bill Nelson, Edward Kennedy, John Kerry, and Hillary 
Rodham Clinton be added as cosponsors to my amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Alabama.


                            Amendment No. 16

  Mr. SESSIONS. Mr. President, the Senator from Illinois has raised 
questions concerning the position of military personnel in bankruptcy. 
I believe his language is overly broad and I believe the concerns he 
has do not justify the language of his amendment. I cannot support it. 
I think I will take a minute to discuss his amendment and then discuss 
the amendment I will offer, which I believe would be more appropriate 
under the circumstances.
  The amendment Senator Durbin has proposed would create a gaping hole 
in the means test and in the homestead language--it would exempt 
certain individuals from those provisions and violate certain 
principles that have been part of this bankruptcy legislation. As I 
pointed out earlier today, many of the concerns that are raised here 
are covered by the Servicemembers Civil Relief Act which we passed in 
2003 to modify the Soldiers' and Sailors' Civil Relief Act passed in 
1940. The combined acts allow military members to suspend or postpone 
civil financial obligations during their period in the military 
service.
  Specifically, this act provides as follows. There is an interest rate 
cap of 6 percent on all debts incurred before the commencement of 
active-duty service. In other words, before active duty you have a 
certain rate of income and if you sign up for a note that carries a 10-
percent interest, you can have that interest rate reduced to 6 percent 
while you are activated, on active duty for the United States of 
America.
  There are protections from eviction from your home. It provides for a 
delay of all civil court proceedings, including bankruptcy and 
foreclosures of your home; a prohibition on entering default judgments 
against active-duty personnel members, and the ability to reopen a 
default judgment if one were to be entered; the ability to terminate 
property, residential, and automobile leases at will, if you are 
activated; the continuation of life insurance of at least $250,000 
without requiring premiums to be paid; and the tolling of statutes of 
limitation. In other words, if you are activated and you have a cause 
of action against someone and you are interrupted in your ability to 
file that and the time may have otherwise run, the statute of 
limitations, the time in which you can file a lawsuit, would have run, 
then you can extend that while you are on active duty.
  There is temporary relief for mortgage payments for people on active 
duty, credit rating protection, penalties for landlords and creditors 
who violate the act involving fines of up to $100,000 and/or 
imprisonment. These are a lot of broad protections that indicate to me 
we are at a point where it would not be necessary or wise to frustrate 
or undermine or go against the guiding principles that are in this 
bankruptcy bill. We hammered it out. And I have not agreed with all of 
them that have been set forth. This is not, in my view, a justification 
for a very significant carve out to the means test and homestead 
provisions for those on active duty.
  I would have to oppose this Durbin amendment. I believe, however, 
that we can be more explicit in the legislation and make sure that 
soldiers, certain persons with medical conditions, and veterans with 
low income can qualify under the safe harbor of the bill. I am offering 
an amendment which clarifies that these individuals who may fall under 
the special circumstances provisions of the bill are explicitly allowed 
to be covered under the special circumstances provisions of the bill to 
give them certain advantages. It would deal primarily with the concern 
that some would be required to pay back a portion of their debt, and 
this would deal with that.
  My amendment includes protections for the following three categories 
of individuals: those called or ordered to active duty in the Armed 
Forces, low-income veterans, and individuals with serious medical 
conditions. These are all situations that we want to make sure the 
bankruptcy bill's special circumstances clause includes. My

[[Page S1846]]

amendment does not create a gaping loophole in our legislation. 
Instead, it makes clear that people capable of paying back their debt 
should do so, at least in part, but those incapable of paying back 
their debt due to military service or a serious medical condition may 
not be required to do so. I hope my colleagues can support this 
amendment.
  I will just say with regard to the homestead exemption included in 
the Durbin amendment that this would go against a lot of consensus we 
finally reached on homestead. Senator Hatch referred to it earlier. The 
fact is we have decided as a Senate and after debate three different 
times in passing this legislation on this floor by a overwhelming vote 
each time that we were not going to overrule the States' definition of 
homestead.
  The State of Florida has a high homestead. In my view, it is too 
high, but it is in Florida law, and the Senator from Florida may well 
believe that he needs to defend that law. Many of our Senators say: 
This is our State's law, and I am not going to vote for a bill with an 
amendment which overrides my State's law on what the homestead should 
be. I have a personal belief that it is a necessary provision for us to 
take, but that has been the consensus, so I have to live with it even 
though I have been concerned on some of the issues.
  We have been consistent in not overruling the State definition of 
homestead. I note that any State legislature could change their 
homestead any time they want. They can create a separate homestead 
rule. If they choose for the military, they could raise it or lower it, 
they can cap it or put a floor on it--whatever they choose. We have 
decided, as this bill has been through the Congress several times now, 
to defer to the States on that issue. I believe it would be 
inappropriate for us to now carve out this exemption to it.
  I yield the floor and reserve the remainder of the time.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. Mr. President, I thank my colleague from Alabama.
  Let me make a couple comments.
  First, his amendment, which I will oppose and urge all of my 
colleagues to oppose, puts servicemen and servicewomen in the category 
in this bill where they are presumed to be abusers in bankruptcy. That 
is right. The presumption in his amendment is that if you served in the 
military and file for bankruptcy, that you are abusing the bankruptcy 
process. He adds language which says that, and, therefore, we want the 
judge to take a look at these presumed abusers of the bankruptcy 
process and consider the fact that they happen to be in the military.
  The Senator's amendment is entirely opposite of what we are trying 
achieve with the Durbin amendment. We are trying to presume the 
obvious. The men and women serving our country overseas who have been 
activated in the Guard and Reserve, taken away from their families and 
their businesses, should be presumed not to be abusive of the process 
but be presumed to be some of our most important citizens. Why do we 
want to throw them into the presumption of abusing the bankruptcy 
process? What I want to do is exactly the opposite. If you are serving 
our country and you face bankruptcy, we want you to walk into that 
courtroom and, frankly, get a better shake under the law than you 
currently get.
  First, we don't want you to have to go through the hoops that have 
been created by the credit card industry and big banks for people who 
supposedly abuse bankruptcy. No. You put your life on the line for 
America. You were activated to serve in Iraq, and you risk your life 
every day for us. You lost your business at home, your family went 
bankrupt, and yet we are giving you a break in the bankruptcy court, 
unlike the Sessions amendment, which presumes you are an abuser of the 
process if a serviceman walks into the bankruptcy court.
  The second thing we say is military servicemen don't get to pick the 
States they live in; they are transferred by the military to different 
places. But while these transfers of their families are going on, they 
could go bankrupt. If they go bankrupt, why do you have to make this 
some sort of roulette game as to what laws apply?
  You are in the military and you file for bankruptcy. Then you ought 
to be able to count on several things:
  First, the Federal exemptions on personal property. You know you can 
always turn to that. That means the things that you can keep in your 
family, in your household, even if you go through bankruptcy.
  Second, the homestead exemption. If you happen to be in a State that 
is tough and doesn't allow you to protect any part of your equity in 
your home and you have been transferred there in the military, why use 
that against men and women who are serving this country? Why wouldn't 
you say, as our bill does, that we will protect up to $75,000 of your 
homestead?
  Some will say: They may live in a State where it has zero homestead 
exception. That is true. I plead guilty to the charge that I am 
favoring the men and women in uniform who file for bankruptcy. I am. 
Unlike Senator Sessions' amendment, which presumes them to be abusive 
of bankruptcy, I presume the opposite, that men and women in the 
military don't go into bankruptcy just because it is an interesting 
thing to do. I think they have proven that they are responsible people 
when they raise their hand and swear an oath to the United States and 
are willing to risk their lives for our country. That is the 
presumption of responsibility that should be given to the men and women 
in uniform--exactly the opposite of the presumption of Senator 
Sessions. His presumption is that they are abusing the process and we 
will take a second look at it and we will let them come up with more 
documentation to prove they are not abusing the process.
  The last thing my amendment does is to go after the most abusive 
creditors of the military men and women in America today. I showed the 
illustrations earlier. Can you imagine that a loan company would 
actually say to a sailor, airman, a marine, or soldier, we will loan 
you the money, but we want you to pledge as collateral for the loan 
your military retirement pay or your disability pay for your injury 
overseas serving America? They do it. Maybe they are not supposed to. 
They do it. And they charge these men and women in uniform the most 
outrageous interest rates in America. It ought to make the credit card 
companies blush. These pay day lenders charge 100 percent, 200 percent, 
400 percent for these soldiers who are trying to keep their families 
together while they are serving America. My bill, quite honestly, says 
we are not going to give those creditors a day in court. Those 
creditors who charge over 36 percent a year in terms of loans to the 
military cannot collect them in bankruptcy.

  I think that, frankly, is fair to these families because once you get 
into this ``juice loan'' racket that these payday loan companies come 
up with, there is no end in sight. You are sunk. Mr. President, $3,000 
in debt turns into $20,000 before you can blink an eye.
  Let me tell you a difference between what has been offered by Senator 
Sessions and what I am offering on this floor. The fact is, these 
groups support my amendment: the Military Officers Association of 
America, the Air Force Sergeants Association, the National Consumer Law 
Center, the National Association for the Uniformed Services, the 
Enlisted Association of the National Guard of the United States, and 
many other individual leaders in the Guard and Reserve across our 
country.
  They are not supporting the Sessions amendment. I can understand why. 
They do not think our service men and women should be presumed abusive 
of the process. Let me tell you why we need this amendment.
  In 1999, 16,000 members of the military in America filed for 
bankruptcy. Since then, there has been a massive activation of troops, 
Guard and Reserve, across America. Now we have men and women serving 
for long periods of time they did not anticipate, with dramatic losses 
in pay. This cutback in income for these individuals is creating a 
great hardship.
  Thirty percent of all military families report a loss of family 
income when the spouse is deployed. But listen to the numbers for the 
National Guard and Reserve. Mr. President, 41 percent of Guard and 
Reserve families lost income when a spouse was deployed. How do they 
keep it together? Some of them

[[Page S1847]]

rely on relatives. Mom and dad step in. They are proud of their son or 
daughter serving in the military, they say: We will try to keep the 
wife, for example, who stayed home, and the children, together, while 
you are overseas. Do not worry about us. Just come home safely.
  They make great sacrifices. Some of them walk away from a business. 
Those are the ones who get hit especially hard, such as reservists who 
own their own business and who are activated.
  Fifty-five percent of self-employed reservists lost money when they 
were activated. And the average loss was $6,500. For some people, 
$6,500 may not mean much. But for these families, it may tip them over 
the edge. You find them making sacrifices for America, and all I am 
asking is, if the worst outcome occurs, if service to our country leads 
to an economic catastrophe for a family, and they have nowhere to turn 
but to bankruptcy court, for goodness' sake, should not this Senate say 
to these men and women in bankruptcy, We are going to give you a 
helping hand; you reached out your hand to help America; we are going 
to help you in the bankruptcy court?
  But, no, not with the Sessions amendment. The Sessions amendment does 
not give them the helping hand. The Sessions amendment presumes that 
they abuse bankruptcy and says to the judge: Take that into 
consideration if you want to let them off the hook and want to let them 
try again to file for bankruptcy. That is cold comfort, cold comfort to 
the men and women in uniform, risking their lives for America, who 
know, back home, the terrible economic circumstances their families are 
facing.
  Some people think I am making this up, but I am not. The anecdotal 
evidence that we received from all over the United States, as well as 
the reports that we have had from the military groups that are 
supporting my amendment, tell me a lot of families are right on the 
edge. They may not be able to survive this situation. I talked about 
this gentleman, Mr. Korizon, from Schaumberg, IL, activated for the 
Persian Gulf war, who left behind a construction company with 26 
people. After he had been activated for 6 months, he had to file 
bankruptcy. He served his country. He kept his word. He kept his 
promise. He risked his life for America. He lost his business. He filed 
for bankruptcy. Does he deserve any special consideration in court? The 
other side of the aisle says no. Get in line. Just another one of those 
bankruptcies. I think he does.
  You take a look at SGT Patrick Kuberry, who owned a restaurant in 
Denver. His partner in the restaurant was also in the military. They 
were both activated. Before it was over--both of them activated--they 
lost their restaurant and filed for bankruptcy. They served our country 
after 9/11. They protected us, the Members of the Senate, and our 
families. And they paid a heavy price. They lost the only business they 
had. Should they get a break in bankruptcy court? Of course they 
should. I think most Americans would agree they should.
  The list goes on and on. I think the list tells the story. We have to 
be sensitive to the fact that this amendment, which I have proposed, is 
an amendment which addresses the most basic and fundamental need here.
  Let me tell you something else. Senator Hatch of Utah came to the 
floor earlier. Do you know what he said? He said: I can't understand 
why so many more people are filing bankruptcy today. Well, he is 
unlikely to read this book, but I wish he would. It is called ``The 
Two-Income Trap,'' by Elizabeth Warren and her daughter Amelia Warren 
Tyagi. She analyzes why people are filing bankruptcy. And it is not 
because they are immoral. People are filing bankruptcy because: Since 
the 1970s, the number of involuntary job losses is up 150 percent. 
Since the 1970s, wage earners missing work due to illness or disability 
are up 100 percent, divorce is up 40 percent, people losing health 
insurance is up 49 percent, wage earners missing work to care for a 
sick child or elderly family member is up 1,000 percent-plus.
  Now, add to these circumstances the possibility that you just 
received notice that your Guard unit has been activated, and you have a 
sick parent at home and you wonder: How in the heck am I going to keep 
this together? I was here working my job, trying to be a good son, a 
good daughter, trying to take care of my parent. What is going to 
happen? How am I going to meet this need?

  These are real family circumstances of people who serve in the 
military. All I am asking is to make sure that if the worst thing 
happens, if they have to go to bankruptcy court, not that they get off 
the hook--they are not asking for that--but only that they get fair 
treatment. I knew the credit industry would oppose this amendment. I 
knew they would oppose it because I went after the payday loans and 
these ``juice loan'' rackets that are taking advantage of the military. 
They all gather together when you go after one of their own. The 
predators are treated just like those who are supposed to be 
respectable. And that is a shame.
  I think the credit industry should sit down and have a balanced bill. 
And I think they ought to sit down at night and thank their lucky stars 
that men and women in this country step forward every single day and 
volunteer to keep us safe, to protect our homes and protect our Nation. 
Is it too much to ask the credit card industry and this big bank lobby 
that is behind this bill to give them a break in bankruptcy court if 
the bottom falls out while they are serving America? I cannot imagine 
it is.
  Mr. President, I yield the floor and reserve the remainder of my 
time.
  The PRESIDING OFFICER. The Senator from Alabama.
  Mr. SESSIONS. Mr. President, I just want to say how strongly I value 
the contribution of our men and women in uniform. When I was in the 
Army Reserve I had the opportunity and the honor to call employers of 
service men and women whom we believed may have been discriminated 
against because they were fulfilling a military obligation. When I was 
a U.S. attorney, I filed a lawsuit against a business that terminated 
someone I believed, and the jury agreed, had been terminated at least 
in part because of them being a member of the Guard and Reserve.
  We need to make sure our military men and women are protected and 
that they cannot be taken advantage of. I was in Iraq in January, and I 
met with soldiers there. One told me about his house. He was not able 
to keep up the payments. I asked him if he knew about the Soldiers and 
Sailors Relief Act, and he said yes, that was protecting him. Under 
that act his house could not be foreclosed on. And JAG officers, back 
there, helped him deal with that. But he was sharing with me one of his 
frustrations. He also told me he planned to re-enlist.
  But I must react adversely to my colleague's statement that the 
amendment I offer, which expands protections and guarantees certain 
protections for military personnel over the present language in the 
statute, presumes military people who file bankruptcy to be abusers. 
Now, that is not so.
  Look. This is the deal. Let's be real frank about it. What he is 
raising fundamentally is simply whether a person ought to be handled 
under chapter 13 or under chapter 7. If a military person's income 
falls below that of the median income in America, he can file chapter 7 
and wipe out every debt he has--zilch, zero, walk away free--just like 
any other American can. And that has not been changed. And as Senator 
Hatch has indicated, probably close to 90 percent of American 
individuals who file for bankruptcy relief will be falling in that 
category.
  Mr. DURBIN. Will the Senator from Alabama yield for a question on my 
time?
  Mr. SESSIONS. All right.
  Mr. DURBIN. I just want to ask the Senator a question.
  Is it not true that you have amended page 12, section (B)(I) of S. 
256, which reads in part: ``In any proceeding brought under this 
subsection, the presumption of abuse may only be rebutted by 
demonstrating special circumstances'' such as being called to active 
duty in the Armed Forces?
  So when I say you are presuming that they are abusing bankruptcy, 
these are the exact words of your amendment.
  Mr. SESSIONS. Well, look, this is the deal. My amendment does not 
presume abuse. The bill already does that if you file for Chapter 7 and 
you have above median income. My amendment only

[[Page S1848]]

adds language to give examples of what a ``special circumstance'' could 
be.
  This is what we are saying here. The way this statute is written, 
what it says is if you make above median income in America and you can 
pay back a portion of your debts, you should not be allowed to go under 
chapter 7 and wipe them all out. I don't think most military people 
want to be treated differently from that. If they have come back from 
active duty and are making $200,000 a year or $75,000 or $100,000 and 
they have a small amount of debt that they can pay back--it may be 
substantial--but an amount they can pay back, they will be able to go 
under chapter 13 and during that period of time the court would decide 
how much of the debt they should pay back based on their income. And if 
they have extraordinary circumstances, special circumstances as a 
result of their military duty, the court can exempt them from going 
into chapter 13, if it feels that is appropriate.
  But fundamentally, this bill says if you are making a higher income 
and you can pay back part of it, why should you not? Not all of it. It 
is over 5 years. And the way they do it, the money goes to the court. 
Certain debts on a percentage basis are paid. And at the end of a 
maximum of 5 years you are wiped out. They don't make you pay for any 
more than 5 years. So you pay back a portion of what you owe over a 
period of 5 years.
  This is not abusing people. These are people who have incurred debts, 
and they can pay some of it back. And they pay it. Most people under 
this legislation will fall in the other category as exists today, and 
they will wipe out all of their debts. So this is not abusive 
legislation. That is important to state.
  It also specifically protects veterans who are defined by statute 
today as low-income veterans. They would be covered by this. There are 
people with medical expenses. That was defined explicitly as a special 
circumstance, and active-duty personnel.
  As one businessman and fellow Senator indicated, we also have to be 
careful that if we provide too many special protections for service 
personnel, we could actually drive up their interest rates when they go 
out to borrow money because a lender may feel they are a greater risk 
than otherwise would be the case.
  I believe we need to give our servicemen special protections. The 
Servicemember Civil Relief Act does that. It provides that you cannot 
foreclose your home while you are on active duty. It provides that your 
interest rate is reduced if you incurred debts before you go on active 
duty. You can't exceed 6 percent. They can't take a default judgment 
against you while you are away. Your statute of limitation is tolled so 
you can file any action you have that might otherwise be fileable while 
you are away. You can come back and still have time to do it.
  I think we ought to continue to look at it. If there are additional 
things such as loans and other matters that are important for 
protection of our military, we need to look at it. But credit card, 
bank interest rates, those matters are not to be dealt with on a 
bankruptcy court reform bill. Those pieces of legislation are more 
appropriately and properly under the jurisdiction of the Banking 
Committee. That is where they need to be decided and debated.
  Mr. BIDEN. Mr. President, I appreciate the sentiment behind Senator 
Durbin's amendment, but the fact of the matter is that it is not 
needed. In the first instance, it is simply not the case that the means 
test in this bill will prevent our men and women in uniform from 
receiving the full protection of our bankruptcy laws.
  The means test will not apply to any one in military service under 
the median income in their State. The median income in Delaware for a 
family of four is $72,680. If a staff sergeant at Dover Air Force Base 
in Delaware had to file for bankruptcy, he would automatically be 
exempt, at his pay scale of $34,319. So there is no way, under the 
means test in this bill today, that he would be denied the full 
protection of chapter 7. That is precisely why I insisted on that safe 
harbor in the means test two Congresses ago.
  So the very assumption behind the amendment, that we need to exempt 
service men and women from the means test, is wrong. And if a pilot at 
Dover, who might well fall above the median income, were to file, he 
would only be subject to movement to chapter 13 if, and only if, he had 
enough income after deducting all of his normal expenses, to continue 
to pay some of his bills. And under chapter 13, he could keep his house 
and other assets, something filers under chapter 7 cannot do.
  As Senator Hatch pointed out earlier, and Senator Sessions, too, 
special protections exist in current law--the Soldiers and Sailors 
Relief Act--that prevent foreclosure on a house, that cap interest 
payments. The extra protections sought by the Durbin amendment are 
already in place.
  On the point of the payday loans, I agree that is an abuse that 
should be halted. Truly unscrupulous lenders that take advantage of 
anyone, in uniform or not, should be put out of business. But that is 
in fact a matter for banking regulations, not bankruptcy law. This 
amendment is closing the barn door after the horse is already gone.
  Under the bankruptcy reform bill before us, the test to determine a 
filer's ability to pay specifically allows for the ``special 
circumstances'' that could reduce their ability to pay. The Sessions 
amendment, that we just passed, makes it crystal clear that those 
special circumstances include service in the armed forces--if that 
service puts you into a situation where you are unable to pay your 
legal debts. That can happen to someone called up in the reserves, and 
it is precisely why that category of special circumstances was put into 
the bill in the first place.
  I could not support this bill if I did not belief that it is already 
fundamentally fair. This is a bill that received 82 votes the last time 
the Senate voted on it. I would never call those Senators callous or 
indifferent to the difficult circumstances our servicemen and women 
face. They are not. The Durbin amendment assumes all 82 of us got it 
wrong last time. I do not agree.
  With the additional clarification of the Sessions amendment, I am 
convinced that the concerns raised by Senator Durbin are fully 
addressed.
  Mr. LEAHY. Mr. President, I stand to voice my support for the 
amendment offered by my friend and colleague, Senator Durbin, which 
will protect our military servicemembers from attempts to penalize them 
by making it tougher for them to file for bankruptcy, even when the 
reason they lost all their income is because they answered the call of 
duty to serve America. I am proud to join my colleague as a cosponsor 
of this amendment.
  We cannot have a thorough debate on bankruptcy reform without 
considering the economic hardships faced by servicemembers and their 
families. Calls to serve their country in Iraq, Afghanistan, or 
elsewhere can cause loss of family income, the closing of a family 
business, or unexpected expenses. Unfortunately, it is not uncommon for 
servicemembers and their families to be forced into filing for 
bankruptcy relief. We need to protect those who are fighting for us.
  I support Senator Durbin's efforts to protect our soldiers, 
particularly young recruits and junior officers, from sales of 
inappropriate insurance and investment products on military bases. It 
is crucial that servicemen and women who sacrifice for their country 
not be exploited or taken advantage of through dishonest business 
practices. It is our duty to ensure that America's military personnel 
are offered first-rate financial products so they can provide for their 
families and invest in their futures.
  I commend Senator Durbin for his leadership on this issue, and I urge 
my colleagues to accept his amendment so we can remedy the financial 
hardships faced by servicemembers who serve our nation and their 
families.


                            Amendment No. 23

  Mr. SESSIONS. Mr. President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Alabama [Mr. Sessions] proposes an 
     amendment numbered 23.

  Mr. SESSIONS. Mr. 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:

[[Page S1849]]

 (Purpose: To clarify the safe harbor with respect to debtors who have 
serious medical conditions or who have been called or ordered to active 
           duty in the Armed Forces and low income veterans)

        On page 12, line 10, insert after ``special 
     circumstances'' the following: ``, such as a serious medical 
     condition or a call or order to active duty in the Armed 
     Forces, to the extent such special circumstances''.
       On page 18, line 4, insert after ``debtor'' the following: 
     ``, including a veteran (as that term is defined in section 
     101 of title 38),''.

  Mr. SESSIONS. Mr. President, how much time remains?
  The PRESIDING OFFICER. The Senator from Alabama has 15 minutes.
  (Disturbance in the Visitors' Galleries.)
  The PRESIDING OFFICER. The Sergeant at Arms will restore order in the 
gallery.
  The Senator from Alabama.
  Mr. SESSIONS. I thank the Chair.
  I do not believe our service men and women should be insulted or are 
being insulted by the amendment I offered to ensure that they have 
certain special categories of protection under this act. I think they 
will welcome the amendment. I do not believe, however, that we need to 
change the overall idea and concept of the legislation, that homestead 
should be decided by the States and not by this Federal legislation. 
And if a serviceman is unable to pay his debts, he will be able to file 
bankruptcy against those. He will be able to wipe out all those debts. 
If he is able to pay back a portion, like any other citizen, he would 
be required to pay back that portion under this legislation. I think 
that is fair.
  We need to be careful that they are not in any way adversely impacted 
by being overseas defending the interests of this country. I do not 
believe they are under this legislation.
  I reserve the remainder of my time.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. Mr. President, I thank the Senator from Alabama. This 
exchange is a rare and a good occurrence. As I said before, it is 
dangerously close to debate which we occasionally have in the Senate. I 
thank the Senator from Alabama for being here, even though we are on 
polar opposite sides of the debate. There should be more conversation 
and dialog on the floor such as this, a competition of ideas.
  Nothing I said about his amendment reflects on him or his respect for 
the military. He has served in the military. I have not. I have great 
respect for him for having done that. But what I am trying to do with 
this amendment is to show what I think is appropriate respect to the 
men and women serving in uniform.
  The point I made earlier was that the section of the underlying bill 
where people are presumed to have abused bankruptcy--in other words, 
they can pay their debts, but they try to get discharged from 
bankruptcy from their debt--that section is what the Senator from 
Alabama amended. So he puts into that section the requirement that the 
court take a look at the fact that the person filing bankruptcy may be 
in the military. That is all. That is the only point I am trying to 
make. I do not question his respect for the military in any way at all.
  His amendment misses the point completely. Instead of presuming that 
the men and women who serve our country are abusing the bankruptcy laws 
when they go to file bankruptcy, I say stick to the current law. The 
current law allows a bankruptcy judge to make this determination. The 
new proposal by Senator Sessions, the one we are about to vote on, 
would require the service man or woman to file copious documents, incur 
additional legal costs, and then, if they are presumed to be abusing 
bankruptcy, to go through it all over again. What I am trying to do is 
spare them from that, and maybe it is soft on my part. Maybe I am not 
tough enough. I am trying to spare them because they are sparing me the 
worry about the safety of this country. They are serving this country 
in uniform. They are risking their lives. Yes, maybe I am going a 
little further than some would. I don't think it is an unreasonable 
leap. We understand the economic hardships that activation in the 
military can lead to.
  Let me say a word about what used to be known as the Soldiers and 
Sailors Relief Act, now the Servicemembers Civil Relief Act.
  The Senator from Alabama continues to return to it, saying this is 
their protection. Well, there is some protection in this law as it 
currently exists, but not nearly enough. This law, as currently 
written, does not apply to debts incurred after military service 
begins. So if you are in the military service and have debts that are 
incurred because you are overseas--your family debts that could lead 
you into bankruptcy--there is no protection from the Servicemembers 
Civil Relief Act. The protections are not automatic. You have to go to 
court and fight for them, too. Imagine that, fighting for your country 
overseas and being worried about fighting legal battles back home for 
lien enforcement on autos and other personal property being taken by 
self-help repossession. It doesn't fully protect servicemembers' 
spouses or dependents. These protections are not absolute.
  If the creditor can show that the proceedings he instituted do not 
materially affect the serviceman, they can go forward. This bill, as 
written, doesn't stop debt collection harassment. This bill, as 
written, is providing protection that is only temporary at best and not 
long-term solutions to financial problems.
  A member of my staff is active military and he is on detail to my 
office. I always go to him and ask him about these ideas, because he 
sees it from the eyes of a serviceman. He sent me a little note about 
Senator Sessions' amendment. He says it keeps the troops subject to the 
means test, but would allow a call or order to active duty in the armed 
services, to the extent that such special circumstances justify 
additional expenses or adjustments of current monthly income. This puts 
the service member at the mercy of someone else's opinion as to what 
was justified, what was reasonable. He gives an example, and a good 
one:

       Suppose a soldier decides to keep his family in their home 
     rather than move them in with his parents while he is 
     deployed. You can understand why he might--the comfort of 
     their home, schools the kids are used to. Instead of picking 
     them up and saying I am going overseas and you are moving in 
     with mom and dad, he says stay in the home. Senator Sessions' 
     amendment would force that soldier to justify his decision to 
     keep the family in their home, made under circumstances that 
     few outside the military can appreciate. What may seem like a 
     reasonable alternative--picking up the wife and kids and 
     sending them to mom's and dad's house to live in the 
     basement, or in an extra bedroom, may not be reasonable in 
     that soldier's eyes.

  What I am asking my colleagues in the Senate is, when you look at 
this Bankruptcy Code, join me in saying if we are going to give special 
consideration and help to the men and women in uniform--I don't think 
that is an unreasonable thing to do; I think we owe it to them--they 
ought to have a chance to go to court and be spared from this harsh 
means test and everything included in this bill to prove up where you 
stand. The judge, the trustee in bankruptcy, and others are going to 
make the ultimate decision as to whether you receive your bankruptcy.
  Secondly, moving these soldiers all around the United States--at 
least if they file for bankruptcy, give them an option to choose an 
exemption under Federal law for personal protections and a $75,000 
homestead exemption.
  Finally, let me say this to these predatory lenders, the payday loan 
companies. The argument is if you treat them harshly in bankruptcy 
court, they may not be able to offer these 100-percent, 200-percent, 
400-percent interest loans. I hope they go out of business tomorrow, to 
be honest. A lot of them are snaring these unsuspecting soldiers and 
marines and sailors into debt they can never get out from under. I 
think it is horrendous that men and women who serve our country should 
be subjected to that. I don't think a 36-percent a year annual interest 
rate, which we allow in the Durbin amendment, is unreasonably low. I 
think it is a reasonable return for a loan in most circumstances. It is 
far more than people pay for cars or homes today. They may pay that 
much on credit cards, if they are not careful. But to say the payday 
loan lenders are not going to have their day in court to exploit the 
men and women in uniform, I think, is a reasonable conclusion. It is a 
conclusion, frankly, that was joined in by a number of military groups 
that have endorsed this amendment.

[[Page S1850]]

  For those colleagues following this debate, let me say that, to my 
knowledge, the Sessions amendment has no support from military families 
and support groups. It may have the support of the payday loan 
companies and some of the credit card companies and banks. But 
supporting my legislation are the Military Officers Association of 
America, Air Force Sergeants Association, National Association for the 
Uniformed Services, and the Enlisted Association of the National Guard 
of the United States. I will stand with my supporters and ask my 
colleagues to join me in that effort.
  Mr. President, at this time I will yield the floor and reserve the 
remainder of my time. We are under a unanimous consent request, and I 
note that Senator Leahy of Vermont has come to lay down an amendment.
  If I may get the attention of the Senator from Alabama for a moment. 
Senator Leahy is here to lay down an amendment. I would appreciate it 
if we can amend our unanimous consent request to give the Senator 7 
minutes and protect and preserve the time we have remaining in debate.
  Mr. SESSIONS. That is acceptable to me.
  Mr. DURBIN. Mr. President, I ask unanimous consent that Senator Leahy 
be allowed to lay down his amendment and to speak for 7 minutes, and 
that we return to debate and the previous unanimous consent request.
  The PRESIDING OFFICER (Mr. Thune). Without objection, it is so 
ordered.


                            Amendment No. 26

  Mr. LEAHY. Mr. President, I thank the Senator from Illinois and the 
Senator from Alabama for their usual courtesies. I ask unanimous 
consent that it be in order to set aside, under our understanding, the 
pending amendment so I might introduce an appropriately referred 
amendment for myself, Senator Snowe, and Senator Cantwell.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Vermont [Mr. Leahy], for himself, Ms. 
     Snowe, and Ms. Cantwell, proposes an amendment numbered 26.

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

    (Purpose: To restrict access to certain personal information in 
                         bankruptcy documents)

        On page 132, between lines 5 and 6, insert the following:

     SEC. 234. PROTECTION OF PERSONAL INFORMATION.

       (a) Restriction of Public Access to Certain Information 
     Contained in Bankruptcy Case Files.--Section 107 of title 11, 
     United States Code, is amended by striking subsection (b), 
     and inserting the following:
       ``(b) On request of a party in interest, the bankruptcy 
     court shall, and on the bankruptcy court's own motion, may, 
     protect a person with respect to a trade secret or 
     confidential research, development, or commercial 
     information.
       ``(c) The bankruptcy court, for cause, may protect an 
     individual, with respect to--
       ``(1) any means of identification (as defined in section 
     1028(d) of title 18) contained in a paper filed, or to be 
     filed, in a case under this title; or
       ``(2) information contained in a paper described in 
     paragraph (1) that could cause undue annoyance, 
     embarrassment, oppression, or risk of injury to person or 
     property.''.
       (b) Security of Social Security Account Number of Debtor in 
     Notice to Creditor.--Section 342(c) of title 11, United 
     States Code, is amended--
       (1) by inserting ``last 4 digits of the'' before ``taxpayer 
     identification number''; and
       (2) by adding at the end the following: ``If the notice 
     concerns an amendment that adds a creditor to the schedules 
     of assets and liabilities, the debtor shall include the full 
     taxpayer identification number in the notice sent to that 
     creditor, but the debtor shall include only the last 4 digits 
     of the taxpayer identification number in the copy of the 
     notice filed with the court.''.

  Mr. LEAHY. Mr. President, the reason for this amendment--and I 
realize we will not vote on it today and we may vote on it tomorrow, 
although it may well be accepted--is one of the facts we have today.
  The bankruptcy process requires the submission of many documents 
containing highly personal information. But we must be careful that our 
efforts to require documentation for accuracy and accountability do not 
inadvertently create problems for privacy and security.
  We are in an age where personal information can be easily digitized 
and shared, and when it falls into the wrong hands, easily abused.
  Identity theft is one danger. We have only to look to the recent 
debacle of Choicepoint selling the personal data of 145,000 individuals 
to scam artists. Many of these individuals have already become victims 
of identity theft, and they are not alone. Last year alone, 9.3 million 
people were victimized by identity theft. Another danger is tracking or 
harassing a former battered spouse. We need to minimize these 
possibilities, while still allowing for accountability.
  We took an important first step by ensuring privacy protections for 
databases of personal information that become assets in bankruptcy. I 
was pleased to work closely with my colleagues in providing this 
protection.
  But our responsibilities didn't end there. We also need to ensure 
reasonable privacy protection for personal information that is 
submitted by the debtors. I am submitting an amendment that will do 
just that by enhancing the court's discretion to protect personal 
information, and by requiring truncation of social security numbers in 
publicly filed documents. The Judicial Conference supports this 
amendment and I will ask unanimous consent that the Judicial Conference 
letter supporting the amendment be printed in the Record.
  I am pleased that my colleagues Senator Snowe and Senator Cantwell 
have agreed to co-sponsor this amendment. They have been leaders on 
privacy issues, and I appreciate their support.
  First, the amendment addresses court discretion in several ways. It 
allows the court, for cause, to protect personal identifiers, including 
the debtor's or other person's name, social security account number, 
date of birth, driver's license number, passport number, employee or 
taxpayer identification number, and unique biometric data. The personal 
identifiers protected under this provision are the same ones defined as 
``means of identification'' under the Identity Theft Assumption 
Deterrence Act of 1998. This definition is codified as Section 1028(d) 
of Title 18 of the criminal code.
  The amendment also allows the court, for cause, to seal or redact 
``information that could cause undue annoyance, embarrassment, 
oppression or risk of injury to person or property.'' This standard is 
drawn from the current civil procedure discovery rules--Fed. Rule of 
Civ. Procedure 26--and would replace the existing standard in 
bankruptcy court, which only protects individuals against ``scandalous 
or defamatory matter.'' This change would allow the court to protect 
information, such as the home or employment address of a debtor, 
because of a personal security risk, including fear of injury by a 
former spouse or stalker. It would also allow the court to protect 
other information normally considered private, such as medical 
information.
  The amendment would also provide persons the opportunity to request 
protection of sensitive information not only after it is filed with the 
court, but prior to filing as well. This protection is particularly 
important in an electronic filing environment, where information once 
filed is immediately available to the public.
  In addition to enhancing court discretion, the amendment also 
protects social security numbers. Currently, the bankruptcy code 
requires debtors to include their tax payer identification numbers, 
which for individuals is almost uniformly his or her social security 
number, on any notice the debtor gives to creditors.
  Because these notices are also filed with the court, the court's 
files routinely include unredacted social security numbers, creating 
the potential for abuse by those accessing public court records.
  The amendment would simply allow debtors to limit disclosure to only 
a part of his or her social security number in notices that it files 
with the court. Specifically the notice to the court would include only 
the last four digits. The amendment still protects creditors where 
necessary, and specifies that creditors who are on the

[[Page S1851]]

schedule of assets and liabilities should receive the full tax payer 
identification number in the notices sent specifically to the creditor.
  The idea of truncation isn't new. Just last year, we passed the Fair 
and Accurate Credit Transactions Act of 2003, and that Act required 
truncation of credit card and debit card numbers on receipts given to 
cardholders. Under that law, only the last 5 digits of credit card and 
debit card numbers can be printed.
  Requiring truncation for social security numbers is similarly 
reasonable. It provides protection against abuse, but still allows for 
important information sharing to take place.
  The bankruptcy process requires submission of many documents 
containing highly personal information. I spoke about this on the floor 
yesterday. We must be careful that our efforts to require documentation 
for accuracy and accountability do not inadvertently create problems 
for privacy and security.
  We are in an age where personal information can be easily digitized 
and shared, and when it falls into the wrong hands, easily abused. We 
know what happens with identity theft. Look at the totally 
irresponsible, outrageous, unbelievable debacle of Choicepoint, selling 
the personal data of 145,000 individuals to scam artists. It is hard to 
think of anything being done more irresponsibly than the executives at 
Choicepoint, unless it is the executives of Bank of America, who ship 
the data of their customers by commercial airplane--the same kind of 
flight we have all taken, and all of us have lost luggage. I said 
yesterday maybe their executives fly by private planes and they don't 
know what it is like to fly commercial. The point is their 
irresponsibility.
  Many of the individuals who have had data stolen become victims of 
identity theft. There were 145,000 individuals whose data was 
compromised with Choicepoint that we know of now. Some have already 
become victims of identity theft. Last year alone, 9.3 million people 
were victimized by identity theft. Another danger is tracking or 
harassing a former battered spouse. I want to make sure we keep 
accurate information and that people have to say who they are, but we 
don't want to allow somebody to go into electronic court files and get 
Social Security numbers and names and addresses and everything else, 
and then use that information for identity theft or worse. We need to 
minimize these possibilities, while still allowing for accountability.
  We took an important first step by ensuring privacy protections for 
databases of personal information that become assets in bankruptcy. I 
was please to work with my colleagues in providing this protection. But 
our responsibilities did not end there. We also need to ensure 
reasonable privacy protection for personal information submitted by the 
debtors. This amendment will do that by enhancing the court's 
discretion to protect personal information, and by requiring truncation 
of social security numbers in publicly filed documents.
  I have a letter from the Judicial Conference of the United States, 
Chief Justice Rehnquist presiding, in which they support this 
amendment. They strongly support this amendment. These are the courts 
that are going to have to enforce this.
  I ask unanimous consent that the Judicial Conference letter 
supporting the amendment be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:
                                               Judicial Conference


                                         of the United States,

                                Washington, DC, February 25, 2005.
     Hon. Patrick J. Leahy,
     Ranking Democrat, Committee on the Judiciary,
     U.S. Senate, Washington, DC.
       Dear Senator Leahy: I am writing today to express the 
     Judicial Conference's support of two proposed amendments to 
     the ``Bankruptcy Abuse Prevention and Consumer Protection Act 
     of 2005'' (S. 256). Both amendments to the bill would amend 
     the Bankruptcy Code to effect the Judicial Conference's 
     privacy policy and protect confidential or sensitive 
     information from public disclosure. Your support of these 
     amendments to pending bankruptcy reform legislation would be 
     greatly appreciated.


                   Section 107 of the Bankruptcy Code

       This amendment would implement Judicial Conference policy 
     regarding protection of certain information contained in 
     bankruptcy case files from public disclosure by means of four 
     revisions to section 107 of the Bankruptcy Code. First, the 
     amendment would transform former subsection (b)(1) regarding 
     protection of trade secret or confidential research, 
     development, or commercial information into a new subsection 
     (b). No substantive change would be made to this provision.
       Second, the amendment would create a new subsection (c) to 
     allow the court for cause to authorize the redaction of 
     personal identifiers to protect a debtor, creditor, or other 
     person from identity theft or other harm. The amendment 
     incorporates by reference section 1028(d)(7) of title 18, 
     United States Code, a provision of the ``Identity Theft and 
     Assumption Deterrence Act of 1998,'' with regard to the types 
     of personal identifiers that may be redacted. These include 
     the debtor's or other person's name, social security account 
     number, date of birth, driver's license number, alien 
     registration number, government passport number, employee or 
     taxpayer identification number, unique biometric data, unique 
     electronic identification number, electronic address or 
     routing code, and telecommunication identifying information 
     or access device. The amendment would also permit the court 
     to exercise its discretion to protect personal identifiers by 
     means other than redaction where appropriate in the 
     circumstances of the case.
       Third, this provision would allow the protection of 
     information under subsection ( c) ``contained in a paper 
     filed, or to be filed,'' in a bankruptcy case. This provision 
     is intended to provide persons the opportunity to request 
     protection of the information not only after it is filed with 
     the court, but prior to filing as well. This authority would 
     be especially useful in an electronic filing environment, 
     where information once filed is immediately available to the 
     public.
       Finally, this new subsection (c) would have the effect of 
     striking from the current provision ``scandalous or 
     defamatory matter'' as a basis for protection of a person and 
     instead allow the court for cause to seal or redact 
     ``information that could cause undue annoyance, 
     embarrassment, oppression or risk of injury to person or 
     property.'' This language is drawn from Federal Rule of Civil 
     Procedure 26 regarding the issuance of protective orders in 
     the course of discovery. This new provision would expand the 
     authority of the bankruptcy court to allow the court to 
     protect information, such as the home or employment address 
     of a debtor, because of a personal security risk, including 
     fear of injury by a former spouse or stalker. It would also 
     allow the court to protect other information normally 
     considered private, such as medical information which, if 
     publicly) disclosed, could result in untoward consequences to 
     the debtor or others.


                 Section 342(c) of the Bankruptcy Code

       This amendment to the bill would amend section 342(c) of 
     the Bankruptcy Code to implement Judicial Conference policy 
     that social security account numbers be protected from public 
     disclosure in court documents.
       Section 342(c) of title 11, United States Code, currently 
     requires a debtor to include his or her taxpayer 
     identification number, which for an individual is almost 
     uniformly his or her social security account number, on any 
     notice the debtor gives to his or her creditors. Debtors are 
     required to give such notice in various contexts, including 
     the filing of adversary proceedings, such as a complaint to 
     determine the dischargeability of a debt, or contested 
     matters, such as a motion to avoid a lien impairing an 
     exemption.
       As a copy of such notice is required to be filed with the 
     court, court files routine include unredacted social security 
     account numbers of debtors. By requiring only the last four 
     digits of a taxpayer identification number to appear an the 
     notice, the debtor's fun social security account number will 
     no longer appear in the court file and thus be protected from 
     public disclosure.
       The amendment also adds a provision to section 342(c) to 
     require that adequate notice of the bankruptcy filing is 
     given to a creditor who is added to the case after the 
     initial notice of the case has been sent. The taxpayer 
     identification number would be treated in the same manner in 
     the notice to a newly added creditor as the number was 
     treated in the initial notice to the original creditors. The 
     debtor is directed to send to the newly added creditors a 
     notice of the bankruptcy filing containing the debtor's full 
     taxpayer identification number, but to include only the last 
     four digits of the number in the copy of the notice filed 
     with the court.
       Thank you far your consideration of these proposed 
     amendments. If you have any questions or concerns, please 
     have your staff contact Michael W. Blommer, Assistant 
     Director, at (202) 502-1700.
                                            Leonidas Ralph Mecham,
                                                        Secretary.

  Mr. LEAHY. Mr. President, I am pleased my colleague from Maine, 
Senator Snowe, and my colleague from Washington State, Senator 
Cantwell, have agreed to cosponsor this amendment. They both have been 
leaders of privacy issues. I appreciate their support.
  Here is what the amendment does: It addresses court discretion in 
several ways. It allows the court for cause to protect personal 
identifiers, including the debtor's or other person's name,

[[Page S1852]]

Social Security account number, date of birth, driver's license number, 
passport number, employee or tax identification number, and unique 
biometric data. The personal identifiers protected under this provision 
are the same ones defined as ``means of identification'' under the 
Identity Theft Deterrence Act of 1998. This definition is codified in 
Section 1028(d) of Title 18 of the criminal code.
  The amendment also allows the court, for cause, to seal or redact 
``information that could cause undue annoyance, embarrassment, 
oppression or risk of injury to person or property.'' This standard is 
drawn from the current civil procedure discovery rules. This change 
would allow the court to protect information, such as the home or 
employment address of a debtor because of a personal security risk. 
Unfortunately, many times that risk is from a former spouse or a 
stalker. It would also allow the court to protect other information 
normally considered private, such as medical information.
  The amendment would provide persons the opportunity to request 
protection of sensitive information not only after it is filed with the 
court, but prior to filing as well. This protection is particularly 
important in an electronic filing environment, where information once 
filed is immediately available to the public.
  In addition to enhancing court discretion, the amendment also 
protects Social Security numbers. Currently, the bankruptcy code 
requires debtors to include their tax payer identification numbers 
(which for individuals is almost uniformly his or her social security 
number) on any notice the debtor gives to creditors. Because these 
notices are also filed with the court, the court's files routinely 
include unredacted social security numbers, creating the potential for 
abuse by those accessing public court records.
  This amendment would simply allow debtors to limit disclosure to only 
a part of his or her social security number in notices filed with the 
court. Specifically the notice to the court would include only the last 
four digits.
  This amendment still protects creditors where necessary, and 
specifies that creditors who are on the schedule of assets and 
liabilities should receive the full tax payer identification number in 
the notices sent specifically to the creditor. What it means is 
somebody cannot get on line, get all this information, sell it, or do 
whatever they want to.
  The idea of truncation isn't new. Just last year, we passed the Fair 
and Accurate Credit Transactions Act of 2003, and the Act required 
truncation of credit card and debit card numbers on receipts given to 
cardholders. Under that law, only the last 5 digits of credit card and 
debit card numbers can be printed. Requiring truncation for social 
security numbers is similarly reasonable. It provides protection 
against abuse, but still allows for important information sharing to 
take place.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time? The Senator from Alabama.
  Mr. SESSIONS. Mr. President, I note that with regard to, I believe 
the new name for it is the Servicemembers Civil Relief Act, which is 
the updated Soldiers and Sailors Relief Act, is a good piece of 
legislation. It provides tremendous protection for our men and women 
who have been called to active duty and sent around the world to defend 
our interest. It is very important legislation. We updated it not too 
long ago, in 2003. Maybe it needs to be updated again.
  A bill structuring the rules of procedure for a bankruptcy in America 
is not the place to enter into debate about the refined procedures that 
might be necessary to give greater protection than we give today to our 
service men and women.
  I suggest very strongly that to those who disagree there are enough 
protections, let's consider that. Let's look at that and see if we can 
do a better job of providing relief. The danger we get into is this: If 
we start amending what homestead is and having a Federal law dominate 
state homestead laws, which has not been done in our history, is not 
the current law, and we have rejected time and again in many different 
ways, I think we jeopardize the bipartisan consensus we had that led to 
a vote that passed this legislation last time without the Sessions 
amendment, which I think provides additional benefits for servicemen. 
We passed it 83 to 15. I think one time it passed with 97 to 1 votes; 
another time 78 votes. This is legislation that has had four markups in 
the Judiciary Committee. We debated it there. We have had long debates 
on the floor. As a matter of fact, as I recall, we spent 2 weeks on it 
every time it has been before the Senate, and it is projected we might 
go 2 weeks again on this legislation.
  I know my friend from Illinois is concerned about soldiers. I also 
know he does not support the bill, or at least has not been a supporter 
of it. I expect it would not hurt his feelings if this amendment, which 
would upset the agreements we reached on homestead, led to the defeat 
of the bill. It would not hurt him at all. We had a Schumer amendment 
last time on a very discrete issue, a very controversial issue that 
ended up blocking final passage of the bill. We do not need to do that 
this time.
  I believe there are strong protections for our service men and women. 
I do not think, as a matter of principle, that a serviceman should be 
exempt from the means test. The means test is not harsh. It does not 
mean ``mean;'' it means ``means,'' income, how much is your income, and 
if your income is above the median income in America and you can pay 
back some of those debts, I think anybody ought to do that, if they 
can. That is the principle of the bill.
  We proceed at some risk when we start carving out exceptions. Senator 
Feingold wants to change the homestead exemption for those over 62. I 
see the Chair, a distinguished new Senator with a young family. There 
are a lot of young people out here who bought a house. If we change the 
homestead law, why just do it for seniors? Why not for everybody? Maybe 
a family with two or three kids needs protection more than somebody who 
is 62. I don't know. I am saying, we have dealt with those issues. We 
have decided we would allow the States to set the homestead limit. That 
was a good decision, a defensible decision. That is one as a Senate, 
each time it has come forward, that we have reached that agreement, and 
I believe we ought to stay with it.
  I do not think it reflects any diminishment or lack of respect for 
the men and women in uniform. I respect them. I care about them. We 
have done many things for them and I want to do more. I was proud to 
sponsor the legislation that increased the death benefits from $12,000 
to $100,000 and increased the servicemen group life from $250,000 to 
$400,000. The President has submitted that as part of the supplemental. 
I hope we get that done. We need to do a lot of things for our 
military, but altering the bankruptcy bill under the guise of helping 
our military in a way that could actually jeopardize a bipartisan 
consensus would be the wrong approach.
  I am concerned about it. For that reason I have to object to the 
Durbin amendment and suggest the amendment I have offered will do the 
things he wants to see done or needs to be done without jeopardizing 
our consensus.
  I yield the floor and reserve the remainder of my time.
  Mr. DURBIN. Mr. President, how much time is remaining in the debate?
  The PRESIDING OFFICER. There is 2 minutes 34 seconds remaining in 
debate.
  Mr. DURBIN. On which side?
  The PRESIDING OFFICER. On the Senator's side, and 7\1/2\ minutes for 
the Senator from Alabama.
  Mr. DURBIN. If only 2\1/2\ minutes remain on our side, if I can get 
the attention of the Senator from Alabama, if he is prepared to close 
the debate--I ask the Senator from Alabama, it is my understanding he 
has 7\1/2\ minutes remaining; I have 2\1/2\ minutes remaining, and 2\1/
2\ minutes is all I need to close. I do not know if the Senator from 
Alabama wants to use up more of his time and even it out.
  Mr. SESSIONS. In my litigation experience, the plaintiff gets the 
final word. So the Senator should use his time and I will finish. I may 
yield back some of that time.
  Mr. DURBIN. Fine. Let me do that, then. I ask unanimous consent that 
before we vote on the Durbin amendment, we have 4 minutes equally 
divided to explain our positions on the Durbin amendment.

[[Page S1853]]

  The PRESIDING OFFICER. Is there objection?
  Mr. SESSIONS. I do not have any objection.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DURBIN. The first vote for my Senate colleagues will be on the 
Sessions amendment. The Sessions amendment changes S. 256, the 
bankruptcy bill, in the section where the bill establishes a 
presumption that people are abusing bankruptcy. In other words, they 
are not entitled to bankruptcy. The Sessions amendment says that the 
judge should consider whether the person who has filed for bankruptcy 
is in the active military service and is therefore a special 
circumstance. So Senator Sessions leaves the military men and women in 
the section of this bill where one presumes to be abusing the law. I do 
not approach it in that way at all, and that is the reason why the 
military groups and families are supporting my amendment and not the 
Sessions amendment.
  As I said earlier, Senator Sessions certainly respects the military, 
but we can show our respect for the military by saying if they are 
activated to serve this country, if they are removed from their family, 
removed from their job, removed from their business, and terrible 
things happen and the business fails or their family goes into 
bankruptcy and they have to go back to America with their life and 
limbs intact and file in bankruptcy court, we are going to give them 
special consideration. They did something special for America; we are 
going to do something special for them. We are not going to make them 
jump through all the hoops that have been created by this new 
bankruptcy law that are expensive, time consuming, and loaded with 
documents that need to be filed. We are going to protect their home for 
$75,000 worth at least, wherever they happen to be assigned in the 
military. We are going to protect their basic possessions that they can 
have after the bankruptcy is over, and we are not going to protect 
those creditors and lenders which abused them by charging interest 
rates which were sky high. We will not give them their day in court.
  The PRESIDING OFFICER. The time of the Senator from Illinois has 
expired.
  Mr. DURBIN. I urge my colleagues to oppose the Sessions amendment and 
support the Durbin amendment, which has the endorsement of the military 
groups and families.
  The PRESIDING OFFICER. The Senator from Alabama.
  Mr. SESSIONS. Mr. President, I will make a few general points. This 
is not a harsh bill. People who make below median income can use the 
same bankruptcy procedures they always have. Spouses and children are 
going to have a tremendously better position in this bankruptcy bill 
vis-a-vis their alimony and child support payments than we have ever 
given them before. There are a lot of good things in this bill.
  I reject the suggestion that this is a bill written by credit card 
companies to meet their special interests. What we have is a bankruptcy 
court system that is not working well. It is being abused in a lot of 
different ways.
  I do not know how we came up with the idea to use the language--and 
the Senator is correct, it does say abusing the system. It could just 
as well as have said people who make above median income will not be 
guaranteed not to pay back some of their debts because, as a matter of 
policy, the Congress has decided that if they make above median income 
and can pay some of their debts back over a period of up to 5 years, if 
the Court so declares, then they ought to pay some of that back. I do 
not think that is harsh or mean. And all other debts are being wiped 
out. People cannot sue you, creditors cannot call on you. Your phones 
cannot be stopped. People can be fined if they harass you for the 
collection of those debts. That is not a harsh thing.

  The way it was written, it uses that word ``abusive,'' that we 
consider it an abuse if you file to wipe out all of your debts when you 
have a higher income. It might have been better to have said we just do 
not think you ought to not pay something back if you make above median 
income. That is the way lawyers write language and that is the way we 
stuck with it, but it should not be taken in any personal way. It is 
just a statement of policy of the Congress about who ought to pay back 
their debts.
  There is talk like it is a credit card company's fault that someone 
takes their card and goes out and runs up $3,000 or more in debts on 
that card, and it is their fault if someone does not pay it back, that 
they deserve what they get and they gave away $3,000. Who pays for 
that? It is the consumers in the long run who pay for that.
  It has been said that they send credit cards to children. Under 
American law, if a young person receives a credit card and actually 
goes out and uses it and it is in his or her name, they do not ever 
have to pay a dime back. A minor is not bound by such a contract as 
that. The credit card company would be the total loser in that 
arrangement.
  They are bringing all these issues up about credit cards. They bring 
the issues up about health care and insurance and people who do not 
have insurance or do have insurance. They raise the question of the 
military. They raise the question of old people. But I just point out 
that we have considered all of that. We have considered that for 8 
years now in great detail, and we have hammered out a bill that I 
believe is fair and just and has received 83 votes in this body last 
time for final passage. I believe we will see another big vote this 
time.
  The amendment I have offered is a fair solution to the concern of our 
military men and women. If it is not, we ought to look at the Soldiers 
and Sailors Relief Act and see if we can make it stronger if that is 
the right step. Let us keep the bankruptcy law, the court procedures of 
the Federal bankruptcy system, consistent and harmonious with the 
philosophy we started with and have carried on with this bill.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. Mr. President, I ask unanimous consent that Senator 
Mikulski be added as a cosponsor to my amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SESSIONS. Mr. President, I believe the Sessions amendment is 
before the body. I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  Does the Senator from Alabama yield back his remaining time?
  Mr. SESSIONS. I yield back the remainder of my time.
  The PRESIDING OFFICER. All time is yielded back.
  The question is on agreeing to amendment No. 23.
  The yeas and nays have been ordered. The clerk will call the roll.
  The legislative clerk called the roll.
  Mr. McCONNELL. The following Senators were necessarily absent: the 
Senator from Minnesota (Mr. Coleman), the Senator from Texas (Mr. 
Cornyn) and the Senator from Virginia (Mr. Warner).
  Further, if present and voting, the Senator from Minnesota (Mr. 
Coleman) and the Senator from Texas (Mr. Cornyn) would have voted 
``yea.''
  Mr. DURBIN. I announce that the Senator from Minnesota (Mr. Dayton) 
and the Senator from Hawaii (Mr. Inouye) are necessarily absent.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 63, nays 32, as follows:

                      [Rollcall Vote No. 12 Leg.]

                                YEAS--63

     Alexander
     Allard
     Allen
     Baucus
     Bennett
     Biden
     Bond
     Brownback
     Bunning
     Burns
     Burr
     Byrd
     Carper
     Chafee
     Chambliss
     Coburn
     Cochran
     Collins
     Conrad
     Craig
     Crapo
     DeMint
     DeWine
     Dole
     Domenici
     Ensign
     Enzi
     Feinstein
     Frist
     Graham
     Grassley
     Gregg
     Hagel
     Hatch
     Hutchison
     Inhofe
     Isakson
     Johnson
     Kohl
     Kyl
     Lincoln
     Lott
     Lugar
     Martinez
     McCain
     McConnell
     Murkowski
     Nelson (FL)
     Nelson (NE)
     Roberts
     Santorum
     Sessions
     Shelby
     Smith
     Snowe
     Specter
     Stevens
     Sununu
     Talent
     Thomas
     Thune
     Vitter
     Voinovich

                                NAYS--32

     Akaka
     Bayh
     Bingaman
     Boxer
     Cantwell
     Clinton
     Corzine
     Dodd
     Dorgan
     Durbin
     Feingold
     Harkin
     Jeffords
     Kennedy
     Kerry
     Landrieu
     Lautenberg
     Leahy

[[Page S1854]]


     Levin
     Lieberman
     Mikulski
     Murray
     Obama
     Pryor
     Reed
     Reid
     Rockefeller
     Salazar
     Sarbanes
     Schumer
     Stabenow
     Wyden

                             NOT VOTING--5

     Coleman
     Cornyn
     Dayton
     Inouye
     Warner
  The amendment (No. 23) was agreed to.
  The PRESIDING OFFICER. The Democratic leader.
  Mr. REID. Mr. President, would the suggestion of an absence of a 
quorum be in order?
  The PRESIDING OFFICER. It would.
  Mr. REID. 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. FRIST. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Chambliss). Without objection, it is so 
ordered.
  Mr. FRIST. Mr. President, for the information of Senators, this will 
be the last rollcall vote tonight. We will be coming in tomorrow at 
9:15. We will have 1 hour of morning business. After that morning 
business, we will have two rollcall votes in all likelihood. So we need 
people back early in the morning. After that, another amendment will be 
introduced, and we may well have another vote prior to lunch tomorrow. 
I have talked to the Democratic leader and the managers on both sides, 
and that is agreeable. This will be the last rollcall vote tonight.


                     Amendment No. 16, As Modified

  The PRESIDING OFFICER. There are 4 minutes evenly divided. Who yields 
time?
  The Senator from Alabama.
  Mr. SESSIONS. Mr. President, the Senator from Illinois has suggested 
that I go first on his amendment. I know he would like to do the 
closing argument. He is very good at that.
  The Senator from Illinois suggests that we are accusing military 
persons who file for bankruptcy as abusers if they qualify for the 
means test. That is an incorrect statement of what we are about with 
the amendment we just passed and what the bankruptcy bill is about. 
This legislation provides that if a bankruptcy filer makes above median 
income--this explains a lot about the bill--then absent special 
circumstances, a filer can be required to pay back at least a part of 
the debts they owe, only if they make above median income. It also 
provides that if their income falls below median income, they can stay 
in chapter 7 and wipe out all their debts just as they always have. If 
a debtor's income is above median income and special circumstances 
apply, they still may be eligible to avoid chapter 13, wipe out all 
their debts under chapter 7.
  The amendment I just offered and just passed explicitly states that 
when one is called to active military duty in the Armed Forces, that 
can be a special circumstance that could protect them and provide an 
additional opportunity to not go into chapter 13.
  An expert testified at the committee last week that about 80 percent 
of the people who file are below median income and that about 7 percent 
in addition will qualify under the special circumstances. The amendment 
we just passed protects our servicemen and guarantees they will be 
considered under special circumstances.
  We should vote down this amendment because it also sets a homestead 
limit in violation of State law and contrary to the philosophy of this 
bill.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. Mr. President, I ask unanimous consent that Senator 
Corzine be added as a cosponsor of the Durbin amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DURBIN. I yield 30 seconds to the Senator from Massachusetts, Mr. 
Kennedy.
  The PRESIDING OFFICER. The Senator from Massachusetts.
  Mr. KENNEDY. Mr. President, we are having a difficult time enough now 
in meeting our goals for the Reserve and the Guard. Unless we pass the 
Durbin amendment, we are going to have a much more difficult time. If 
you support the Guard and the Reserve and support our troops, you will 
support the Durbin amendment.
  Mr. DURBIN. Mr. President, I thank the Senator from Massachusetts.
  How many of us have seen men and women going off to serve our country 
to risk their lives knowing that they are leaving behind families and 
their businesses and knowing the economic hardship they will face? Some 
of them are going to be forced into bankruptcy. We have case after case 
where it has happened. All the Durbin amendment says is, if you have to 
file bankruptcy after this new bankruptcy reform bill were to become 
law, the bankruptcy system will consider the fact that you have served 
our Nation by exempting you from certain aspects of this new bill. We 
will not push you into a means test, but we will consider your 
individual circumstances.
  We will give you a homestead exemption of $75,000 regardless of where 
you have been assigned for military duty. We will protect your personal 
assets with the Federal personal exemption regardless of where you have 
been assigned to duty and where you have to file bankruptcy.
  There are those who say this is a special favor for the armed 
services. It is, and I believe it should be. They risk their lives for 
us. They should not risk their home and their finances as well. We 
ought to stand behind them. Yes, you can vote for the Sessions 
amendment and for the Durbin amendment as well. They are not 
inconsistent.
  The PRESIDING OFFICER. The question is on agreeing to the Durbin 
amendment No. 16, as modified.
  Mr. DURBIN. I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The clerk will call the roll.
  The assistant legislative clerk called the roll.
  Mr. McCONNELL. The following Senators were necessarily absent: the 
Senator from Minnesota (Mr. Coleman) and the Senator from Texas (Mr. 
Cornyn).
  Further, if present and voting, the senator from Minnesota (Mr. 
Coleman) and the senator from Texas (Mr. Cornyn) would have voted 
``nay.''
  Mr. DURBIN. I announce that the Senator from Minnesota (Mr. Dayton) 
and the Senator from Hawaii (Mr. Inouye) are necessarily absent.
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 38, nays 58, as follows:

                      [Rollcall Vote No. 13 Leg.]

                                YEAS--38

     Akaka
     Bayh
     Bingaman
     Boxer
     Cantwell
     Clinton
     Conrad
     Corzine
     Dodd
     Dorgan
     Durbin
     Feingold
     Feinstein
     Harkin
     Jeffords
     Kennedy
     Kerry
     Kohl
     Landrieu
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lincoln
     Mikulski
     Murray
     Nelson (FL)
     Obama
     Pryor
     Reed
     Reid
     Rockefeller
     Salazar
     Sarbanes
     Schumer
     Specter
     Stabenow
     Wyden

                                NAYS--58

     Alexander
     Allard
     Allen
     Baucus
     Bennett
     Biden
     Bond
     Brownback
     Bunning
     Burns
     Burr
     Byrd
     Carper
     Chafee
     Chambliss
     Coburn
     Cochran
     Collins
     Craig
     Crapo
     DeMint
     DeWine
     Dole
     Domenici
     Ensign
     Enzi
     Frist
     Graham
     Grassley
     Gregg
     Hagel
     Hatch
     Hutchison
     Inhofe
     Isakson
     Johnson
     Kyl
     Lott
     Lugar
     Martinez
     McCain
     McConnell
     Murkowski
     Nelson (NE)
     Roberts
     Santorum
     Sessions
     Shelby
     Smith
     Snowe
     Stevens
     Sununu
     Talent
     Thomas
     Thune
     Vitter
     Voinovich
     Warner

                             NOT VOTING--4

     Coleman
     Cornyn
     Dayton
     Inouye
  The amendment (No. 16) was rejected.
  Mr. SESSIONS. I move to reconsider the vote.
  Mr. GRASSLEY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. GRASSLEY. Mr. President, I am glad we are now finally considering 
S. 256, the Bankruptcy Reform Act of 2005. Although a few amendments 
were accepted during the Judiciary Committee markup a couple weeks ago, 
and we did that to accommodate Democratic Members, this bill is 
practically identical to the conference report that both the House and 
Senate conferees signed

[[Page S1855]]

in the 107th Congress, minus the poison pill abortion amendment.
  Many of my colleagues know I have been working on this bill for quite 
some time now and that there has always been strong bipartisan support 
for passing bankruptcy reform. I started working on bankruptcy issues 
in the mid-1990s, and I did that with my colleague, then-former Senator 
Heflin of Alabama. We served together as either chairman or ranking 
member of the Administrative Oversight Subcommittee for a period of, I 
believe, 12 years.
  During this period of time, we created what became known as the 
National Bankruptcy Review Commission. We held numerous hearings in the 
subcommittee on various topics dealing with the subject of bankruptcy 
reform.
  In the 105th Congress, Senator Durbin and I passed out of the Senate 
a bankruptcy bill by a vote of 98 to 1, but it never got to conference.
  In the 106th Congress, Senator Torricelli and I worked closely and 
negotiated many compromises. We were able to vote out of the Senate a 
Grassley-Torricelli bill by a vote of 83 to 14. The Senate then 
approved the bankruptcy conference report by a vote of 70 to 28. Mr. 
President, 53 Republican Senators and 17 Democratic Senators voted for 
that conference report, but President Clinton pocket-vetoed the bill, 
and although we had the votes to override it, we were, unfortunately, 
not to have that opportunity. That is what a pocket veto is all about.
  In the 107th Congress, I introduced, with Senator Biden, the same 
language of the conference report agreed to by both the House and 
Senate in the previous 106th Congress.
  We passed the bankruptcy bill by a strong bipartisan vote of 85 to 
13, with further changes made to address concerns of Democratic Party 
members. We went to conference with the House and reached an agreement 
on a conference report. During that conference committee, numerous 
amendments were negotiated with Democrats who opposed the bill. We 
negotiated in good faith, but the inclusion of what has become known as 
the Schumer abortion language ultimately proved to be unacceptable to 
the House and we were not able to get to the finish line.
  The Senate tried to address the bankruptcy bill in the 108th 
Congress. The House passed the conference report language without the 
abortion provisions, but the Senate never took it up. In addition, the 
House amended a Senate bill with a bankruptcy bill and requested a 
conference, but Senate Democrats denied us the ability to have a 
conference on that bill.
  So after three Congresses, we are here again in the 109th Congress 
trying to pass bankruptcy reform. My Democratic colleagues, Senator 
Carper and Ben Nelson, have joined me, as well as Senators Hatch, 
Sessions, and others, on this bill, S. 256, the Bankruptcy Reform Act 
of 2005. The bill continues in the tried and true spirit and tradition 
of this bill being bipartisan, so we do have that bipartisan support on 
its introduction, and from the votes we have had on amendments today, 
it looks like that bipartisanship is still going to hold. So I hope my 
colleagues will not be fooled when longstanding opponents to this bill, 
even though they may never number more than 15, vociferously claim that 
the bankruptcy bill is really controversial and really unnecessary 
because those statements, made by the very small number of people in 
this body who do not think we need to do anything on bankruptcy reform, 
everything they are saying is far from the truth.
  I note that throughout the years, we really bent over backward in 
trying to accommodate Democratic Senators' concerns with the bill's 
process, even in this Congress. I do not think that it is any surprise 
to anyone that my position is that the bankruptcy bill is still very 
much simply unfinished business after all of these compromises 
throughout now the fourth Congress. This bill has passed both the House 
and the Senate a total of 11 times between these two Houses of 
Congress. It is about time that we get the job done now. Hence, simply 
unfinished business, even though some of my colleagues will try to make 
this be a totally brand-new debate, just like we were starting over 
with the purest bill that I would prefer, but because purest bills 
never get through the Senate, it takes bipartisanship.
  We are where we are because of compromise and unfinished business, 
and hopefully we will move this bill to the House and to the President, 
somewhat I hope a repeat of what we did 3 weeks ago with the class 
action tort reform bill. That is why at the beginning of this Congress 
I reintroduced the bipartisan conference report that was arrived at in 
the 107th Congress with only one change, and that change is to leave 
the poison pill of the Schumer abortion language out of it.
  Remember that this compromise that I introduced in this year, the 
107th Congress, minus the Schumer amendment, otherwise is exactly the 
same language negotiated when the Democrats had a majority. It was two 
Congresses ago when Senator Jeffords changed from being a Republican to 
an Independent, sitting with the Democrats. They took over the 
Congress, and it is that Democratic Senate that negotiated this 
agreement for the Senate. That is the bill we are working on now as the 
underlying provision.
  The Schumer abortion language that tanked the bill in the House, in 
the 107th Congress, is left out. Other than that, the bill was 
basically the exact same language that Senate Members, both Republican 
and Democrats, have supported.
  The reason I did this is because we had reached many carefully 
crafted compromises and had a good bipartisan product. I did not think 
that we had to go through committee this time because this bill had 
been done so many times before, but Majority Leader Frist insisted that 
it go through regular order. The Judiciary Committee held a hearing and 
markup on this bill.
  So my colleagues are clear, the committee accepted five amendments to 
further accommodate Democratic members. The committee also defeated a 
number of other amendments that were clearly offered to open issues and 
weaken the bill.
  I would like to make my position crystal clear. We have all 
cooperated and compromised at great length in order to enact this 
legislation that fixes an unfair bankruptcy regime, provides new 
consumer protections, helps children in need of child support, and 
makes other necessary reforms to a system that is often open to abuse. 
I do not believe there is any need to reopen this bill and to disrupt 
those many compromises we have already reached with our Democratic 
colleagues, and more importantly with the House of Representatives.
  I hope this clarification on the history and procedural process of 
the bill will show that, one, the bill is a bipartisan effort; two, 
that we have been working on bankruptcy reform for too long and have 
gone over all the fine points of the bill in great detail; and, three, 
that we have bent over backward to allow a fair process to move forward 
with this bill.

  I discussed the merits of this bankruptcy reform bill. There is broad 
public support for reforming our bankruptcy system. The vast majority 
of people believe that individuals who file for bankruptcy protection 
should be required to pay back some of their debt if they have the 
ability to do so, and that is precisely what this bankruptcy bill 
attempts to do.
  Most people think it should be more difficult for individuals to file 
for bankruptcy. Most Americans are tired of paying for high rollers who 
game the current bankruptcy system and its loopholes to get out of 
paying their fair share. Most people recognize that too many people are 
filing for bankruptcy. Too many people are gaming the system, and the 
numbers are up in historically high proportions in recent years that 
prove that. Bankruptcy filings were at an alltime high even during the 
boom years of our economy. Opponents to the bill act as if there is 
nothing to worry about, but the fact is we have a bankruptcy crisis on 
our hands.
  I want to visit with my colleagues about how this bill will change 
the way bankruptcy is being treated. Simply put, bankruptcy is a court 
proceeding where people get their debts wiped away. Every time a debt 
is wiped away through bankruptcy, somebody loses money. Of course, that 
is common sense, and when somebody who extends credit has their 
obligations wiped away in bankruptcy, they are forced to make a 
decision. Should this loss simply be

[[Page S1856]]

swallowed as the cost of doing business or are prices raised for other 
customers to make up for another's losses?
  Presently, when individuals file for bankruptcy under chapter 7, a 
court proceeding takes place and their debts are simply erased. But 
every time a debt is wiped away through bankruptcy, someone loses 
money. When someone loses money in this way, he or she has to decide to 
either assume that loss as a cost of business or raise the price for 
other customers to make up for that loss.
  When bankruptcy losses are infrequent, lenders maybe are able to 
swallow that loss. But when they are frequent, lenders need to raise 
prices for other consumers to offset their losses. These higher prices 
translate into higher interest rates for future borrowers. The result 
of the bankruptcy crisis is that hard-working, law-abiding Americans 
have to pay higher prices for goods and services because somebody else 
did not make good on their obligations to pay. This bill would make it 
harder for individuals who can repay their debt to file for bankruptcy 
under chapter 7. This would lessen, then, the upward pressure on 
interest rates and prices. It is only fair to require people who can 
repay their debts to pull their own weight. But under current 
bankruptcy law, an individual can get full debt cancellation in chapter 
7 with no questions asked.
  The Bankruptcy Reform Act of 2005 asks the very fundamental question 
of whether repayment is possible by an individual. It is this simple: 
If repayment is possible, then he or she will be channeled into chapter 
13 of the Bankruptcy Code which requires people to repay a portion of 
their debt as a precondition for limited debt cancellation. In other 
words, people who have the ability to pay will not get off scot-free 
anymore.
  This bill does this by providing for a means-tested way of steering 
people who are filers, who can repay a portion of their debts, away 
from chapter 7 bankruptcy. This test employs a legal presumption that 
chapter 7 proceedings should be dismissed or converted into chapter 13 
whenever the filers earn more than the State median income and can 
repay at least $6,000 of his or her unsecured debt over a 5-year period 
of time.
  In calculating a debtor's income, living expenses are deducted as 
permitted under IRS standards for the State and locality where the 
debtor lives. Legitimate expenses such as food, clothing, medical, 
transportation, attorney's fees, and charitable contributions are taken 
into account in this analysis, as provided under Internal Revenue 
Service guidelines.
  Moreover, a debtor may rebut the presumption by demonstrating special 
circumstances. So the means test takes into account a debtor's income, 
a debtor's expenses, and allows a debtor to, even beyond that, show 
special circumstances which would justify adjustments to the means 
test.
  In this way, the bankruptcy reform bill preserves the principle of a 
fresh start for people who have been overwhelmed by medical debts or 
sudden, unforeseen emergencies. As stated by the Government Accounting 
Office, the bill allows for the 100-percent deductibility of medical 
expenses before examining repayment ability. The bill preserves fair 
access, then, to bankruptcy for those people who are truly in need.
  So that I am crystal clear, people who do not have the ability to 
repay their debt can still use the bankruptcy system as they would have 
before. This bill clearly provides that people of limited income can 
still file under chapter 7 and get that fresh start. There is a 
specific safe harbor built in for these individuals, so their debts can 
be wiped away, as is done right now.
  I point this out because so often during this debate it is going to 
be pointed out to you, inaccurately, that somehow poor people are not 
getting that opportunity for a fresh start. So I want to repeat: There 
is a safe harbor for poor people. But the free ride is over for people 
who have higher incomes, and who can repay their debt.

  Personal responsibility has been one of the main themes of the 
bankruptcy reform bill, going back to my first introduction. But even 
before that, since 1993, the number of Americans who declared 
bankruptcy has increased, would you believe it, over 100 percent. While 
no one knows all the reasons underlying the bankruptcy crisis, the data 
shows that bankruptcies increased dramatically during the same 
timeframe when unemployment was low and real wages were at an all-time 
high.
  I believe the bankruptcy crisis is, in fact, a moral crisis. People 
have to stop looking at bankruptcy as a conventional financial planning 
tool, where honest Americans have to foot the bill for those who do not 
pay their honest debt. It is clear to me that our lax bankruptcy system 
must bear some of the blame for the bankruptcy crisis. A system where 
people are not even asked whether they can pay off their debts 
obviously contributes to the fraying of the moral fiber of America. Why 
should people pay their bills when the system allows them to walk away 
with no questions asked? Why should people honor their obligations when 
they can take the easy way out through bankruptcy?
  I think the system needs to be reformed because it is fundamentally 
unfair. This bill will promote personal responsibility among borrowers 
and create a deterrence for those hoping to cheat the system. This bill 
does more than provide for a flexible means test that gives judges 
discretion to consider the individual circumstances of each debtor in 
order to determine whether they truly belong in chapter 7. It also 
contains tough new consumer protections. But the opponents of this bill 
do not seem to realize that. So I want them to pay attention as I 
describe new procedures to prevent companies from using threats to 
coerce debtors into paying debts which could be wiped away once they 
are in bankruptcy.
  The bill requires the Justice Department to concentrate law 
enforcement resources on enforcing consumer protection laws against 
abusive debt collection practices. It contains significant new 
disclosures for consumers, mandating that credit card companies provide 
key information about how much they owe and how long it will take to 
pay off their credit card debts by only making the minimum payment. 
That is a very important consumer education for every one of us.
  Consumers will also be given a toll-free number to call where they 
can get information about how long it will take to pay off their own 
credit card balances if they only pay the minimum payment. This will 
educate consumers and improve consumers' understanding of what their 
financial situation is.
  Credit card companies that offer credit cards over the Internet will 
be required for the first time ever to fully comply with the Truth In 
Lending Act, so claims that this bill is unbalanced are off base.
  Moreover, the bill makes changes which will help particularly 
vulnerable segments of our society. Child support claimants are given a 
higher priority status when the assets of a bankruptcy estate are 
distributed to creditors.
  Here again, I make crystal clear that the bankruptcy bill makes 
significant improvements for child support claimants. This bankruptcy 
bill does not hurt them, as opponents of the bill are trying to claim. 
In fact, the organization, the very organization that specializes in 
tracking down deadbeat dads, feels this bill will be a tremendous help 
in collecting child support.
  The people on the front lines say the bankruptcy bill is good for 
collecting child support. An example: The bill provides that parents 
and State child support enforcement collection agencies are given 
notice when a debtor who owes child support or alimony files for 
bankruptcy. Bankruptcy trustees are required to notify child support 
creditors of their right to use child support enforcement agencies to 
collect outstanding amounts due.
  In addition, the bill requires creditors to provide the last known 
address of debtors owing support obligations upon the request of the 
custodial parent.
  The bill goes further--requiring that the identity of minor children 
be protected in bankruptcy proceedings.
  Concerns expressed by opponents to the bill about this being a flawed 
part of it just don't hold water.
  The bill also makes great strides in cracking down on very wealthy 
individuals who abuse the bankruptcy system. If you listen to our 
critics, you might get the impression that the homestead exemption is a 
giant loophole that this bill does not deal with, and that we are busy 
protecting the rich.

[[Page S1857]]

  The GAO looked at the question of how frequently the homestead 
exemption is abused by wealthy people in bankruptcy. The GAO found that 
less than 1 percent of bankruptcies filed in States where there are 
unlimited homestead exemptions involve homesteads over $100,000. That 
means 99 percent of bankruptcy filings were not abusive.
  This is not a loophole at all. In fact, the provision in this bill 
with respect to homestead is a significant improvement from current 
law. There is a Federal cap on homestead exemptions in current law.
  Under the current bankruptcy law, the debtors living in certain 
States can shield from their creditors virtually all of the equity in 
their home. Consequently, some debtors relocate to these States to take 
advantage of the mansion loophole provisions that are, in most cases, 
in their constitution. This bill would take a strong stand against this 
abuse by requiring that a person be a resident in a State for 2 years 
before he can claim the State's homestead exemption. Current 
requirements can be as little as 91 days.
  The bill further reduces the intent for abuse by requiring a debtor 
to own the homestead for at least 40 months before he can use State 
exemption law. Current law doesn't have any such requirement.
  Furthermore, the bill would prevent individuals who have violated 
security laws or individuals who have engaged in criminal conduct from 
shielding their homestead assets from those whom they have defrauded or 
injured. Specifically, if a debtor was convicted of a felony, violated 
a security law, or committed a criminal act intentionally, or engaged 
in reckless misconduct that caused serious physical injury or debt, the 
bill overrides State homestead exemption laws and caps the debtor's 
homestead at $125,000 as the amount that would be protected.
  To the extent that the debtor's homestead exemption was obtained 
through the fraudulent conversion of nonexempt assets during the 10-
year period preceding the filings of the bankruptcy case, this bill 
requires such exemption to be reduced by the amount attributable to the 
fraud.
  These homestead provisions were delicately compromised between those 
who believe that the homestead should be capped through Federal law--I 
am one of those--or others who are uncomfortable with a uniform Federal 
cap which may violate their own State constitution.
  So, please, tomorrow when this debate is conducted on changing this 
provision that has been so carefully worked out over a period of at 
least two Congresses, don't believe it when people say we have a gaping 
loophole. The homestead provisions in the bankruptcy bill will 
substantially cut down on the abuses that might be referred to.
  I would like to talk about another thing this bankruptcy bill does 
which is so important for those of us who represent agricultural 
States. This bill makes chapter 12 of the Bankruptcy Code, which gives 
essential protections to family farmers, a permanent chapter in the 
Bankruptcy Code. The bill enhances these protections. It makes more 
farmers eligible for chapter 12. The bill lets farmers in bankruptcy 
avoid capital gains tax. This is very important because it will free up 
resources to be invested in farming operations that otherwise would go 
down the black hole of the Internal Revenue Service. Farmers need this 
chapter 12 safety net.
  In addition, the bankruptcy bill will for the first time create badly 
needed protections for patients in bankruptcy hospitals and nursing 
homes. Let me provide an example of what could happen right now without 
the patient protections contained in this bill.
  At a hearing I held on nursing home bankruptcies, I learned about a 
situation in California where a bankruptcy trustee just showed up at a 
nursing home on a Friday evening and evicted the residents of that 
nursing home. The bankruptcy trustee didn't provide any notice 
whatsoever that this was going to happen. There was absolutely no 
chance for the nursing home residents to be relocated. The bankruptcy 
trustee literally put these elderly people out on the street and 
changed the locks on the doors so that they couldn't get back into the 
nursing home. The bankruptcy bill will prevent this from ever happening 
again. These are protections that we will be giving these deserving 
senior citizens for the first time.
  The truth is that bankruptcies hurt real people. It isn't fair to 
permit people who can repay to skip out on their debts. Yes, we must 
preserve fair access to bankruptcy for those who truly need a fresh 
start. This bill does not in any way compromise that century-old 
principle of our Bankruptcy Code.

  This bankruptcy reform act does that--it guarantees a fresh start. It 
lets those people who can pay their debts live up to their 
responsibilities as well.
  Let us restore the balance. Let us pass this bill. This bill is a 
product of much negotiation and compromise over three Congresses. It is 
fair, it is balanced, but, more importantly, it is a bill that once got 
to President Clinton and he pocket-vetoed it. This bill that passed by 
overwhelming majorities of both Houses of Congress is long overdue 
legislation.
  I urge my colleagues to support this legislation but, more 
importantly, help us defeat amendments that are opening all of the 
carefully crafted compromises that we worked on over the last 3 to 4 
years.
  I yield the floor. I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Thune). The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. McCONNELL. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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