Lou Dobbs Tonight - Interview

HEADLINE: LOU DOBBS TONIGHT; CNNfn

GUESTS: Steve Shepard, Rik Kirkland, Tim Ferguson, Chuck Grassley

BYLINE: Kitty Pilgrim, Christine Romans, Peter Viles, Barbara Starr, Jeff Koinange, Charlayne Hunter-Gault, Frank Buckley, Jason Carroll, Bill Tucker

BODY:
PILGRIM: Now, even if economists are telling us that the economy's improving, don't look for bankruptcies to drop off. Bankruptcy, personal or business often lags behind what's happening in the economy. And with debt levels this high, it shows no sign of improving for a very long time.

Well, Senator Chuck Grassley's been trying to overhaul the nation's bankruptcy code for the past six years, and now it appears he may be close to passing the legislation he wants.

Chuck Grassley is the chairman of the Senate Finance Committee, and he joins me now from Capitol Hill.

And thanks for joining us, senator.

SEN. CHUCK GRASSLEY (R-IA), SENATE FINANCE COMMITTEE: Glad to be with you, Kitty.

PILGRIM: It's been a tough struggle to pass bankruptcy legislation, why?

We were looking back, and there's been attempt after attempt where it passes both the House and the Senate and yet there's always some snag.

GRASSLEY: Well, two times it was relatively new. You know, it's been 20 years since we've dealt with bankruptcy as a major overhaul. Then one time we got it to President Clinton, and he didn't like it, and he vetoed it. And now it's been through the House four times, the Senate three times. And if we get it through the Senate this time, the president will sign it.

PILGRIM: Now, you've been in for the long haul.

What is the worst, egregious abuse of this, and what would you like to see fixed?

GRASSLEY: OK. The basic principle behind it is this -- that people are gaming the system, and with some ability to repay still going into chapter 7 bankruptcy. My goal is to make sure that people who have the ability to repay some of their debt do not get off scot-free.

There's a special case for farmers, and they have real issues where if they give up all their assets, then they sort of give up the farm literally, and they can't come out. You're trying to make special consideration for farmers. What are the...

GRASSLEY: Well, those special considerations are the fact that farming has never had a permanent chapter in the bankruptcy bill. In fact, 50 years from the 1930s until 1980s, there wasn't any chapter just for farming. And farming's a little bit different than corporate bankruptcy. So farmers that would have to go into corporate bankruptcy, the corporate chapter, Chapter 11, did not have a very fair shake. So what we're trying to do is write a chapter for farming that deals with the special needs of farming, and we want to make it a permanent chapter of the bankruptcy code as well.

PILGRIM: You know what really struck me is also your efforts with nursing homes, protecting patients in a nursing home that goes bankrupt. What measures do you think are important there?

GRASSLEY: Well, we set up ombudsmen to take care of hospitals or nursing homes that are in bankruptcy, because we had a situation in California a few years ago where people were put right out on the street, when an institution went into bankruptcy. And those people don't have any place to turn. And so we would make sure that the bankruptcy court sets up an ombudsman to make sure that their needs are taken care of, either keeping the nursing home open, to take care of them there, or find another place for them to be housed.

PILGRIM: Let's talk about protecting the person's home who's filing for bankruptcy. Now, there's a double whammy here because some people really need their home protected, and others are using that home to shelter assets. How do you walk a fine line between those two sets of people and differentiate? What measures have you put in?

GRASSLEY: Well, in previous legislation -- or I mean in previous law, there's been a kind of a state rights that the state could set the amount of the bankruptcy that the home would be worth and how much could be protected. But seven states have some constitutional protections that give extraordinary rights to homeowners and the home itself. And consequently, you can find a lot of people that anticipate going into bankruptcy just pouring a lot of money into very costly homes and protecting millions of dollars from bankruptcy.

So basically, what we do is two things -- we set a minimum standard around the country and only let a higher amount to be protected, unless there was a fraud involved in the filing of the bankruptcy. In other words, somebody anticipating that maybe within the next two years they're going to go into bankruptcy, so we'd call that a fraudulent approach, and you would not protect the massive amount of money at that point.

PILGRIM: Well, you've clearly taken a very thorough approach to this very complicated issue, and we wish you the best of success getting it through the Senate. Senator Chuck Grassley, thanks for joining us.

GRASSLEY: Thank you.