Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2005
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Mr. GRASSLEY. Mr. President, this bill is all about fairness and balance. This bill, as I introduced it minus the Schumer amendment, is exactly the bill that Democratic leaders of the Judiciary Committee signed off on in the summer of 2002 when they controlled the U.S. Senate. I don't know how much more compromise you can get than that. But this amendment would gut one of the major compromises of this legislation that has evolved over that period of time going back to August 2002.
The bill's homestead compromise that we have would create a Federal cap of $125,000 on the homestead exemption, but would allow those States with higher or unlimited exemptions to take advantage of them as long as they comply with the 2-year residency requirements and a 10-year fraud reachback provision.
The bill's compromise is a good one that all parties have signed off on. The Kennedy amendment would gut it.
I ask you to kill this amendment.
I ask for the yeas and nays.
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Mr. GRASSLEY. Mr. President, this would be a good opportunity for us to consider the general environment and the reason for this legislation.
First of all, there has not been any major rewrite of the bankruptcy legislation for more than 25 years. During that period of time, there has been a dramatic change in the economy, particularly the globalization of the economy. It has brought about reasons for changing parts of the Bankruptcy Code.
We have gone from around 300,000 bankruptcies a year to a high of 1.6 million or 1.7 million bankruptcies a year. So there has been an explosion of bankruptcies. Even in the best of times there has been an explosion of bankruptcies. It has become an economic problem where the average person in America is paying an additional $550 for goods and services because somebody else did not pay their bills.
All of these things have brought about reasons for changing the Bankruptcy Code. This legislation that is 500 pages that has been referred to is not something that just has been dropped on the Congress of the United States.
First of all, at least 10 years ago, the Judiciary Committee set up a commission of experts in bankruptcy, not made up of Members of Congress, a commission of people from the private sector and from academia to study what needed to be done with the bankruptcy laws to bring them up to date with the global economy, to bring them up to date with the changes in our domestic economy, and to look at the problem of so many people filing for bankruptcy.
This commission worked several months--more than a year--to produce a product. That was the basis for the introduction of legislation in 1997. In that period of time, this bill has passed the Senate in several different Congresses and has passed the House in several different Congresses, has been worked out in conference, an agreement between the House and Senate in several different Congresses, one of those even reaching President Clinton for his signature. But it was the end of the year, and he pocket-vetoed it. We did not have a chance to reconsider that veto.
The legislation before us, as I have introduced it, and basically the legislation that is before the Senate is legislation that has been so compromised, except for the Schumer amendment--and I will not go into what the Schumer amendment is--but except for that amendment, the bill we introduced and maybe four or five technical changes that were accepted in the Judiciary Committee is the legislation that was signed off on by Democrats who had a majority in the conference committee in the year 2002 when the Democrats controlled the Senate.
Is that exactly the way that I would write this legislation? No, it is not. There are a lot of provisions in this bill I would like to be different. But in the Congress of the United States as a whole--and particularly in the Senate where there is no limit on debate, where filibusters are possible, where the minority has rights they should have, and the only place minority rights are protected--you have to reach compromises.
I know no better compromise that I could put before the Senate than the wording of a compromise that was worked out between a Republican House and a Democratic-controlled Senate in the year 2002. That is what we have before us.
There are probably a lot of people who do not want any bankruptcy reform, but they will probably end up voting for it because this bill in different Congresses has passed by a margin of 97 to 1 on one occasion. The last time it passed the Senate, I think the vote was 85 to 12.
I think all of this is evidence of a bipartisan agreement that the bankruptcy laws need to be reformed. I do not know what more evidence I can give the American people of the way our political system works, the way the Congress works, to arrive at compromise, than the compromise that I lay before the Senate.
We recently heard from my good friend, the Senator from Illinois, the Democratic whip, that there have been many opportunities to help this group of people or that group of people or another group of people. We refer to that sort of helping this group or that group or another group as a carve-out.
My colleagues have seen amendment after amendment that was introduced to do that. We defeated that, because there ought to be uniformity of application of law across the United States, not separating something special for this group or that group or another group when it comes to justice in the bankruptcy courts. And if we added all of that up, we might not have a lot of people left who are going to be affected by what a bankruptcy judge is supposed to decide, which is justice between creditors and debtors.
In this legislation, we preserve one of the main goals of bankruptcy for the last 100 or more years, and that is the principle of a fresh start, where somebody is going to bankruptcy because they have problems that they cannot deal with, financial problems, natural disaster, divorce, medical, whatever it takes to get into financial trouble, that might not be any fault of one's own.
To make it clear that we are not after people who do not have an opportunity--when people are below the median income of their State, they are practically guaranteed a fresh start under this legislation, and if people are above the median income for their State, there is a simple process called a means test, where one puts down all of their income and assets and what they owe and through that makes a determination of whether they have the ability to repay some of their debt.
My friend from Illinois mentioned the figure of $150 or $175 that maybe over the next 10 years one would have to pay. If people have the ability to repay some of their debt, should they not have to repay some of their debt? It seems to me to be fair to those people to whom they do pay their debt.
So we preserve the principle of a fresh start, but we also establish a principle that if one has the ability to repay some their debt, they are not going to get off scot-free.
It is just not those two principles that ought to be looked at to understand whether Congress might be doing the right thing. I am not saying just an overwhelming vote in support of legislation is the only way that one ought to judge whether that legislation is justified, but surely the extent to which things are more bipartisan in the way they are done in this body ought to be some justification that certain tests of justice and fairness are being done or they would not get that kind of support, because I do not know a single Senator who for the most part is not concerned about doing right for the people of his State.
So that is the sort of consideration I hope the people of this country will give to this legislation, the need for it, the justification for it, the fairness of it, and most importantly those two principles of a fresh start for those who deserve it and the principle that if one has the ability to repay some of their debt that they are not going to get off scot-free.
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Mr. GRASSLEY. Mr. President, reserving the right to object, and I will object, but I would like to take just 30 seconds to explain that there are problems with the Coal Act. They are within the jurisdiction of the Senate Finance Committee, and we ought to look at all these issues in the context of a comprehensive review and a comprehensive solution.
So I would see a piecemeal approach, as is being done now through the bankruptcy bill, as, first of all, intervening in the jurisdiction of the Finance Committee, which as chairman I should protect, and, secondly, making more difficult the comprehensive solutions that we ought to find. So I object.
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Mr. GRASSLEY. I would like to speak for a short time.
Mr. President, under current law, investment banks are not allowed to compete on the same playing field as other professionals. Right now, investment banks are precluded per se, in many circumstances, from representing a debtor in a business bankruptcy if the investment bank acted as the investment banker for the company before it filed for court protection.
I think this is a draconian rule. The bill would give the bankruptcy judge the ability to determine whether an investment banker is disinterested, just as the judge determines whether other professionals are disinterested. The provision in the bill, it seems to me, is not only fair, but it will also safeguard the proceedings from any conflict of interest. Do we trust our Federal judges, or don't we, to make this determination? After all, the environment for this is in the judiciary--before judges. We happen to trust them for all other professionals involved in the bankruptcy proceedings, whether there is any conflict of interest for anyone involved. So then the question becomes, why should it be different for investment banks?
I think the provision in the bill is fine as it is. It is part of the compromise. We should allow a judge to make this determination and, thus, protect the integrity of the bankruptcy process. So I ask my colleagues to oppose this amendment.
I suggest the absence of a quorum.
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