Bankruptcy Abuse Prevention and Consumer Protection Act of 2005-Continued
BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2005--Continued
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Mr. DURBIN. Mr. President, now that we are postcloture, the number of amendments is limited, and the type of amendments will be limited. I have three pending amendments before the Senate relative to the bankruptcy bill.
For those of you who have not followed the debate on this bill, this bill will change the bankruptcy law in America. Today, many people go into bankruptcy court because they have no place to turn. They have more debt than they can possibly pay.
One of the major reasons people reach this point in life, the No. 1 reason people go to bankruptcy court is medical bills. Three-fourths of the people in bankruptcy court with medical bill problems had health insurance when they were diagnosed with their illness. If you think, I don't have to worry about bankruptcy court because I have health insurance, so do these people. What happened? They got sick. The bills started piling up. Maybe they lost their job and their health insurance and couldn't afford to pay the COBRA premium, which people have to pay once they have lost a job and health insurance. They gave up on their health insurance, and the bills started stacking up. It reached the point for these folks where they had nowhere to turn. They faced $50,000, $100,000, or $200,000 in medical bills they could never pay off for the rest of their lives. In desperation, and with some embarrassment, people then went to bankruptcy court and said: I have no place to turn. I just can't do it.
A court says: What do you owe? Give us all our assets. What do you have in checking and savings? How much is your home and your car worth? Furniture, everything--what is it all worth? Where are your debts? We will let you walk out of bankruptcy court with very little left, but your debts will be gone.
That happens to people. More often than not, medical bills drive them there.
There are other reasons. You lose your job. How many people have you met in their fifties in America--I have met many in Illinois--who had a great career and a great job and lost it, then went out looking for a comparable job only to learn they were ``too old for the market''? There they sat, taking a job that paid less, trying to maintain a family and household that was basically financed with a higher salary not that long ago. In desperation, they try to keep things together, and it starts to fall apart. The debts they incurred when they had a good job they cannot handle anymore.
What else happens to people? Some people live on the margins already. Some single mothers trying to raise kids are in a situation where finally something happens to them--a medical bill, an unforeseen circumstance--and they are stuck in bankruptcy court.
The credit industry comes in and says: We have to do something about these payments. We have to make it more difficult for them to walk out of that bankruptcy court having given up their assets with their debts basically behind them. So the law is changed here in this 500-page bill written by the credit card industry, written by the financial industry, to make it more difficult for a person to walk out of court with their debts behind them. They make sure in this bill that it is more likely for many that they will walk out of court still paying, on and on. As little as $165 a month is enough to say that you will never be forgiven in bankruptcy. You will just keep paying and paying. The creditors will keep calling and calling. That is what the credit industry wanted. They worked hard for 9 years. They are going to win this battle.
We came to the Senate floor and said, at least let us carve out some people who really should be treated differently. I am sorry that the marines who were here earlier didn't stick around. I wish they could have, I wish they could have heard the debate on the floor of the Senate when I offered an amendment and said: If you activate a guardsman or a reservist for a year or a year and a half and they go over to serve their country as they promised, leaving behind a restaurant or a small business which falls into bankruptcy while they are gone--and it has happened--shouldn't we give them a break in bankruptcy court? For goodness' sakes, these people aren't morally deficient; they are our best, and they are serving our country. They are protecting you, me, and everyone else.
I put in an amendment that said, at least for the men and women in the military who face this kind of bankruptcy--and it happens--let us give them a break in this bill. Let us not put them through the harshest parts of this bill. I lost the amendment 58 to 38. Many of the Senators who go back home and cheer the troops and how much we love them and how much we want to stand behind them couldn't wait to vote with Visa and MasterCard and against the Army, Navy, Marine Corps, Air Force, and Coast Guard. That is what it came to. We lost that amendment.
Senator Kennedy came to the Senate floor and said: If you get swamped with a medical crisis in your family and go into bankruptcy court trying to get out from under something you will never pay off, shouldn't you, when it is all over, at least be able to go home? Shouldn't you have a roof over your head when it is all over if it is medical bills that put you in bankruptcy court? He offered an amendment and said: Let us at least protect $150,000 in equity in your home that you can go back to after bankruptcy.
Think about that. What will $150,000 buy you? In Springfield, IL, it buys you a nice little house. What does it buy you in Washington, Boston, New York, and California? Not much. But when we offered that amendment, only 40 Senators voted for it and 58 or 59 voted against it.
The argument behind this bill originally was that too many people went to bankruptcy court because of their moral failure. They didn't understand that they can't game the system, they can't use it in a way that is fundamentally unjust and immoral by going to bankruptcy court when you shouldn't go. But in the two examples I have given you, does that argument apply? Is there something fundamentally wrong with the values of men and women in uniform serving our country who can't keep that business afloat back home? Of course not. Is there something fundamentally wrong with a person who feels as if he is on top of the world, goes in for a diagnosis at the doctor, and ends up with a life-threatening disease which costs hundreds of thousands of dollars where his health insurance fails him? Is that a moral failure?
It is a failing of Congress. It is a failing of your Government to deal with the realities of the challenges of life, whether it is health care or service in the military.
We went in and argued: What if you were the victim of an identity theft? And it happens; it happened to me. What if someone steals your identity and runs up bills in your name? It can happen to anyone listening to this debate. Senator Bill Nelson of Florida said, in that situation; if all the bills that have swamped you are not even bills of your creation, shouldn't we give you a break under this tough new bankruptcy bill? Overwhelmingly, on a partisan rollcall, the answer was, no. No. Ultimately you shouldn't be discharged from bankruptcy even if those weren't your debts.
We said: What if the people lending the money to you break the law while they are lending it to you? What if they take--and you know this story; it happens in every community. What if they take advantage of an elderly widow or widower living in that little home they have always had? They knock on the door: Boy, you sure could use a new roof, Ma'am. Luckily, I have a company out here that will do it if you just sign a few papers.
The next thing you know, you have one of these phony, predatory lenders coming in with a subprime mortgage with a balloon clause, and grandma's little house disappears. He looked so trustworthy. He seemed like such a nice man. He told me this was a standard contract. Yes, I signed it. I should have called you, but I just signed it.
What about those people? Should they be able to take away her home; go to bankruptcy court and stand in line with all the other creditors and say, Treat me like another legal creditor? I didn't think so.
So I offered an amendment saying those people should not have the advantage of going to court if they have broken the law in the way they make the loan. I didn't have a chance on that amendment. Those who are supporting this bill did not want to talk about that. One Republican Senator supported me. Just one.
Time and again, whether we are talking about victims of bankruptcy who deserve a little help, or whether we are talking about those gaming the system from the creditor's side, we found this stone wall that separates this Chamber. The Republican side does not want to consider any changes to this bill. The credit card industry has written it, and they are sticking with it.
The only perfect laws ever written were written by God and Moses, as far as I am concerned. All of the rest are amendable. All the rest can be improved. Here we assume that if it was generated by the largest credit card companies in America, we cannot argue with them.
One of the best arguments that has been made is, this bill does not apply to people who make less than the median income. That has been a point made over and over and over again during the course of this debate. Why is it important? Because this new law imposes a brandnew set of requirements in bankruptcy court for those who are above the median income. At least that is the argument.
Let me show this listing of all the documents that now have to be filed in bankruptcy court. It is pretty long. I used to practice law. I know it takes time to fill these out. You sit down with your client. You say: Get your income tax returns. Get all the checks you can find. Let's sit down. This will take some time. This is the current requirement under the law. So it is not as if you walk into bankruptcy court, sign your name, and wave and leave out the other door. It is a long process.
During the course of the process, your creditors and the trustee in bankruptcy decide whether you are telling the truth. If you aren't, they will throw you out of court on your ear. That is the way it ought to be.
Now comes this bill which says these papers are not enough. Here we have the new means test. This is an example of what you have to do in addition to all the current requirements to file bankruptcy. This is the means test in this bill. It not only adds to the complexity of this process, it adds to the cost. So here you are without enough money to pay your bills, trying to figure out how to come up with a filing fee of $200, how to pay that lawyer who is going to represent you in bankruptcy, and along comes this bill which says let me give you some more paperwork to fill out before you can qualify for bankruptcy.
The argument has been made over and over again in the Senate that people below the median income do not have to go through this. My amendment will clarify that, amendment No. 110. We want to make it clear that if you have below the median income, you do not have to go through the means test. In other words, on the first line up here, ``current monthly income,'' if you have proof your current monthly income is in the lower income categories, supposedly protected from this bill, that ought to be the end of the story.
It is not now. I want to clarify that. I want to make sure that Members of the Senate who have come to the Senate and said people below a median income could not have to worry about this bill, really mean what they say. I emphasize and underscore my amendment does not in any way relieve those filing for bankruptcy from meeting all the other requisite steps. They still need to complete a lot of forms and schedules outlining assets and liability. We add language that makes it abundantly clear that a court may not dismiss a case based on any formal means testing if the current monthly income of the debtor falls at or below the median family income of the applicable State. The language I offered merely reinforces what Members of the Senate on both sides of the aisle, particularly on the Republican side of the aisle, have said over and over and over again from the beginning of the debate.
Let's look at the statement of my friend and colleague, Senator ORRIN HATCH. Here is what Senator Hatch said in the Senate:
It is possible that during this debate some may falsely suggest that this bill unfairly treats low-income persons. Let me tell you at the outset that the poor are not affected by the means test. The legislation provides a safe harbor for those who fall below the median income, so they are not subjected to the means test at all.
But they are. Under the current language of this bill, it is not clear that they are exempt from the means test, as Senator Hatch has argued.
Now, let's take a statement from Senator Frist, the Republican leader of the Senate. Senator Frist, on March 1, last week, said:
It [the Bankruptcy Reform Act] establishes a means test that is based on fair principle, a simple principle, and that is this, that those who have a means should repay their debts. A simple principle: Those who have the means should repay their debts. It specifically exempts anyone who earns less than the median income in their State.
That is what my amendment says. If you earn less than the median income, finish the forms that are already provided in bankruptcy court, the new law does not affect you. But if you earn over the median income, you have to fill out more forms. So it means the lower income people, just as Senator Hatch and Senator Frist have said, will not have to go through the extra expense and the extra time of going through mountains of paperwork.
Let me also take a quote from Senator Sessions from Alabama who has been on the Senate floor in support of this bill. Here is what he said:
Chairman Sensenbrenner pointed out that the means-based test only applies to people with incomes above the median state average. Anyone below the state median income does not qualify on the means-based test and their bankruptcy petition cannot be tossed out of chapter 7 and put into chapter 13 where some debts are paid back.
That is as clear as can be. Senator Sessions told us that. Now we have another statement from Senator Sessions:
I remind all of my colleagues that people who are economically distressed and if the income is below the median income already will be exempt from the means test.
So my challenge to all those who made those statements is, prove it. Prove it by voting for this amendment. Prove it that if you establish that you have an income below the median income in your area, that you do not have to go through this means test. They have all said it. Now they will have a chance to vote on it.
Let me speak to one of my other amendments. I tried earlier in my first amendment to protect the soldiers activated and fighting overseas who lost their businesses. I failed, 58 to 38. I was surprised by that rollcall, but I watched what happens. Virtually every amendment has failed. As I said, some view this as holy writ. I just view it as a product of the credit industry, their best hope of something they want to pass in the Senate.
So I will offer amendment No. 111 to exempt certain veterans and current members of the Armed Forces from the onerous administrative burdens resulting from the means test. We say in this amendment it applies to members and spouses of members of the Armed Forces on active duty performing a homeland defense activity under title 32,
veterans or their spouses whose indebtedness occurred primarily during a 6-month or longer period of active duty or performance of a homeland defense, reservists of the Armed Forces or their spouses, same situation, surviving spouses of those who died while serving as a member of the Armed Forces.
We take a category of Americans to whom we all owe such a great debt of gratitude and say if their debts overwhelm them because they are serving our country, we are going to give them a break, a chance to avoid this lengthy, expensive means test in this bill. I hope my colleagues will reconsider their earlier vote against this amendment. This is a much more compact, succinct, and limited break for those who are serving.
The last amendment I will offer, amendment No. 112, is if I fail on the previous amendment. Let me tell you what it says. It provides an exemption from the means test only for disabled veterans who incurred their indebtedness primarily during a period of service. It covers service on active duty or during a National Guard homeland security operation. Certainly we can give something of a break to these Americans who have given so much to us.
I go out to Walter Reed Hospital. Many of the men and women who have been injured are amputees. I remember one in particular. I said: How are you?
He said: My rehab is coming along just fine. I think I will be great. I have my new leg. I am learning how to walk on it. I would like to go back to my unit, but I am going to go back home. I am a little bit concerned. I had a job back home. I was an automobile mechanic. I don't know if I will be able to return to that job.
That situation for that man and for so many others reflects this change in their life. Yes, they will receive disability payments, but some of them, because of the serious injuries they have faced--head injuries, the loss of both hands, the loss of both legs--will not be able to return to the life they had before. Some of them may find they can't keep up with the debts that have been incurred while they have served our country. Is it possible the Members of the Senate, for disabled veterans, would give them a break if they are forced into bankruptcy because of debts incurred while they served our country? That is my last amendment.
I hope it doesn't reach that point. I hope all of us who come to the floor to give important speeches in tribute to the men and women in uniform will cast important votes on behalf of those men and women.
The credit card industry is important to America. I think they can do a better job in the business in which they are involved. They ought to take care, with the flood of credit cards that they send to everybody under the sun--the 3-and-a-half-year-old little boy of an attorney on my staff, a 9-month-old daughter of a friend of mine, all receiving credit card applications. They are throwing them at America. Many Americans, without thinking twice, are signing up, going more deeply in debt than they should.
The monthly statement from the credit card company--I am telling you this as a lawyer--flip that over and try to read the fine print. Senator Akaka of Hawaii said: Shouldn't they tell you at least if you make a minimum monthly payment how much it is going to cost you over the period of time it will take to pay it off? Simple enough.
The credit card industry opposed it. It was defeated on the floor. The idea of giving Americans more information so they can make the right credit decisions was defeated on the floor.
You have to believe the industry that opposed providing that information is an industry that doesn't care if you go head over heels in debt. They think they are going to win. They are certainly going to win if this bill passes because that credit card debt is going to hang on for a lifetime. You won't be able to shake it. When we hear the stories of people who are going to be victimized, I hope we will think twice about the wisdom of this legislation.
The trustees in bankruptcy were asked to take a look at what percentage of people filing for bankruptcy were fraudulent, had no business in court. They came up with the number 3 percent, 3 out of 100 are fraudulent and should not be in court. Most of them are discovered. The credit card industry said, no, it is much larger. It is 10 percent, 1 out of 10. This bill doesn't apply to the 10 percent of fraudulent filers. This bill applies to every filer in bankruptcy. That is why many of us think it is fundamentally unfair.
I can read the votes. I have been around Congress to know this is going to pass. I certainly hope with these three amendments that my colleagues will take some time and consider whether they want to live up to what they have said. If they want to exempt lower income families from the means test, my amendment lets them do it. If they do believe we owe something to the men and women in uniform, my amendment gives them a chance to vote that way. And if for no other reason they want to show some sympathy and concern for disabled veterans who have given so much to our country, they will have a chance with amendment No. 112.
I hope the solid wall of opposition to every single amendment will break down. I hope my colleagues will take the time to read and consider these amendments. It will be a lot easier to face the people back home if we at least give some flexibility to this bill when it comes to these important exceptions.
I yield the floor and suggest the absence of a quorum.
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Mr. DURBIN. We are having an exchange, and maybe since we are both in the Chamber we can at least come to an agreement on our disagreement. And I will yield some of my own time if it reaches the point where the Senator thinks it is taking advantage of his time.
Mr. SESSIONS. I was about to yield the floor, but, please, go ahead.
Mr. DURBIN. If the Senator would stay for a few moments, I would like to see if we can get to an agreement on our disagreement.
Right now, under current law, when I go into chapter 7 filing for bankruptcy, I am bound by the requirements of the Bankruptcy Code under section 521 to file a list of my creditors, unless the court orders otherwise, a schedule of assets, liability, current income, current expenditures, and statement of debtor's financial affairs and more when it comes to consumer debt currently. That is what happens when one goes into bankruptcy court--and that is this sheath of paper--they have to fill these things out. These are the documents that get one into court.
Mr. SESSIONS. I would just add, one has to list those debts, and if they do not list them they are not discharged and they can still be liable for them. So the debtor has to list his or her debts.
Mr. DURBIN. So one has to be careful. They better put all of their debts down if they want to have them discharged.
Mr. SESSIONS. Right.
Mr. DURBIN. In comes the new law, and the new law says if one is below median income, that is the end of the story. They continue as currently required under chapter 7. They do not have to go through and prepare and file this means test which is required here because they are not required to.
Page 18 of the bill, no one can challenge a person if in the case of a debtor in a household of one person, the median family income of the applicable State is applicable. So this is the point that has been made over and over, again that having filed the
basic documents in bankruptcy, if it is then established that one is below the median income, end of the story. This bill does not apply. That is the way I understood it.
My amendment is trying to clarify it to make sure that is the way the Senator understands it. In other words, if I have done all of the basic filing and I disclose my monthly income and I am below median income, then I do not have to fill out the forms for the means test; it does not apply to me.
I quoted the Senator earlier, Senator Frist, and Senator Hatch, who have all said that on the Senate floor. My amendment clarifies that and says that unequivocally, after someone has filed their basic documents, if they demonstrate their monthly income is below the median income, they do not have to fill out the forms for the means test as to what they can pay over the next 10 years. They are not covered by that.
Is that the Senator's understanding of what this law says?
Mr. SESSIONS. I think that is my understanding of it.
Mr. DURBIN. Well, my amendment is only trying to clarify that. That is all it is doing. What I just described to the Senator is to say unequivocally, if someone files the initial documents currently required under chapter 7 and demonstrates to the court that their monthly income is below a median income, they do not have to fill out all of the additional paperwork required in the means test, which is substantial and expensive. If the Senator feels as I do, that that is what the law says or should say, I hope the Senator will look at my amendment. It is not a trick amendment. It is just trying to clarify that point.
Mr. SESSIONS. I would be glad to review the amendment. It would appear clear to me that one does need to meet certain basic filing requirements.
Mr. DURBIN. Absolutely.
Mr. SESSIONS. So the income can be determined, and we did step that requirement up to require more in connection with income tax return filings and things of that nature.
I know the Senator is a member of the Judiciary Committee and has worked hard on this bill, so I respect his concern over this issue. I am not one who believes we have a problem, but I will be willing to look at it.
Mr. DURBIN. If the Senator would be kind enough to review my amendment, I would appreciate it very much.
I yield to the Senator.
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