Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

BANKRUPTCY ABUSE PREVENTION AND CONSUMER PROTECTION ACT OF 2005 -- (Extensions of Remarks - April 25, 2005)

SPEECH OF
HON. BETTY McCOLLUM
OF MINNESOTA
IN THE HOUSE OF REPRESENTATIVES
THURSDAY, APRIL 14, 2005

Ms. McCOLLUM of Minnesota. Mr. Speaker, I rise in opposition to S. 256, a bill to modify our Nation's bankruptcy system. I strongly support holding individuals responsible for paying debts they can reasonably afford. Our banks, credit unions, and other responsible financial institutions should not have to foot the bill for the individuals who take advantage of the system to intentionally avoid their debts. Efforts to curb the number of bankruptcies filed each year, which strain our responsible financial institutions and their ability to provide low-cost services to consumers should be pursued and supported.

But the fact is that millions of Americans face difficult and real financial circumstances that are caused by a personal or family healthcare crisis, unemployment, drastic changes in life situations, such as divorce and family death, and even military service. This legislation makes life much more difficult for hard working families who are already in crisis.

Bankruptcy attorneys from Minnesota whom I have spoken with share my concerns. They believe this bill will be particularly harmful to working families, especially those headed by single parents. Custodial parents will have a more difficult time collecting child support by diverting more of a debtor's money to creditors and allowing other non-child support debts to survive bankruptcy. This bill will also make it easier for landlords to evict families who are in bankruptcy from their homes sending parents and their children on to the streets. This bill strips the authority of bankruptcy judges to consider the special circumstances of working families who have found themselves in overwhelming debt.

While there has been much rhetoric regarding personal responsibility heard on the floor of the House, the bill completely fails to address consumer abuses by the credit card industry. Instead, this bill rewards irresponsible credit card companies who deceive consumers and target vulnerable families with questionable business practices and reckless lending. College students and individuals with already heavy debt loads are especially vulnerable to questionable marketing practices that offer easy credit at low rates that later increase to as much as 20 or 30 percent. Individuals must be responsible, but credit card companies must be held accountable for irresponsible business practices as well.

While credit card companies reap the benefits of this bill, about 50 percent of all families who are forced to file for bankruptcy do so because of expensive medical bills. In another 40 percent of circumstances, a person has suffered a death in the family, lost their job, or have recently divorced their spouse. Almost all who file for bankruptcy do so as a last resort and have other compounding financial challenges. Over 60 percent of bankruptcy filers have gone without medical care. Fifty percent have been unable to fill needed prescriptions. One-third have had their utilities turned off. Twenty-one percent have gone without food.

Numerous amendments that would have made this bill more balanced were rejected by the House Judiciary Committee. These include amendments that would have closed loopholes for millionaires, protected service members and veterans from means testing in bankruptcy, discouraged predatory lending practices, exempted debtors from means testing if their financial situations were caused by identity theft, limited the amount of interest that can be charged on any extension of credit to 30 percent, and, among several others, exempted debtors whose financial problems were caused by serious medical problems from means testing.

We must do something to curb the number of personal bankruptcies that strain our banks, credit unions, and responsible financial institutions. But we must not do so at the expense of children receiving court-ordered child support, our veterans, and college students and others lured by easy, high-interest credit.

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