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Description:

To amend title 11, United States Code, to exclude personally identifiable information from the assets of a debtor in bankruptcy.

Description:

Statement Of The American Bankruptcy Institute Before A Joint Hearing Of The House Subcommittee On Commercial And Administrative Law And The Senate Subcommittee On Administrative Oversight And The Courts On Bankruptcy Judgeship Needs Prepared for the American Bankruptcy Institute
 


Statement Of The American Bankruptcy Institute

Before A Joint Hearing Of The
House Subcommittee On Commercial And Administrative Law
And The
Senate Subcommittee On Administrative Oversight And The Courts
On Bankruptcy Judgeship Needs

 

November 2, 1999

 

Chairman Grassley, Chairman Gekas and members of the joint subcommittees, I am Ford Elsaesser, the President of the American Bankruptcy Institute (ABI). I am a senior partner with the Sandpoint, Idaho firm of Elsaesser, Jarzabek, Anderson, Marks & Elliott where my practice is primarily in the areas of commercial and bankruptcy litigation, corporations, partnerships and rural electric cooperatives. I am also the bankruptcy panel trustee for chapters 7, 11 and 12 in the District of Idaho and the Eastern District of Washington, handling 1,100 cases per year. As a speaker at numerous regional and national educational programs around the country, my perspective on bankruptcy is national in scope.

 

 

As you know, the ABI is the nation's largest multi-disciplinary organization devoted to research and education on issues related to bankruptcy and insolvency. Founded in 1982, ABI is non-profit and non-partisan. Our more than 6,800 members span the entire spectrum of bankruptcy professionals: attorneys for both creditors and debtors in individual and commercial cases, judges, accountants, lenders, trustees, credit managers, turnaround professionals, academics and others.

Importantly, the ABI is not a lobbying organization and we do not advocate positions before Congress, although we regularly appear before these subcommittees and other committees of Congress. We have historically supported legislation that affects the administration of justice in the bankruptcy system, such as regarding the salaries of bankruptcy judges, or to provide for judicial retirement benefits, and to increase the number of judges where needed and appropriate. We appeared most recently in support of more judgeships in June, 1997 and December, 1995.

We are pleased to appear again today to provide our views on the Judicial Conference's request for 24 additional bankruptcy judgeships, including 18 now contained in the bankruptcy reform bills (H.R. 833 and S. 625) and six additional positions (District of Puerto Rico, District of Delaware, District of Maryland, Eastern District North Carolina, Southern District of Florida, and Middle District of Georgia, to be shared with the Southern District of Georgia) recommended by the Conference in March 1999.

The ABI applauds the work of the Judicial Conference of the United States for its continued careful assessment of the workload burdens of the bankruptcy courts, and for its prudent recommendations for additional judgeships. Congress last authorized new bankruptcy judgeships in 1992. The Judicial Conference sent recommendations for additional judgeships to Congress in 1993, 1995, 1997 and earlier this year. Each time, the Conference has reassessed its prior recommendations to ensure that the need continues to be demonstrated.

The formal process of the Bankruptcy Committee of the Conference is elaborate, taking into account not only a weighted caseload formula developed by the Federal Judicial Center (generally requiring more than 1,500 weighted filing per judge) but also on-site surveys and other factors not captured by a mere numerical formula. While the focus has been on the formula as an objective measurement, the results from the use of the formula are never dispositive. Some districts that exceed the 1,500 weighted case filings are not recommended for more judges because those courts believe they can handle the additional workload.

Filing Trends in Perspective

As these subcommittees are too well aware, the pending judgeship request comes in the wake of an explosion in bankruptcy filings during much of the 1990's, with total new cases peaking in 1998 at over 1.4 million. Your subcommittees have heard much testimony over the last few years about the apparent paradox of record bankruptcies during "the best economy in a generation," in the words of President Clinton. During the '90s, consumers have dominated the national economy, accounting for two-thirds of our gross domestic product. High rates of employment, household wealth and consumer confidence have coexisted with record levels of household debt as a share of after-tax income. For the first time, the rate of personal savings is negative. Bankruptcy filings have grown in virtual lock-step with an increase in family debt burden, from both home mortgages and installment debt.

Most recently, as consumers' non-mortgage debt burden has stabilized (in the wake of sustained low interest rates and intense competition in the consumer credit markets), we have seen a leveling off and even a decline in personal bankruptcies. The U.S. per capita personal bankruptcy rate dropped by 17.5 percent from the fourth quarter of 1998 to the second quarter of 1999. Certain economic factors suggest that this decline will continue in the near term.

Using a year-end of June 30, filings for the 12-month period ending in 1999 were 1,391,964. In comparison, 1,429,451 new cases were filed for the 12-month period ending in 1998. Although filings have declined this year, the number of new petitions filed represent a 62.2 percent increase over the same period ending in 1995.

Workload Impact

As these subcommittees know, the focus cannot be entirely on total case filings as not all cases result in the same workload for a judge. The vast majority of cases are consumer filings. Since 1993, consumer (non-business) cases have accounted for an increasing percentage of total bankruptcies, peaking at 97 percent this year. These cases typically require less time of a bankruptcy judge. Unless there is an adversary proceeding brought by a creditor, or a motion to convert the case brought by the trustee, most of these cases now involve very little work by the judge.

However, the pending requests should be considered in light of the significant changes to the consumer bankruptcy laws proposed by H.R. 833 and S. 625. Consumer bankruptcy cases which now involve relatively little or no judge time will likely account for a greater workload if either of these bills become law. Attached to my statement is an excerpt from a comprehensive, new analysis completed last week by Hon. Eugene R. Wedoff, a bankruptcy judge in Chicago and the Co-chair of the ABI Consumer Bankruptcy Committee. Judge Wedoff's analysis identifies several discrete areas of ambiguity in the application of the means test found in H.R. 833, where parties and the trustee will be forced to litigate new issues. Beyond the means test, there exist an array of other changes to current law that will require satellite litigation before the bankruptcy judge. These areas include reaffirmations, broadened exceptions to discharge, credit counseling requirements, and more.

As a Chapter 7 trustee, I can state that under the proposed changes, there would be a substantial increase in consumer bankruptcy litigation, even if there is a corresponding decline in filings due to the "disincentives" to file found in both H.R. 833 and S. 625. Ironically then, consumer bankruptcy cases that heretofore rarely reached a bankruptcy judge, will now occupy more judicial time.
Neither will the reform legislation's proposals in the business bankruptcy area lessen the workload faced by bankruptcy judges. It is clear that business cases often involve numerous parties, creditors and collateral litigation over complex issues. These cases have a workload impact far beyond their numbers. The pending bills make few changes designed to lessen this workload. In part due to the healthy national economy, business cases have declined. In the year ending June 30, 1998, there were 39,934 new business cases, down from 50,202 a year earlier. Chapter 11 filings in particular have dropped sharply in recent years, from 13,221 in 1995, to 12,859 in 1996, to 11,159 in 1996, to 9,613 in 1998 and 8,684 last year.

There is concern, however, that a rise in Chapter 11 filings could occur just around the corner. Federal bank regulators have issued repeated warnings in recent months about credit quality and concern over underwriting standards for commercial loans. Bond defaults are rising. Sectors including health care (nursing homes and hospitals) and retail are seeing growth in the number of financially-troubled entities. Health care bankruptcies, in particular, are very judicial time intensive.

Requests for Resources Should be Scrutinized

While it is important to meet the legitimate resource needs of the courts, we agree with Chairman Grassley that the judiciary bears the burden of demonstrating the need for new judgeships. We applaud Chairman Grassley's healthy skepticism toward an ever-growing federal bench, especially a the appellate level. It is also important to realize that the Third Branch of government, including the bankruptcy courts, is not immune from oversight into its use of current resources. No request for more resources should be approved by Congress without an assessment that the current judges are being used in the most efficient manner. We note, however, that the Bankruptcy Committee has consistently recommended fewer permanent and more temporary judgeships than requested by the Circuit Councils.

Limiting judgeship requests to the number necessary is important because each bankruptcy judgeship costs about $721,000 to establish and about $575,000 per year to maintain, according to the General Accounting Office. At the same time, it is important that there are sufficient judgeships to enable the bankruptcy system to operate fairly and efficiently. We believe the Judicial Conference, through its Bankruptcy Committee, has struck the appropriate balance in the pending requests.

Cost Saving Mechanisms Should be Pursued

One cost-conscious innovation we support is the use of temporary judgeships. Eleven of the 24 new positions would be designated as temporary. This provides Congress with a periodic opportunity to assess the continued need for these positions. Converting temporary judgeships to permanent positions should occur only when the long-term need is clear.

There are a number of other cost-saving innovations that should be further promoted, including more and better case management techniques, greater use of automation in the bankruptcy courts, expansion of the use of visiting judges both intra-circuit and inter-circuit, more use of recalled and retired judges, temporary law clerks and other ways to match the existing resources with current need. These devices are especially important in managing complex business cases. We encourage the Judicial Conference and the Administrative Office of the Courts to continue to work to find ways to better equalize the workload of judges.

We thank the Subcommittees for inviting ABI to participate in today's hearing and we look forward to assisting you and your staff in any way you find helpful. I would be pleased to answer any questions you might have.

Description:

To provide for the appointment of additional temporary bankruptcy judges, and for other purposes.

Description:

Mr. GEKAS. Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 2942) to extend for 6 additional months the period for which chapter 12 of title 11 of the United States Code is reenacted, as amended.

Description:

To reenact chapter 12 of title 11, United States Code, and for other purposes.

Description:

To reenact chapter 12 of title 11, United States Code, and for other purposes.

Description:

To reenact chapter 12 of title 11, United States Code, and for other purposes.

Description:

The PRESIDING OFFICER. The time between now and 5:30 is equally divided between the Senator from Utah and the Senator from New Jersey.
Mr. HATCH. Mr. President, this bill is a bipartisan bill, drafted jointly by Senators Grassley and Torricelli. This legislation has been developed in a fair and inclusive manner.
Excerpted from the Congressional Record, 9/21/99

Web posted
September 22, 1999, American Bankruptcy Institute.

U.S. Senate Roll Call Vote

Motion to Invoke Cloture on S.625


BANKRUPTCY REFORM ACT OF 1999 (Senate -
September 21, 1999)


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The PRESIDING OFFICER. The time between now and 5:30 is equally
divided between the Senator from Utah and the Senator from New Jersey.

Mr. HATCH. Mr. President, this bill is a bipartisan bill, drafted
jointly by Senators Grassley and
Torricelli. This legislation has been developed in a
fair and inclusive manner.

The reforms proposed in this bill have been carefully studied and
have been deliberated upon at length. Indeed, Congress has been engaged
in the consideration of this issue now for several years. The National
Bankruptcy Review Commission spent two years comprehensively
examining the bankruptcy system. The findings and opinions of
the Commission, which were reported to Congress, have proved helpful in
identifying the problems in the bankruptcy system and in finding
appropriate solutions.

Furthermore, the Subcommittee on Administrative Oversight and the
Courts, which is chaired by Senator Grassley, has held
numerous hearings on the issue of bankruptcy reform. The
subcommittee heard extensive testimony on the subject from dozens of
witnesses. Again, I would like to thank Senators
Grassley and Torricelli for their
leadership in this important consumer bankruptcy reform,

and also last session's ranking member of the Administrative Oversight
and the Courts Subcommittee, Senator Durbin, along with
other members of the Senate, for their hard work on this issue.

Throughout the process of consideration of this bill, at both the
subcommittee and full committee level, changes suggested by the minority
were included in the bill. During this entire process, I have expressed
my willingness to work to address any remaining concerns the minority
has about the bill. It is apparent, however, that efforts are underway
to defeat this important legislation by attaching irrelevant, extraneous
'political agenda' items to it, such as minimum wage, guns, abortion and
tobacco, to name a few.

I am open to full debate on relevant issues. Nevertheless, some of my
friends on the other side of the aisle continue to tie up consideration
of this bill for what appears to be political points.

Despite the efforts of those in opposition, I remain hopeful and
optimistic that we will be able to pass legislation this year that
provides meaningful and much-needed reform to the
bankruptcy system.

The House of Representatives passed a much more stringent
bankruptcy reform bill by an overwhelming bipartisan
majority earlier this spring. The time has come for us to rise above
politics and to do what is right for the American people. It is time for
meaningful and fair bankruptcy reform.

I urge my colleagues to vote for cloture so we may consider the
substance of this important legislation and make our bankruptcy
system better for all Americans.

The Bankruptcy Reform Act of 1999
closes many of the loopholes in our bankruptcy system that allow
unscrupulous individuals to use bankruptcy as a financial
planning tool rather than as a last resort.

Despite the White House's statement of opposition to the House's
bankruptcy reform bill, H.R. 833, the House of
Representatives realized that the time has come to restore personal
responsibility to our nation's bankruptcy system. House
Democrats and Republicans alike recognized that if we do not take the
opportunity to reform our broken system, every family in my own
State of Utah and throughout the country, many of whom struggle to make
ends meet, will continue to bear the financial burden of those who take
advantage of the system. As a result, the House bill passed by an
overwhelming margin of 313 to 108. Half of the House Democratic Caucus
joined with every House Republican to support the bill. And notably, the
House bankruptcy reform bill is more stringent in its
reforms than the Senate bill before us today.

More than three decades ago, the late Albert Gore, Sr., then a
Senator, commented on the moral consequences of a lax bankruptcy
system. He said:

I realize that we cannot legislate morals, but we, as
responsible legislators, must bear the responsibility of writing laws
which discourage immorality and encourage morality; which encourage
honesty and discourage deadbeating; which make the path of the social
malingerer and shirker sufficiently unpleasant to persuade him at least
to investigate the way of the honest man. (Cong. Rec. 905, January 19,
1965.)

I too believe that the complete forgiveness of debt should be
reserved for those who truly cannot repay their debts. S. 625 provides
us with the opportunity to prevent people who can repay their debts from
'gaming the system' by using loopholes that are presently in place.

Mr. President, S. 625 provides a needs-based means test approach to
bankruptcy, under which debtors who can repay some of their debts
are required to do so. It contains new measures to protect against fraud
in bankruptcy, such as a requirement that debtors supply income
tax returns and pay stubs, audits of bankruptcy cases, and
limits on repeat bankruptcy filings. It eliminates a number of
loopholes, such as the one that allows debtors to transfer their
interest in real property to others who then file for bankruptcy

relief and invoke the automatic stay. And, the bill puts some controls
on the ability of debtors to get large cash advances on their credit
cards and to buy luxury goods on the eve of filing for
bankruptcy.

At the same time, the Senate bill provides many unprecedented new
consumer protections. It imposes penalties upon creditors who refuse to
negotiate in good faith with debtors prior to declaring
bankruptcy. Also, it imposes penalties on creditors who willfully
fail to properly credit payments made by the debtor in a chapter 13
plan, and for creditors who threaten to file motions in order to coerce
a reaffirmation without justification. Moreover, the bill imposes new
measures to discourage abusive reaffirmation practices.

Mr. President, S. 625 addresses the problem of bankruptcy
mills, firms that aggressively promote bankruptcy as a financial
planning tool, and often end up hurting unwitting debtors by putting
them in bankruptcy when it may not be in their best interest.
The bill also imposes penalties on bankruptcy petition preparers
who mislead debtors.

Importantly, the bill makes major strides in trying to break the
cycle of indebtedness. It educates debtors with regard to the
alternatives available to them, sets up a financial management education
pilot program for debtors, and requires credit counseling for debtors. I
must commend Senator Sessions for his leadership on
these important credit counseling provisions.

I am proud that the bill also makes extensive reform to the
bankruptcy laws in order to protect our children. I have
authored provisions of the bill to ensure that bankruptcy cannot
be used by deadbeat dads to avoid paying child support and alimony
obligation. Under my provisions, the obligation to pay child support and
alimony is moved to a first priority status, as opposed to its current
place at seventh in line, behind attorneys fees and other special
interests. My measures also ensure the collection of child support and
alimony payments by, among other things, exempting state child support
collection authorities from the 'automatic stay' that otherwise prevents
collection of debts after a debtor files for bankruptcy, and by
exempting from discharge virtually all obligations one ex-spouse owes
another. A new amendment will make changes to a number of provisions in
the bill to clarify that the provisions are not intended, directly or
indirectly, to undermine the collection of child-support or alimony
payments.

The bill includes a provision that I offered, which was accepted in
the Judiciary Committee, which creates new legal protections for a large
class of retirement savings in bankruptcy, a measure which is
supported by groups ranging from the AARP, to the Small Business Council
of America and the National Council on Teacher Retirement.

Rampant bankruptcy filings are a big problem. In 1998, 1.4
million Americans filed for bankruptcy. That was more Americans
than graduated from college, were on active military duty, or worked in
the post office. Indeed, more people filed for bankruptcy in
1998 than lived in the states of Alaska, Delaware, Hawaii, Idaho, Maine,
Montana, New Hampshire, North Dakota, Rhode Island, South Dakota,
Vermont, or Wyoming.

Last year, about $45 billion in consumer debt was erased in personal
bankruptcies. Let me give this number some context. Forty-five billion
dollars is enough to fund the entire U.S. Department of Transportation
for a year. Losses of this magnitude are passed on the American families
at an estimated cost--if we use low estimates--of $400 to every
household in America every year. That $400 could buy every American
family of four: five weeks worth of groceries, 20 tanks of unleaded
gasoline, 10 pairs of shoes for the average grade-school child, or more
than a year's supply of disposable diapers.

Under current law, families who do not file for bankruptcy

are unfairly having to subsidize those who do. Currently, our
bankruptcy system is devoid of personal responsibility and is
spiraling out of control. This is our opportunity to do something about
it.

As noted scholars Todd Zewicky of George Mason Law School and James
White of the University of Michigan Law School recently wrote:

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Current law requires a case-by-case investigation that turns on
little more than the personal predilections of the judge. This chaotic
system mocks the rule of law, and has resulted in unfairness and
inequality for debtors and creditors alike. The arbitrary nature of the
process has also undermined public confidence in the fairness and
efficiency of the consumer bankruptcy system.

I am proud to be proposing several enhancements to the bill that
primarily are designed to protect consumers and further provide
incentives for consumers to take personal responsibility in dealing with
debt management.

In the area of domestic support, as I indicated earlier, Senator
Torricelli and I intend to build upon the new legal
protections we created, as part of the underlying bill, for ex-spouses
and children who are owed child support and alimony payments. The
changes will further strengthen the ability of ex-spouses and children
to collect the payments they are owed, and will make changes to a number
of existing provisions in the bill to clarify that they will not
directly or indirectly undermine the collection of child support or
alimony payments.

In the area of education, Senator Dodd and I, along
with Senator Gregg, have developed an amendment that
will protect from creditors contributions made for education expenses to
education IRAs and qualified state tuition savings programs. This is a
significant protection for those who honestly put money away for the
benefit of their children and grandchildren's educational expenses. The
potential that education savings accounts will be abused in
bankruptcy is addressed by the amendment's requirement that only
contributions made more than a year prior to bankruptcy are
protected. I believe that protecting educational savings accounts is
particularly important because college savings accounts encourage
families to save for college, thereby increasing access to higher
education. Nationwide, there are more than a million educational savings
accounts, meaning there are more than a million children who would
benefit from this amendment. As much as I believe that the
bankruptcy laws need to be reformed to prevent abuse and to
ensure debtors take personal responsibility, the ability to use
dedicated funds to pay the educational costs of children should not be
jeopardized by the bankruptcy of their parents or grandparents.

I have also developed a debt counseling incentive provision, which
builds on the credit counseling provisions currently in S. 625. It
removes any disincentive for debtors to use credit counseling services
by prohibiting credit counseling services from reporting to credit
reporting agencies that an individual has received debt management or
credit counseling, and establishes a penalty for credit counseling
services that do. Debt management education is vital to reducing the
number of Americans who, because of poor financial planning skills, are
forced to declare bankruptcy. Providing crediting
counseling--instruction regarding personal financial management--to
current and potential filers will help curb bankruptcy filing.

In addition, I intend to offer an amendment that is designed to curb
fraud in filing. This amendment puts in place new procedures and
provides new resources to enhance enforcement of bankruptcy
fraud laws. It will require No. 1 that bankruptcy courts develop
procedures for referring suspected fraud to the FBI and the U.S.
attorney's office for investigation and prosecution and No. 2 that the
Attorney General designate one assistant U.S. attorney and one FBI agent
in each judicial district as having primary responsibility for
investigating and prosecuting fraud in bankruptcy.

I also plan to offer an amendment that will allow a victim of a crime
of violence or drug trafficking offense or another party in interest to
petition the bankruptcy court to dismiss a petition voluntarily
filed by a debtor who was convicted of the crime of violence or drug
trafficking offense. In order to protect women and children who may be
owed payments by such a debtor, however, the amendment would still allow
the bankruptcy petition to continue if the debtor can show that
the filing of the petition is necessary to ensure his ability to meet
domestic support obligations. Bankruptcy is not an
entitlement--it is a process by which certain qualifying individuals
with substantial debts may cancel their debts and obtain a 'fresh
start.' Under this amendment, violent criminals and drug
traffickers--individuals who have chosen to engage in serious, criminal
conduct--would be precluded from availing themselves of the benefits of

bankruptcy protection.

Again, I thank Senator Grassley, the distinguished
chairman of the Judiciary Committee's Subcommittee on Administrative
Oversight and the Courts, for his leadership and dedication to this
effort, and look forward to working with him and the subcommittee's
ranking member, Senator Torricelli, in passing this
legislation.

Let's look at a couple of other charts. This one is done by Penn,
Schoen and Bergland Associates, Inc.: 83 percent of the American people
favor an income test in bankruptcy reform. Only 10
percent oppose it and 7 percent don't know. So we should have an income
test in bankruptcy reform.

Americans agree that bankruptcy should be based on need. Ten
percent believe an individual who files for bankruptcy should be
able to wipe out all their debt regardless of their ability to repay
that debt. Only 10 percent of our society believe that, and I am
surprised that many people believe that. If somebody has the ability to
pay a debt, why should they stiff other people with their debts and why
shouldn't they have to live up to paying off their debts?

Four percent refused to answer this. But 87 percent believe an
individual who files for bankruptcy --all of this yellow--should
be required to repay as much of their debt as they are able and then be
allowed to wipe out the rest.

That makes sense. Otherwise, we have people who are using the
bankruptcy laws as an estate planning device. We have people who
every 5 years file for bankruptcy after running up all kinds of
bills and enjoying the life of Riley during those intervening years.
What we want to do is have people realize there are some disincentives
for doing that and that they have to pay some of these bills themselves.

These particular charts show that the American people have their
heads screwed on right, except for about 10 percent of them. If an
individual has the ability to repay some of the debt, they ought to be
able to and they ought to want to, they ought to do what is right, and
87 percent of the American people believe that is the case. Only 10
percent believe they should be able to wipe out any debts at any time by
going into bankruptcy.

I hope we can get people to vote for cloture on this matter so we can
proceed and so we will not have any further delay in passing what really
will be one of the most important bills in this particular session of
Congress.

Mr. President, I suggest the absence of a quorum.

The PRESIDING OFFICER. The clerk will call the roll.

The bill clerk proceeded to call the roll.

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Mr. HATCH. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.

The PRESIDING OFFICER. Without objection, it is so ordered.

Mr. HATCH. Mr. President, I suggest the absence of a quorum and ask
that the time be divided equally.

The PRESIDING OFFICER. Time will be charged to both sides. The clerk
will call the roll.

The bill clerk proceeded to call the roll.

Mr. WELLSTONE. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.

The PRESIDING OFFICER (Mr. Crapo). Without
objection, it is so ordered.

Mr. WELLSTONE. I thank the Chair.

Mr. President, I will speak briefly in opposition to cutting off
debate on S. 625, the Bankruptcy Reform Act of
1999. I say to my colleagues, the entire concept of the bill is
wrong. It addresses a 'crisis' that appears to be self-correcting. It
rewards the predatory and reckless lending by banks and credit card
companies which fed the crisis in the first place, and it does nothing
to actually prevent bankruptcy by promoting economic security
for working families.

To support, if you will, my case on the floor, I will talk about a
couple of amendments I intended to offer to this bill which I think will
make a huge difference. Let me give a couple of examples.

One amendment will prevent claims in bankruptcy on high-cost
credit transactions in which the annual interest rate exceeds 100
percent, such as pay-day loans and car title pawns. Pay-day loans are
intended to extend small amounts of credit, typically $100 to $500, for
an extremely short period of time, usually 1 week or 2 weeks.

These loans are marketed as giving the borrower a little extra until
pay day, hence the term 'pay-day' loan. The loans work like this:

The borrower writes a check for the loan amount plus a fee. The
lender agrees to hold the check until an agreed-upon date and gives the
borrower the cash. On the due date, the lender either cashes the check
or allows the borrower to extend the loan by writing a new check for the
loan. In any case, the annual interest rate can get as high as 391
percent.

We ought to do something about that, Mr. President. I have an
amendment that will make a difference. I believe I would win if I
offered this amendment to address this problem.

Another amendment I want to offer is about making sure banks offer
low-cost banking services to their customers. For about 12 million
Americans, having a checking account is a simple convenience which they
cannot afford. Why? Because quite often there is a large minimum or you
have fees that are really too high, and therefore people cannot even
have these accounts. I want to make sure these banks are responsive to
low-income citizens as well.

Mr. President, I was on the floor last week for several hours talking
about the crisis in agriculture. I said that those of us from the farm
States want an opportunity to pass legislation that would change the
course of policy and prevent our family farmers from being driven off
the land and prevent, really, what is right now the devastation of our
rural communities.

The minority leader, Senator Daschle, has an
amendment to get the loan rate up, to get prices up, which I support. I
have an amendment--and Senator Dorgan will join
me--which basically says we are going to--for 18 months, until we pass
some antitrust action--put a moratorium on a lot of these mergers and
acquisitions. We want to have some competition in the food industry.

I think I can get a lot of support from Republicans as well as
Democrats. I think there will be a lot of support on the floor of the
Senate for these amendments that try to do something about changing farm
policy so our producers--whether they be in Minnesota, whether they be
in Idaho, whether they be in the Midwest, or whether they be in the
South--are able to make a living and support their families.

In all due respect--I hate to say this--bankruptcy is all too
relevant to what these family farmers are going through. I have an
amendment that says we ought to do some policy evaluation if we are
going to be talking about bankruptcy and we are not going to do
a darn thing to deal with the predatory policies of these credit
companies, that we are not going to do a darn thing about the ways in
which they hook people in who have precious little consumer protection,
that if we are going to talk about low-income citizens, I would like to
see some policy evaluation.

I would like to see us have some understanding about what is going on
in welfare. Where are these mothers and children who are no longer on
the rolls? What are their wage levels? Is there affordable child care?
Do these families have health care coverage or do they not have health
care coverage?

It is also the case that my colleague who sits right next to me,
Senator Kennedy, has an amendment he wants to offer to
raise the minimum wage. I find it interesting that what we have here is
a piece of legislation that does nothing by way of providing consumer
protection, does nothing by way of challenging these credit card
companies, and does absolutely nothing to prevent the bankruptcy
in the first place.

We have the evidence that shows that very few people--maybe 3
percent--have abused the law. And because of that, we are passing a
draconian, harsh piece of legislation which imposes enormous
difficulties on the poorest families, on working-income families. Yet
when some of us say we want to bring some amendments to the floor that
deal with exorbitant interest rates, to make sure that low-income people
have access to banking services, and to make sure we do something about
the economic security for working families--and I include family farmers
who are going bankrupt--we are told by the majority leader we are going
to be shut out from being able to offer amendments, and therefore the
majority leader files cloture.

We will have a cloture vote. I am going to vote against cloture; I am
sure many of my colleagues are going to vote against cloture, and then I
am sure the majority leader is going to pull the bill. If he pulls the
bill, that will be actually a plus for Americans. This is a deeply
flawed piece of legislation--great for the credit companies, terrible
for consumers.

But if he pulls the bill, also that is basically a message to those
of us who for weeks now have been saying we want to come to the floor
with substantive amendments, to fight for the people we represent, to do
something about making sure they have a decent chance--and I am talking
in particular about family farmers. Basically what I am hearing from the
majority leader is: Anytime you say you are going to come to the floor
with these amendments, I am going to pull the legislation. I am not
going to give you a vehicle. We are not going to have an up-or-down vote
on minimum wage.

Apparently, a lot of my colleagues on the other side do not want to
be on record; we are not going to have an up-or-down vote on getting
farm prices up; we are not going to have an up-or-down vote on a
moratorium dealing with these mergers and acquisitions; We are not going
to have an up-or-down vote on amendments that really do deal with these
payday loans, with these exorbitant interest rates, making sure again
that low-income people have access to banking services.

I think there will not be enough votes for cloture. I do not think
there should be enough votes for cloture. I want to say today on the
floor of the Senate, especially to the majority leader--not so much to
my colleague from Utah--if each and every time, as a Senator from an
agricultural State, I am going to be shut out from having any vehicles
whereby I can bring some amendments to the floor to change farm policy
so these producers do not go under in my State, then I am going to have
to look for whatever leverage I have as a Senator to force some
cooperation on the other side so we can have a genuine, substantive
debate

about a lot of issues that are important to people's lives.

Let's talk about raising the minimum wage. Let's talk about what is
happening to family farmers. Let's talk about health care policy. Let's
talk about consumer protection.

This effort on the part of the majority leader--and I guess,
therefore, the majority party--to shut us out from introducing
substantive legislation that would make all the difference in the world
to the people we represent is just simply unacceptable. I do not think
this is any way for us to operate as a Senate. I urge my colleagues to
vote against cloture.

I yield the floor.

[Page: S11091]  
GPO's PDF

Mr. GRASSLEY addressed the Chair.

The PRESIDING OFFICER. The Senator from Iowa.

Mr. GRASSLEY. I yield 7 minutes to the Senator from Alabama.

The PRESIDING OFFICER. The Senator from Alabama is recognized for 7
minutes.

Mr. SESSIONS. I thank the Senator from Iowa and appreciate his
steadfast leadership on this issue. I also thank the distinguished
chairman of the Judiciary Committee, Senator Hatch, for
his leadership.

We have worked over the past several years to produce a much needed
piece of legislation, a reform of Federal bankruptcy
law. Bankruptcy is provided for in the U.S. Constitution, and we
have seen some remarkable changes in the last few years that demand that
we reform the system.

Last year there were over 1.4 million bankruptcies filed in America.
That comes out to almost 4,000 filings every day of the year. Since
1990, personal bankruptcies are up 94.7 percent. This dramatic increase
in personal bankruptcies occurred in spite of the fact that over that
same period business bankruptcies fell 31 percent and the country
enjoyed a healthy and expanding economy. These statistics demonstrate
there is need for reform immediately.

Bankruptcy exists to provide relief as a last resort for the
most debt-ridden individuals. It is not a financial planning device.
This bill was needed last year, but it did not pass due to the same
kinds of partisanship and political tactics we have seen here today.

This year, I think Congress will pass this bill. I hope we will
proceed to it today for a final vote. The majority leader of the Senate
and the Members of this Senate have a lot of work to do this year. We
have quite a number of critical appropriations bills, including the
Defense appropriations that may come up later tonight. We have to
consider those bills.

We cannot have a bankruptcy bill like the one that passed
this Senate last year with 97 votes--a very similar bankruptcy
bill which almost every single Senator voted for. That bill turned into
a Christmas tree of amendments on every kind of unrelated issue that any
Senator wanted to bring up, and I am afraid that the same thing might
happen today.

Why is this happening? I will tell you why. Some Senators do not want
this bill to pass, but they are afraid to vote against it straight up,
and so they offer amendment after amendment, and they tell the majority
leader: We won't have any limit. We want to offer as many amendments as
we can on a number of unrelated subjects--international affairs,
economics, whatever they want to bring. This means we could be here for
weeks on a bill that has been debated for the last 2 years with great
intensity. The Senate does not need that. The majority leader cannot
allow that to happen. We will have to not proceed with it, I assume, if
we cannot get cloture today.

A bankruptcy bill similar to this passed the House earlier
this year 313-108. Senator Grassley's bill came out of
the Judiciary Committee 14-4. So I am proud to be a key sponsor of this.
I think it makes the kind of changes we need without changing the
fundamental principles that if a person is over their head in debt,
helplessly unable to pay their debts, they ought to be able to wipe out
those debts and start over. We have no dispute with that principle. That
is a fundamental, historic principle.

I know it makes a lot of people mad to think that somebody does not
have to pay their debts, that they can just go to court and wipe out
their duly signed contract. But this country has always adhered to the
view that if your debts reach a certain level and you cannot pay them,
you can start

Description:

To amend title XVIII of the Social Security Act to establish additional provisions to combat waste, fraud, and abuse within the medicare program, and for other purposes.

Description:

Making appropriations for the Departments of Commerce, Justice, and State, the Judiciary, and related agencies for the fiscal year ending September 30, 2000, and for other purposes.

Description:

The Committee on the Judiciary, to which was referred the bill (S. 625) to amend title 11, of the United States Code, to provide for reform of the bankruptcy laws, having considered the same, reports favorably thereon, with amendments, and recommends that the bill, as amended, do pass.

Description:

To amend certain banking and securities laws with respect to financial contracts.

Description:

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE\; TABLE OF CONTENTS.
(a) Short Title: This Act may be cited as the `Consumer Bankruptcy Reform Act of 1999'.
(b) Table of Contents: The table of contents for this Act is as follows:
Web posted © May 4,
1999, American Bankruptcy Institute.

S.
945


Introduced May 3, 1999

by Sens. Richard Dubrin (D-Ill.), Patrick Leahy (D-Vt.),

Ted Kennedy (D-Mass.), Russ Feingold (D-Wisc.) and Paul Sarbanes
(D-Md.)

Be it enacted by the Senate and House of Representatives

of the United
States of America in Congress assembled,



SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title: This Act may be cited as the `Consumer Bankruptcy
Reform Act of 1999'.

(b) Table of Contents: The table of contents for this Act is as follows:





Sec. 1. Short title; table of contents.



TITLE I--NEEDS-BASED BANKRUPTCY



Sec. 101. Conversion.



Sec. 102. Dismissal or conversion.



TITLE II--ENHANCED PROCEDURAL PROTECTIONS FOR

CONSUMERS



Sec. 201. Allowance of claims or interests.



Sec. 202. Exceptions to discharge.



Sec. 203. Effect of discharge.



Sec. 204. Automatic stay.



Sec. 205. Discharge.



Sec. 206. Discouraging predatory lending practices.



Sec. 207. Enhanced disclosure for credit extensions secured by dwelling.





Sec. 208. Dual-use debit card.



Sec. 209. Enhanced disclosures under an open end credit plan.



Sec. 210. Violations of the automatic stay.



Sec. 211. Discouraging abusive reaffirmation practices.



Sec. 212. Sense of Congress regarding the homestead exemption.



Sec. 213. Encouraging creditworthiness.



Sec. 214. Treasury Department study regarding security interests under
an open end credit
plan.



TITLE III--IMPROVED PROCEDURES FOR EFFICIENT

ADMINISTRATION OF THE BANKRUPTCY SYSTEM



Sec. 301. Notice of alternatives.



Sec. 302. Fair treatment of secured creditors under chapter 13.



Sec. 303. Discouragement of bad faith repeat filings.



Sec. 304. Timely filing and confirmation of plans under chapter 13.



Sec. 305. Application of the codebtor stay only when the stay protects
the debtor.



Sec. 306. Improved bankruptcy statistics.



Sec. 307. Audit procedures.



Sec. 308. Creditor representation at first meeting of creditors.



Sec. 309. Fair notice for creditors in chapter 7 and 13 cases.



Sec. 310. Stopping abusive conversions from chapter 13.



Sec. 311. Prompt relief from stay in individual cases.



Sec. 312. Dismissal for failure to timely file schedules or provide
required information.



Sec. 313. Adequate time for preparation for a hearing on confirmation of

the plan.



Sec. 314. Discharge under chapter 13.



Sec. 315. Nondischargeable debts.



Sec. 316. Credit extensions on the eve of bankruptcy presumed
nondischargeable.



Sec. 317. Definition of household goods and antiques.



Sec. 318. Relief from stay when the debtor does not complete intended
surrender of
consumer debt collateral.



Sec. 319. Adequate protection of lessors and purchase money secured
creditors.



Sec. 320. Limitation.



Sec. 321. Miscellaneous improvements.



Sec. 322. Bankruptcy judgeships.



Sec. 323. Definition of domestic support obligation.



Sec. 324. Priorities for claims for domestic support obligations.



Sec. 325. Requirements to obtain confirmation and discharge in cases
involving domestic
support obligations.



Sec. 326. Exceptions to automatic stay in domestic support obligation
proceedings.



Sec. 327. Nondischargeability of certain debts for alimony, maintenance,

and support.



Sec. 328. Continued liability of property.



Sec. 329. Protection of domestic support claims against preferential
transfer motions.



Sec. 330. Protection of retirement savings in bankruptcy.



Sec. 331. Additional amendments to title 11, United States Code.



Sec. 332. Debt limit increase.



Sec. 333. Elimination of requirement that family farmer and spouse
receive over 50 percent
of income from farming

operation in year prior to bankruptcy.



Sec. 334. Prohibition of retroactive assessment of disposable income.




Sec. 335. Amendment to section 1325 of title 11, United States Code.




Sec. 336. Protection of savings earmarked for the postsecondary
education of children.



TITLE IV--FINANCIAL INSTRUMENTS



Sec. 401. Bankruptcy Code amendments.



Sec. 402. Damage measure.



Sec. 403. Asset-backed securitizations.



Sec. 404. Prohibition on certain actions for failure to incur finance
charges.



Sec. 405. Fees arising from certain ownership interests.



Sec. 406. Bankruptcy fees.



Sec. 407. Applicability.



TITLE V--ANCILLARY AND OTHER CROSS-BORDER CASES



Sec. 501. Amendment to add chapter 6 to title 11, United States Code.




Sec. 502. Amendments to other chapters in title 11, United States Code.




TITLE VI--MISCELLANEOUS



Sec. 601. Executory contracts and unexpired leases.



Sec. 602. Expedited appeals of bankruptcy cases to courts of appeals.




Sec. 603. Creditors and equity security holders committees.



Sec. 604. Repeal of sunset provision.



Sec. 605. Cases ancillary to foreign proceedings.



Sec. 606. Limitation.



Sec. 607. Amendment to section 546 of title 11, United States Code.



Sec. 608. Amendment to section 330(a) of title 11, United States Code.




TITLE VII--TECHNICAL CORRECTIONS



Sec. 701. Adjustment of dollar amounts.



Sec. 702. Extension of time.



Sec. 703. Who may be a debtor.



Sec. 704. Penalty for persons who negligently or fraudulently prepare
bankruptcy
petitions.



Sec. 705. Limitation on compensation of professional persons.



Sec. 706. Special tax provisions.



Sec. 707. Effect of conversion.



Sec. 708. Automatic stay.



Sec. 709. Allowance of administrative expenses.



Sec. 710. Priorities.



Sec. 711. Exemptions.



Sec. 712. Exceptions to discharge.



Sec. 713. Effect of discharge.



Sec. 714. Protection against discriminatory treatment.



Sec. 715. Property of the estate.



Sec. 716. Preferences.



Sec. 717. Postpetition transactions.



Sec. 718. Technical amendment.



Sec. 719. Disposition of property of the estate.



Sec. 720. General provisions.



Sec. 721. Appointment of elected trustee.



Sec. 722. Abandonment of railroad line.



Sec. 723. Contents of plan.



Sec. 724. Discharge under chapter 12.



Sec. 725. Extensions.



Sec. 726. Bankruptcy cases and proceedings.



Sec. 727. Knowing disregard of bankruptcy law or rule.



Sec. 728. Rolling stock equipment.



Sec. 729. Curbing abusive filings.



Sec. 730. Study of operation of title 11 of the United States Code with
respect to small
businesses.



Sec. 731. Transfers made by nonprofit charitable corporations.



Sec. 732. Effective date; application of amendments.



TITLE I--NEEDS-BASED BANKRUPTCY



SEC. 101. CONVERSION.

Section 706(c) of title 11, United States Code, is amended by inserting
`or consents to'
after `requests'.



SEC. 102. DISMISSAL OR CONVERSION.

(a) In General: Section 707 of title 11, United States Code, is
amended--



(1) by striking the section heading and inserting the following:



`707. Dismissal of a case or conversion to a case under chapter 13';




and



(2) in subsection (b)--



(A) by inserting `(1)' after `(b)';



(B) in paragraph (1), as redesignated by subparagraph (A) of this
paragraph--



(i) in the first sentence--



(I) by striking `but not' and inserting `or';



(II) by inserting `, or, with the debtor's consent, convert such a case
to a case under
chapter 13,' after `consumer debts'; and



(III) by striking `substantial abuse' and inserting `abuse'; and



(ii) by striking `There shall be a presumption in favor of granting the
relief requested
by the debtor.'; and



(C) by adding at the end the following:

`(2) In considering under paragraph (1) whether the granting of relief
would be an abuse
of the provisions of this chapter, the

court shall consider whether--



`(A) under section 1325(b)(1), on the basis of the current income of the

debtor, the
debtor could pay an amount greater than or

equal to 30 percent of unsecured claims that are not considered to be
priority claims (as
determined under subchapter I of

chapter 5); or



`(B) the debtor filed a petition for the relief in bad faith.

`(3)(A) If a panel trustee appointed under section 586(a)(1) of title 28

brings a motion
for dismissal or conversion under this

subsection and the court grants that motion and finds that the action of

the counsel for
the debtor in filing under this chapter was

not substantially justified, the court shall order the counsel for the
debtor to reimburse
the trustee for all reasonable costs in

prosecuting the motion, including reasonable attorneys' fees.

`(B) If the court finds that the attorney for the debtor violated Rule
9011, at a minimum,
the court shall order--



`(i) the assessment of an appropriate civil penalty against the counsel
for the debtor;
and



`(ii) the payment of the civil penalty to the panel trustee or the
United States trustee.

`(C) In the case of a petition referred to in subparagraph (B), the
signature of an
attorney shall constitute a certificate that the

attorney has--



`(i) performed a reasonable investigation into the circumstances that
gave rise to the
petition; and



`(ii) determined that the petition--



`(I) is well grounded in fact; and



`(II) is warranted by existing law or a good faith argument for the
extension,
modification, or reversal of existing law and does

not constitute an abuse under paragraph (1).

`(4)(A) Except as provided in subparagraph (B) and paragraph (5), the
court may award a
debtor all reasonable costs in

contesting a motion brought by a party in interest (other than a panel
trustee or United
States trustee) under this subsection

(including reasonable attorneys' fees) if--



`(i) the court does not grant the motion; and



`(ii) the court finds that--



`(I) the position of the party that brought the motion was not
substantially justified; or




`(II) the party brought the motion solely for the purpose of coercing a
debtor into
waiving a right guaranteed to the debtor under

this title.

`(B) A party in interest that has a claim of an aggregate amount less
than $1,000 shall
not be subject to subparagraph (A).

`(5)(A) Only the judge, United States trustee, bankruptcy administrator,

or panel trustee
may bring a motion under this

subsection if the debtor and the debtor's spouse combined, as of the
date of the order for
relief, have current monthly total

income equal to or less than the national median household monthly
income calculated on a
monthly basis for a household of

equal size.

`(B) For purposes of subparagraph (A), for a household of more than 4
individuals, the
median monthly income for that

household shall be--



`(1) the median monthly income of a household of 4 individuals; plus



`(2) $583 for each additional member of that household.'.

(b) Clerical Amendment: The table of sections for chapter 7 of title 11,

United States
Code, is amended by striking the item

relating to section 707 and inserting the following:



`707. Dismissal of a case or conversion to a case under chapter 13.'.




TITLE II--ENHANCED PROCEDURAL PROTECTIONS FOR

CONSUMERS



SEC. 201. ALLOWANCE OF CLAIMS OR INTERESTS.

Section 502 of title 11, United States Code, is amended by adding at the

end the
following:

`(k)(1) The court may award the debtor reasonable attorneys' fees and
costs if, after an
objection is filed by a debtor, the

court--



`(A)(i) disallows the claim; or



`(ii) reduces the claim by an amount greater than 20 percent of the
amount of the initial
claim filed by a party in interest; and



`(B) finds the position of the party filing the claim is not
substantially justified.

`(2) If the court finds that the position of a claimant under this
section is not
substantially justified, the court may, in addition to

awarding a debtor reasonable attorneys' fees and costs under paragraph
(1), award such
damages as may be required by the

equities of the case.'.



SEC. 202. EXCEPTIONS TO DISCHARGE.

Section 523 of title 11, United States Code, is amended--



(1) in subsection (a)(2)(A), by striking `a false representation' and
inserting `a
material false representation upon which the

defrauded person justifiably relied'; and



(2) by striking subsection (d) and inserting the following:

`(d)(1) Subject to paragraph (3), if a creditor requests a determination

of
dischargeability of a consumer debt under this section

and that debt is discharged, the court shall award the debtor reasonable

attorneys' fees
and costs.

`(2) In addition to making an award to a debtor under paragraph (1), if
the court finds
that the position of a creditor in a

proceeding covered under this section is not substantially justified,
the court may award
reasonable attorneys' fees and costs

under paragraph (1) and such damages as may be required by the equities
of the case.

`(3)(A) A creditor may not request a determination of dischargeability
of a consumer debt
under subsection (a)(2) if--



`(i) before the filing of the petition, the debtor made a good faith
effort to negotiate a
reasonable alternative repayment schedule

(including making an offer of a reasonable alternative repayment
schedule); and



`(ii) that creditor refused to negotiate an alternative payment
schedule, and that refusal
was not reasonable.

`(B) For purposes of this paragraph, the debtor shall have the burden of

proof of
establishing that--



`(i) an offer made by that debtor under subparagraph (A)(i) was
reasonable; and



`(ii) the refusal to negotiate by the creditor involved to was not
reasonable.'.



SEC. 203. EFFECT OF DISCHARGE.

Section 524 of title 11, United States Code, is amended by adding at the

end the
following:

`(i) The willful failure of a creditor to credit payments received under

a plan confirmed
under this title (including a plan of

reorganization confirmed under chapter 11) in the manner required by the

plan (including
crediting the amounts required under

the plan) shall constitute a violation of an injunction under subsection

(a)(2).

`(j) An individual who is injured by the failure of a creditor to comply

with the
requirements for a reaffirmation agreement under

subsections (c) and (d), or by any willful violation of the injunction
under subsection
(a)(2), shall be entitled to recover--



`(1) the greater of--



`(A)(i) the amount of actual damages; multiplied by



`(ii) 3; or



`(B) $5,000; and



`(2) costs and attorneys' fees.'.



SEC. 204. AUTOMATIC STAY.

Section 362(h) of title 11, United States Code, is amended to read as
follows:

`(h)(1) An individual who is injured by any willful violation of a stay
provided in this
section shall be entitled to recover--



`(A) actual damages; and


`(B) reasonable costs, including attorneys' fees.

`(2) In addition to recovering actual damages, costs, and attorneys'
fees under paragraph
(1), an individual described in

paragraph (1) may recover punitive damages in appropriate
circumstances.'.



SEC. 205. DISCHARGE.

Section 727 of title 11, United States Code, is amended--



(1) in subsection (c), by adding at the end the following:

`(3)(A) A creditor may not request a determination of dischargeability
of a consumer debt
under subsection (a) if--


`(i) before the filing of the petition, the debtor made a good faith
effort to negotiate a
reasonable alternative repayment schedule

(including making an offer of a reasonable alternative repayment
schedule); and



`(ii) that creditor refused to negotiate an alternative payment
schedule, and that refusal
was not reasonable.

`(B) For purposes of this paragraph, the debtor shall have the burden of

proof of
establishing that--



`(i) an offer made by that debtor under subparagraph (A)(i) was
reasonable; and



`(ii) the refusal to negotiate by the creditor involved to was not
reasonable.'; and



(2) by adding at the end the following:

`(f)(1) The court may award the debtor reasonable attorneys' fees and
costs in any case in
which a creditor files a motion to

deny relief to a debtor under this section and that motion--



`(A) is denied; or



`(B) is withdrawn after the debtor has replied.

`(2) If the court finds that the position of a party filing a motion
under this section is
not substantially justified, the court may

assess against the creditor such damages as may be required by the
equities of the case.'.




SEC. 206. DISCOURAGING PREDATORY LENDING PRACTICES.

Section 502(b) of title 11, United States Code, is amended--



(1) in paragraph (8), by striking `or' at the end;



(2) in paragraph (9), by striking the period at the end and inserting `;

or'; and



(3) by adding at the end the following:



`(10) the claim is based on a secured debt if the creditor has failed to

comply with the
requirements of subsection (a), (b), (c),

(d), (e), (f), (g), (h), or (i) of section 129 of the Truth in Lending
Act (15 U.S.C.
1639).'.


SEC. 207. ENHANCED DISCLOSURE FOR CREDIT EXTENSIONS SECURED BY DWELLING.



(a) Open-End Credit Extensions:



(1) Credit applications: Section 127A(a)(13) of the Truth in Lending Act

(15 U.S.C.
1637a(a)(13)) is amended--



(A) by striking `consultation of tax advisor: A statement that the' and
inserting the
following: `tax deductibility: A statement

that--



`(A) the'; and



(B) by striking the period at the end and inserting the following: `;
and



`(B) in any case in which the extension of credit exceeds the fair
market value of the
dwelling, the interest on the portion of the

credit extension that is greater than the fair market value of the
dwelling is not tax
deductible for Federal income tax purposes.'.



(2) Credit advertisements: Section 147(b) of the Truth in Lending Act
(15 U.S.C. 1665b(b))
is amended--



(A) by striking `If any' and inserting the following:



`(1) In general: If any'; and



(B) by adding at the end the following:



`(2) Credit in excess of fair market value: Each advertisement described

in subsection (a)
that relates to an extension of

credit that may exceed the fair market value of the dwelling shall
include a clear and
conspicuous statement that--



`(A) the interest on the portion of the credit extension that is greater

than the fair
market value of the dwelling is not tax

deductible for Federal income tax purposes; and



`(B) the consumer may want to consult a tax advisor for further
information regarding the
deductibility of interest and charges.'.

(b) Non-Open End Credit Extensions:



(1) Credit applications: Section 128 of the Truth in Lending Act (15
U.S.C. 1638) is
amended--



(A) in subsection (a), by adding at the end the following:



`(15) In the case of a consumer credit transaction that is secured by
the principal
dwelling of the consumer, in which the

extension of credit may exceed the fair market value of the dwelling, a
clear and
conspicuous statement that--



`(A) the interest on the portion of the credit extension that is greater

than the fair
market value of the dwelling is not tax

deductible for Federal income tax purposes; and



`(B) the consumer should consult a tax advisor for further information
regarding the
deductibility of interest and charges.'; and


(B) in subsection (b), by adding at the end the following:

`(3) In the case of a credit transaction described in paragraph (15) of
subsection (a),
disclosures required by that paragraph

shall be made to the consumer at the time of application for such
extension of credit.'.



(2) Credit advertisements: Section 144 of the Truth in Lending Act (15
U.S.C. 1664) is
amended by adding at the end the

following:

`(e) Each advertisement to which this section applies that relates to a
consumer credit
transaction that is secured by the principal

dwelling of a consumer in which the extension of credit may exceed the
fair market value
of the dwelling shall clearly and

conspicuously state that--



`(1) the interest on the portion of the credit extension that is greater

than the fair
market value of the dwelling is not tax

deductible for Federal income tax purposes; and



`(2) the consumer may want to consult a tax advisor for further
information regarding the
deductibility of interest and charges.'.

(c) Effective Date: This section and the amendments made by this section

shall take effect
1 year after the date of enactment of

this Act.



SEC. 208. DUAL-USE DEBIT CARD.

(a) Consumer Liability:



(1) In general: Section 909 of the Electronic Fund Transfer Act (15
U.S.C. 1693g) is
amended--



(A) by redesignating subsections (b) through (e) as subsections (d)
through (g),
respectively;



(B) in subsection (a)--



(i) by redesignating paragraphs (1) and (2) as subparagraphs (A) and
(B), respectively,
and indenting appropriately;



(ii) by inserting `Cards Necessitating Unique Identifier:



`(1) In general: ' after `(a)';



(iii) by striking `other means of access can be identified as the person

authorized to use
it, such as by signature, photograph,'

and inserting `other means of access can be identified as the person
authorized to use it
by a unique identifier, such as a

photograph, retina scan,'; and



(iv) by striking `Notwithstanding the foregoing,' and inserting the
following:



`(2) Notification: Notwithstanding paragraph (1),'; and



(C) by inserting after subsection (a) the following new subsections:


`(b) Cards Not Necessitating Unique Identifier: A consumer shall be
liable for an
unauthorized electronic fund transfer only

if--



`(1) the liability is not in excess of $50;



`(2) the unauthorized electronic fund transfer is initiated by the use
of a card that has
been properly issued to a consumer other

than the person making the unauthorized transfer as a means of access to

the account of
that consumer for the purpose of

initiating an electronic fund transfer;



`(3) the unauthorized electronic fund transfer occurs before the card
issuer has been
notified that an unauthorized use of the card

has occurred or may occur as the result of loss, theft, or otherwise;
and



`(4) such unauthorized electronic fund transfer did not require the use
of a code or other
unique identifier (other than a

signature), such as a photograph, fingerprint, or retina scan.

`(c) Notice of Liability and Responsibility To Report Loss of Card,
Code, or Other Means
of Access: No consumer

shall be liable under this title for any unauthorized electronic fund
transfer unless the
consumer has received in a timely manner

the notice required under section 905(a)(1), and any subsequent notice
required under
section 905(b) with regard to any

change in the information which is the subject of the notice required
under section
905(a)(1).'.



(2) Conforming amendment: Section 905(a)(1) of the Electronic Fund
Transfer Act (15 U.S.C.
1693c(a)(1)) is amended to

read as follows:



`(1) the liability of the consumer for any unauthorized electronic fund
transfer and the
requirement for promptly reporting any

loss, theft, or unauthorized use of a card, code, or other means of
access in order to
limit the liability of the consumer for any

such unauthorized transfer;'.

(b) Validation Requirement for Dual-Use Debit Cards:



(1) In general: Section 911 of the Electronic Fund Transfer Act (15
U.S.C. 1693i) is
amended--



(A) by redesignating subsection (c) as subsection (d); and



(B) by inserting after subsection (b) the following new subsection:

`(c) Validation Requirement: No person may issue a card described in
subsection (a), the
use of which to initiate an electronic

fund transfer does not require the use of a code or other unique
identifier other than a
signature (such as a fingerprint or retina

scan), unless--



`(1) the requirements of paragraphs (1) through (4) of subsection (b)
are met; and



`(2) the issuer has provided to the consumer a clear and conspicuous
disclosure that use
of the card may not require the use of

such code or other unique identifier.'.



(2) Technical and conforming amendment: Section 911(d) of the Electronic

Fund Transfer Act
(15 U.S.C. 1993i(d)) (as

redesignated by subsection (a)(1) of this section) is amended by
striking `For the purpose
of subsection (b)' and inserting `For

purposes of subsections (b) and (c)'.



SEC. 209. ENHANCED DISCLOSURES UNDER AN OPEN END CREDIT PLAN.

(a) Amendments to the Truth in Lending Act:



(1) Enhanced disclosure of repayment terms:



(A) In general: 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) In a clear and conspicuous manner, repayment information that
would apply to the
outstanding balance of the

consumer under the credit plan, including--



`(i) the required minimum monthly payment on that balance, represented
as both a dollar
figure and a percentage of that

balance;



`(ii) the number of months (rounded to the nearest month) that it would
take to pay the
entire amount of that current balance if

the consumer pays only the required minimum monthly payments and if no
further advances
are made;



`(iii) the total cost to the consumer, including interest and principal
payments, of
paying that balance in full if the consumer pays

only the required minimum monthly payments and if no further advances
are made; and



`(iv) the following statement: `If your current rate is a temporary
introductory rate,
your total costs may be higher.'.



`(B) In making the disclosures under subparagraph (A) the creditor shall

apply the annual
interest rate that applies to that

balance with respect to the current billing cycle for that consumer in
effect on the date
on which the disclosure is made.'.



(B) Publication of model forms: Not later than 180 days after the date
of enactment of
this Act, the Board of Governors of the

Federal Reserve System shall publish model disclosure forms in
accordance with section 105
of the Truth in Lending Act for the

purpose of compliance with section 127(b)(11) of the Truth in Lending
Act, as added by
this paragraph.



(C) Civil liability: Section 130(a) of the Truth in Lending Act (15
U.S.C. 1640(a)) is
amended, in the undesignated paragraph

following paragraph (4), by striking the second sentence and inserting
the following: `In
connection with the disclosures referred

to in subsections (a) and (b) of section 127, a creditor shall have a
liability determined
under paragraph (2) of this subsection

only for failing to comply with the requirements of section 125, 127(a),

or of paragraph
(4), (5), (6), (7), (8), (9), (10), or (11)

of section 127(b), or for failing to comply with disclosure requirements

under State law
for any term or item that the Board has

determined to be substantially the same in meaning under section
111(a)(2) as any of the
terms or items referred to in section

127(a), or paragraph (4), (5), (6), (7), (8), (9), (10), or (11) of
section 127(b).'.



(2) Disclosures in connection with solicitations:



(A) In general: Section 127(c)(1)(B) of the Truth in Lending Act (15
U.S.C. 1637(c)(1)(B))
is amended by adding at the end

the following:



`(iv) Credit worksheet: An easily understandable credit worksheet
designed to aid
consumers in determining their ability to

assume more debt, including consideration of the personal expenses of
the consumer and a
simple formula for the consumer to

determine whether the assumption of additional debt is advisable.



`(v) Basis of preapproval: In any case in which the application or
solicitation states
that the consumer has been preapproved

for an account under an open end consumer credit plan, the following
statement must appear
in a clear and conspicuous manner:

`Your preapproval for this credit card does not mean that we have
reviewed your individual
financial circumstances. You should

review your own budget before accepting this offer of credit.'.



`(vi) Availability of credit report: That the consumer is entitled to a
copy of his or her
credit report in accordance with the Fair

Credit Reporting Act.'.



(B) Publication of model forms: Not later than 180 days after the date
of enactment of
this Act, the Board of Governors of the

Federal Reserve System shall publish model disclosure forms in
accordance with section 105
of the Truth in Lending Act for the

purpose of compliance with section 127(c)(1)(B) of the Truth in Lending
Act, as amended by
this paragraph.

(b) Effective Date: This section and the amendments made by this section

shall take effect
on January 1, 2001.



SEC. 210. VIOLATIONS OF THE AUTOMATIC STAY.

Section 362(a) of title 11, United States Code, is amended--



(1) in paragraph (7), by striking `and' at the end;



(2) in paragraph (8), by striking the period and inserting `; and';



(3) by adding at the end the following:



`(9) any communication threatening a

Description:

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS (Senate - May 3, 1999)
As Reported Online at http://www.thomas.gov
Posted by the Amerian Bankruptcy Institute
CONSUMER BANKRUPTCY REFORM ACT OF 1999

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
(Senate - May 3, 1999)


As Reported Online at http://www.thomas.gov


Posted by the Amerian Bankruptcy Institute

CONSUMER BANKRUPTCY REFORM ACT OF 1999

Mr. DURBIN.

Mr. President, today, joined by colleagues, Senator
Leahy, Senator Kennedy, Senator

Feingold and Senator Sarbanes, I am
introducing the bankruptcy reform bill that passed the Senate last year
by a vote of 97-1.

A constant theme that has guided me throughout the consideration of
bankruptcy legislation is balanced reform. You cannot have meaningful
bankruptcy reform without addressing both sides of the
problem--irresponsible debtors and irresponsible creditors.

Unfortunately, the bill we worked so hard to develop, was decimated
in conference and the result was a one-sided bill designed to reward the
credit industry and penalize American consumers. I could not support it.
I hope this year will be different.

The bankruptcy code is delicate balance. When you push one thing,
almost invariably something else will give. For that reason, it is
crucial for bankruptcy reform to be thoughtful and for the changes to be
targeted and not create more problems than they attempt to solve.

This year, Senator Grassley has introduced S.625,
the bankruptcy reform bill of 1999. This bill has more similarities to
last year's conference report than the bipartisan measure that passed
the Senate last year by an overwhelming margin.

The Durbin-Leahy bill is fairer. S.625 uses a means test adopted from
IRS collection allowances. The test would require every debtor,
regardless of income, who files for Chapter 7 bankruptcy to be
scrutinized by the U.S. trustee to determine whether the filling is
abusive. The bill creates a presumption that a case is abusive if a
debtor can pay the lesser of 25% of unsecured nonpriority claims or
$15,000 over 5 years. The IRS means test was designed for use on a case
by case basis, not as an automatic template.

In my home state, the average annual income for bankruptcy filers in
the Central District of Illinois for 1998 was $20,448, yet the average
amount of unsecured debt was $22,900. This figure shows that many filers
were hopelessly insolvent. They owed more money on debt that had no
collateral than their total income for the entire year. These debtors
don't even come close to meeting the standards that would require them
to convert their case to a

chapter 13 case, but they will be forced to go through additional
scrutiny at extra costs to everyone involved.

In contrast, the Durbin-Leahy bill gives courts discretion to dismiss
or convert a Chapter 7 bankruptcy case if the debtor can fund a Chapter
13 repayment plan. One of the factors for the court to consider in
making the decision is whether the debtor is capable of paying 30% of
unsecured claims under a 3 year plan. This reform can address abuses
without the complexity of certifying ability to pay in every case as
required by S.625.

The Durbin-Leahy bill is cheaper because every case does not go
through means testing. By requiring the trustee to submit reports on all
filers the cost to trustees is dramatically increased with little
reward.

The means test in S. 625 looks a lot like the means test in the House
bill. We now know that the means test in the House bill would only apply
to far less than 10% of Chapter 7 filings. A study released by the
American Bankruptcy Institute found that by using the test from the
House bill, 97% of sample Chapter 7 debtors had too little income to
repay even 20% of their unsecured debts over five years. As a result,
only 3% of the sample Chapter 7 filers had sufficient repayment capacity
to be barred from Chapter 7 under the rigid means test. This means 100%
of the filers would have to go through a process that would only apply
to 3% of the cases.

Beyond the administrative costs, there is the unneeded stress on poor
families. According to the National Conference on Bankruptcy Judges, a
review of surveys of Chapter 7 cases from 46 judicial districts in 33
states reveals that the median gross annual income for the 3151 cases in
1998 was $21,540, some $15,000 lower than the 1997 national median
income for all families in the United States. Yet, the median amount of
unsecured nonpriority debt for these same debtors was $23,411. These
people are insolvent, and forcing them to go through unnecessary hoops
for little reward is unfair and ineffective.
The Durbin-Leahy bill is more balanced. The Durbin-Leahy bill includes
credit disclosures designed to help families understand their debt and
prevent them from incurring debt which makes them financially
vulnerable. Many families file for bankruptcy after a health crisis or
some other catastrophic event that prevents them from paying their
debts. For example, the survey conducted by the bankruptcy judges shows
that on average over 25% of bankruptcy cases involve debtors with
medical debts over $1000. By requiring more complete information for
debtors, they can make better credit decisions and avoid bankruptcy
altogether.

The Durbin-Leahy bill addresses abusive creditor practices. The
Durbin-Leahy bill protects the elderly from predatory lending practices.
Much of our discussion concerning reform of the nation's bankruptcy laws
has focused upon perceived abuses of the bankruptcy system by consumer
debtors. Far less discussion has occurred with regard to abuses by
creditors that help usher the nation's consumers into bankruptcy. I
believe that abuses exist on both sides of the debtor-creditor
relationship and that bankruptcy reform is incomplete if it fails to
address documented abuses among creditors.

Last year, I worked to protect elderly Americans by prohibiting a
high-cost mortgage lender who extended credit in violation of the
provisions of the Truth-In-Lending Act from collecting its claim in
bankruptcy. If the lender has failed to comply with the requirements of
the Truth-in-Lending Act for high-cost second mortgages, the lender will
have absolutely no claim against the bankruptcy estate. This provision
is not aimed at all lenders or at all second mortgages. Indeed, it is
aimed only at the worst, most predatory, of these by and large worthy
lenders. It is aimed only at practices that are already illegal and it
does not deal with technical or immaterial violations of the Truth in
Lending Act.

Disallowing the claims of predatory lenders in bankruptcy cases will
not end these predatory practices altogether. Yet it is one step we can
take to curb creditor abuse in a situation where the lender bears
primary responsibility for the deterioration of a consumer's financial
situation.

I encourage my Senate colleagues to join Senator
Leahy and me in this effort. Bankruptcy reform must be
balanced and must not create a nation of financial outlaws.

Mr. President, I ask unanimous consent that a copy of the bill be
printed in the Record.

There being no objection, the bill was ordered to be printed in the
Record, as follows:

See http://www.abiworld.org/legis/bills/99mays945.html

---

END

Description:

Mr. President, I rise today to introduce legislation that would modify our bankruptcy laws to deal with bankruptcies in the health care sector.

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS (Senate - April 20, 1999)


As Reported Online at http://www.thomas.gov


Posted by the Amerian Bankruptcy Institute

Mr. GRASSLEY. Mr. President, I rise today to introduce legislation that would modify our bankruptcy laws to deal with bankruptcies in the health care sector. According to testimony I received in the Subcommittee on Administrative Oversight and the Courts, almost one-third of our hospitals could face foreclosure because they are not financially sound. And a number of nursing homes are in terrible financial trouble. I believe that chapter 11 and chapter 9 of the Bankruptcy Code could be vitally important in keeping troubled hospitals in business. The bill we are proposing will ensure that chapter 11 will work fairly and efficiently in the unfortunate event that we face a rash of health care bankruptcies. The bill will also make sure the health care businesses which liquidate under Chapter 7 don't just throw patients by the wayside in a rush to sell assets and pay creditors.

Currently, the Bankruptcy Code does an adequate job of helping debtors reorganize and helping creditors recover losses. However, the code does not provide protection for the interests of patients. This bill contains several important reforms to protect patients when health care providers declare bankruptcy. Specifically, the bill addresses the disposal of patient records, the costs associated with closing a health care business, the duty to transfer patients upon the closing of a health care facility and the appointment of an ombudsman to protect patient rights.

Section 102 covers the disposal of patient records. The legislation provides clear and specific guidance to trustees who may not be aware of state law requirements for maintaining the patient records or the confidentiality issues associated with patient records. Section 102 is necessary given the patient's need for the records and the apparent lack of clear instruction, whether statutory or otherwise, describing a proper procedure in dealing with patient records when closing a facility.

Section 103 brings the costs associated with closing a health care business, including any expenses incurred by disposing of patient records and transferring patients to another health care facility, within the administrative expense umbrella of the Bankruptcy Act.

Section 104 provides for an ombudsman to act as an advocate for the patient. This change will ensure that judges are fully aware of all the facts when they guide a health care provider through bankruptcy. Prior to a chapter 11 filing or immediately thereafter, the debtor employs a health care crisis consultant to help it in its reorganization effort. The first step is usually cutting costs. Sometimes, this step may result in a lower quality of patient care. The appointment of an ombudsman should balance the interests between the creditor and the patient. These interests need balancing because the court appointed professionals owe fiduciary duties to creditors and the estate but not necessarily to the patients. There will be occasions which illustrate that what may be in the best interest of creditors may not always be consistent with the patients' best interest. The trustee's interest, for example, is to maximize the amount of the estate to pay off the creditors. The more assets the trustees disburses, the
more his payment will be. On the other hand, the ombudsman is designed to insure continued quality of care at least above some minimum standard. Such quality of care standards currently exist throughout the health care environment, from the health care facility itself to State standards and Federal standards.

Consider the following excerpt from the Los Angeles Times on September 28, 1997 which describes the unconscionable, pathetic, and traumatizing consequences of sudden nursing home closings:

It could not be determined Saturday how many more elderly and chronically ill patients may be affected by the health care company's financial problems. Those at the Reseda Care Center in the San Fernando Valley, including a 106-year-old woman, were rolled into the street late Friday in wheelchairs and on hospital beds, bundled in blankets as relatives scurried to gather up clothes and other personal belongings.

The presence of an ombudsman probably would result in fewer instances similar to what I just described, where trustees quickly close health care facilities without notifying appropriate state and federal agencies and without notifying the bankruptcy court.

Section 1105 requires a trustee to use reasonable and best efforts to transfer patients in the face of a health care business closing. This provision is both useful and necessary in that it outlines a trustee's duty with respect to a transfer of vulnerable patients.

For all these reasons, I urge you to join me and my colleagues in supporting this bill which will protect the interests of patients in health care bankruptcies.

Mr. LEAHY. Mr. President, I am pleased to join Senator Grassley and Senator Torricelli in introducing legislation to protect patient privacy when a hospital, nursing home, HMO or other institution holding medical records is involved in a bankruptcy proceeding that leads to liquidation.

Of course, in the best case scenario any institution holding patient health care records would continue to follow applicable state or federal law requiring proper storage and safeguards. The fact is, however, under current law during a business liquidation an individual would have to wait until there has been a serious breach of their privacy rights before anyone stepped in to ensure that patient privacy is protected. Under current law it is questionable what protection these most sensitive personal records would have during a liquidation.

The reality of this situation and the practical questions of what recourse an individual would have if their personal medical records were not properly safeguarded against a business that is going out of business makes this provision essential. Our legislation would set in law the procedure that an institution holding medical records would have to follow during a liquidation proceeding.

The bottom line is that we do not want to have to wait until there has been a breach of privacy before steps are taken to protect patient privacy. Once privacy is breached--there is nothing one can really do to give that back to an individual.

I have been working on the overall issue of medical privacy for many years. I look forward to working with Senator Grassley and Senator Torricelli on this issue to make sure that patient privacy rights are protected in bankruptcy.

---

END

Description:

To amend title 11, United States Code, to provide for health care and employee benefits, and for other purposes. (Introduced in Senate)

Description:

To amend the Truth in Lending Act to enhance consumer disclosures regarding credit card terms and charges, to restrict issuance of credit cards to students, to expand protections in connection with unsolicited credit cards and third-party checks, and to protect consumers from unreasonable practices that result in unnecessary credit costs or loss of credit, and for other purposes.

Description:

To combat nursing home fraud and abuse, increase protections for victims of telemarketing fraud, enhance safeguards for pension plans and health care benefit programs, and enhance penalties for crimes against seniors, and for other purposes.

Description:

To amend title 11, United States Code, to provide for family fishermen, and to make chapter 12 of title 11, United States Code, permanent.

Description:

Mr. President, today I am introducing a bill to make reorganization under Chapter 12 of the Bankruptcy Code
applicable to family fishermen. In brief, the bill would allow family fishermen the opportunity to apply for the protections of
reorganization in bankruptcy and provide to them the same protections and terms as those granted the family farmer who enters
bankruptcy.

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS (Senate - March 23, 1999)


As Reported Online at http://thomas.loc.gov


Posted by the Amerian Bankruptcy Institute
THE FISHERMEN'S BANKRUPTCY PROTECTION ACT

     [Begin insert]

Ms. COLLINS. Mr. President, today I am introducing a bill to make reorganization under Chapter 12 of the Bankruptcy Code
applicable to family fishermen. In brief, the bill would allow family fishermen the opportunity to apply for the protections of
reorganization in bankruptcy and provide to them the same protections and terms as those granted the family farmer who enters
bankruptcy. 

Like many Americans, I'm appalled by those who live beyond their means, and use the bankruptcy code as a tool to cure their
self-induced financial ills. I have supported and will continue to support alterations to the bankruptcy code that ensure the
responsible use of its provisions. All consumers bear the burden of irresponsible debtors who abuse the system. Therefore, I
believe bankruptcy should remain a tool of last resort for those in severe financial distress. 

As those familiar with the bankruptcy code know, business reorganization in bankruptcy is a different creature than the forgiveness
of debt traditionally associated with bankruptcy. Reorganization embodies the hope that by providing business a break from
creditors, and allowing debt to be adjusted, the business will have an opportunity to get back on sound financial footing and thrive.
In that vein, Chapter 12 was added to the bankruptcy code in 1986 by the Senator from Iowa, Mr. Grassley, to provide for
bankruptcy reorganization of the family farm and to give family farmers a `fighting chance to reorganize their debts and keep their
land'. 

To provide the `fighting chance' envisioned by the authors of Chapter 12, Congress provided a distinctive set of substantive and
procedural rules to govern effective reorganization of the family farm. In essence, Chapter 12 was a recognition of the unique
situation of family owned businesses and the enormous value of the family farmer to the American economy and our cultural
heritage. 

Chapter 12 was modeled on bankruptcy Chapter 13 which governs the reorganization of individual debt. However, to address the
unique problems encountered by farmers, Chapter 12 provided for significant advantages over the standard Chapter 13 filer. These
advantages include a longer period of time to file a plan for relief, greater flexibility for the debtor to modify the debts secured by
their assets, and alteration of the statutory time limit to repay secured debts. The Chapter 12 debtor is also given the freedom to
sell off parts of his or her property as part of a reorganization plan. 

Unlike Chapter 13, which applies solely to individuals, Chapter 12 can apply to individuals, partnerships or corporations which fall
under a $1.5 million debt threshold--a recognition of the common use of incorporation even among small family held farms. 

Without getting too technical, I should also mention that Chapter 12 also contains 

significant advantages over corporate reorganization which is governed by Chapter 11 of the Bankruptcy Code. For example,
Chapter 12 creditors generally may not challenge a payment plan that is approved by the Court. 

Chapter 12 has been considered an enormous success in the farm community. According to a recent University of Iowa study, 74
percent of family farmers who filed Chapter 12 bankruptcy are still farming, and 61 percent of farmers who went through Chapter
12 believe that Chapter 12 was helpful in getting them back on their feet. 

Recognizing its effectiveness, my bill proposes that Chapter 12 should be made a permanent part of the bankruptcy code, and
equally important, my bill would extend Chapter 12's protections to family fishermen. 

In my own state of Maine, fishing is a vital part of our economy and our way of life. The commercial fishing industry is made up of
proud and fiercely independent individuals whose goal is simply to preserve their business, family income and community. 

In my opinion, for too long the fishing industry has been treated like an oddity, rather than a business through which courses the
life's blood of families and communities. This bill attempts to bridge that gap and afford fishermen the protection of business
reorganization as it is provided to family farmers. 

There are many similarities between the family farmer and the family fisherman. Like the family farmer, the fisherman should not
only be respected as a businessman, but for his or her independence in the best tradition of our democracy. Like farmers,
fishermen face perennial threats from nature and the elements, as well as changes to laws which threaten their existence. Like
family farmers, fishermen are not seeking special treatment or a hand-out from the federal government, they seek only `the fighting
chance' to remain afloat so that they can continue in their way of life. 

Although fishermen do not seek special treatment from the government, they play a special role in seafaring communities on our
coasts, and they deserve protections granted others who face similar, often unavoidable, problems. Fishermen should not be denied
the bankruptcy protections accorded to farmers solely because they harvest the sea and not the land. 

I have proposed not only to make Chapter 12 a permanent part of the bankruptcy code, but also to apply its provisions to the family
fisherman. The bill I have proposed mirrors Chapter 12 with very few exceptions. Its protections are restricted to those fishermen
with regular income who have total debt less than $1.5 Million, the bulk of which, eighty percent, must stem from commercial
fishing. Moreover, families must rely on fishing income for these provisions to apply. 

Those same protections and flexibility we grant to farmers should also be granted to the family fisherman. By making this modest
but important change to the bankruptcy code, we will express our respect for the business of fishing, and our shared wish that this
unique way of life should continue
Description:

To amend the Truth in Lending Act to provide for enhanced information regarding credit card balance payment terms and conditions, and to provide for enhanced reporting of credit card solicitations to the Board of Governors of the Federal Reserve System and to Congress, and for other purposes.

Description:

To amend title 11, United States Code, and for other purposes.

Description:

To amend title 11, United States Code, and for other purposes.

Description:

S. 586. A bill to amend title 11, United States Code, to limit the value of certain real property that a debtor may elect to exempt under State or local law, and for other purposes to the Committee on the Judiciary.

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
(Senate - March 11, 1999)


As Reported Online at http://www.thomas.gov


Posted by the Amerian Bankruptcy Institute

By Mr. KOHL (for himself, and Mr. Sessions):

S. 586. A bill to amend title 11, United States Code, to limit the
value of certain real property that a debtor may elect to exempt under
State or local law, and for other purposes to the Committee on the
Judiciary.

[Page: S2577]

BANKRUPTCY ABUSE REFORM ACT OF 1999

Mr. KOHL. Mr. President, I rise today, with Senator
Sessions, to introduce the bipartisan Bankruptcy Abuse
Reform Act of 1999, legislation which addresses a serious problem that
threatens Americans' confidence in our bankruptcy laws. The measure
would cap at $100,000 the State homestead exemption that an individual
filing for personal bankruptcy can claim. It passed the Senate last year
when it was included in the Consumer Bankruptcy Reform Act of 1998 (H.R.
3150), and I hope that we can all support this measure again this year.
The goal of our measure is simple but vitally important: to make sure
that our Bankruptcy Code is more than just a beachball for crooked
millionaires who want to hide their assets.

Let me tell you why this legislation is critically needed. In chapter
7 Federal personal bankruptcy proceedings, the debtor is allowed to
exempt certain possessions and interests from being used to satisfy his
outstanding debts. One of the chief things that a debtor seeks to
protect is his home, and I agree with that in principle. Few question
that debtors should be able to keep a roof over their heads. But, in
practice, this homestead exemption has become a source of great abuse.

Under section 522 of the Code, a debtor may opt to exempt his home
according to local, State, or Federal bankruptcy provisions. The Federal
exemption allows the debtor to shield up to $15,000 of value in his
house. The State exemptions vary tremendously: some States do not allow
the debtor to exempt any of his home's value, while a handful of states
set no ceiling and allow an unlimited exemption. The vast majority of
states have exemptions under $40,000.

Our proposal would amend Section 522 to cap State exemptions so that
no debtor could ever exempt more than $100,000 of the value of his home.

Mr. President, in the past few years, the ability of debtors to use
State homestead exemptions has led to flagrant abuses of the Bankruptcy
Code. Multimillionaire debtors have moved to one of the states with
unlimited exemptions--most often Florida or Texas--bought
multi-million-dollar houses, and continued to live like kings even after
declaring bankruptcy. This shameless manipulation of the Bankruptcy Code
cheats honest creditors out of compensation and rewards only those who
can `game' the system. Oftentimes, the creditor who is robbed is the
American taxpayer. In recent years, S&L swindlers, convicted insider
trader convicts, and others have managed to protect their ill-gotten
gains through this loophole.

The owner of a failed Ohio S&L, who was convicted of securities
fraud, wrote off most of $300 million in bankruptcy claims, but still
held on to the multimillion dollar ranch he bought in Florida. A
convicted Wall Street financier filed bankruptcy while owing at least
$50 million in debts and fines, but still kept his $5 million Florida
mansion with 11 bedrooms and 21 bathrooms. And just last year, movie
star Burt Reynolds wrote off over $8 million in debt through bankruptcy,
but still held onto his $2.5 million Florida estate. These deadbeats
stay wealthy while legitimate creditors--including the U.S.
Government--get the short end of the stick.

Simply put, the current practice is grossly unfair and contravenes
the intent of our laws: People are supposed to get a fresh start, not a
head start, under the Bankruptcy Code.

Mr. President, the legislation that I have introduced today is
simple, effective and straightforward. It caps the homestead exemption
at $100,000, which is far more than estimated median home equity of
people in bankruptcy. It is endorsed by the National Bankruptcy Review
Commission. And it will protect middle class Americans while preventing
the abuses that are making the middle class question the integrity of
our laws--the abuses the average American taxpayer is paying for out of
pocket.

Indeed, it is even generous to debtors. Less than ten states have a
homestead exemption that exceeds $100,000. More than two-thirds of
states cap the exemption at $40,000 or less. My own home state of
Wisconsin has a $40,000 exemption and that, in my opinion, is more than
sufficient.

Mr. President, this proposal is an effort to make our bankruptcy laws
more equitable. I urge my colleagues to support this important measure.

---

END

Description:

To amend title 11, United States Code, to limit the value of certain real and personal property that a debtor may elect to exempt under State or local law, and for other purposes.

Description:

To amend the Truth in Lending Act to protect consumers from certain unreasonable practices of creditors which result in higher fees or rates of interest for credit cardholders, and for other purposes.

Description:

To amend title 28, United States Code, to authorize the appointment of additional bankruptcy judges for the judicial district of Maryland. (Introduced in Senate)
To amend title 28, United States Code, to authorize the appointment
of additional bankruptcy judges for the judicial district of Maryland.
(Introduced in Senate)

S 454 IS

106th CONGRESS

1st Session

S. 454

To amend title 28, United States Code, to authorize the
appointment of additional bankruptcy judges for the judicial district of
Maryland.

IN THE SENATE OF THE UNITED STATES

February 24, 1999

Mr. SARBANES (for himself and Ms. MIKULSKI) introduced the following
bill; which was read twice and referred to the Committee on the
Judiciary


A BILL

To amend title 28, United States Code, to authorize the
appointment of additional bankruptcy judges for the judicial district of
Maryland.

    Be it enacted by the Senate and House of Representatives of
    the United States of America in Congress assembled,

SECTION 1. BANKRUPTCY JUDGESHIPS.

    In section 152(a)(2) of title 28, United States Code, in the
    item relating to the judicial district of Maryland, strike `4' and
    insert `8'.
Description:

Mr. President, I rise today on behalf of myself and my colleague from Maryland, Senator Mikulski, to introduce legislation that is absolutely critical to the administration of justice and the economy in our State of Maryland.
(Presented by the American Bankruptcy Institute)

The following is an excerpt from the Congressional Record, February 24, 1999:


STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS (Senate - February 24, 1999)


BANKRUPTCY JUDGESHIPS FOR THE DISTRICT OF MARYLAND

  • [Begin insert]

Mr. SARBANES. Mr. President, I rise today on behalf of myself and my colleague from Maryland, Senator Mikulski, to introduce legislation that is absolutely critical to the administration of justice and the economy in our State of Maryland. This legislation provides for four additional bankruptcy judges for the federal judicial District of Maryland.

This bill represents only the most recent of our efforts to strengthen Maryland's federal bankruptcy court. Early in the 105th Congress, we introduced legislation adding two additional bankruptcy judges for the District of Maryland, in line with the then-pending request of the Judicial Conference. The House of Representatives followed suit in summer 1997, passing legislation that authorized these two judges, in addition to other new bankruptcy judgeships throughout the country. Last year, the Senate overwhelmingly passed bankruptcy reform legislation that, among other things, authorized these two judgeships, though under the Senate bill the judges were of temporary, rather than permanent, status. This legislation ultimately was not enacted into law, however, and with such inaction the problem facing Maryland's sitting bankruptcy judges has only grown. Maryland remains without the additional judgeships it so desperately needs to make our bankruptcy system work.

Our State's need for additional bankruptcy judges has long since passed the critical stage. Since November 1993, when Maryland last received an additional bankruptcy judge, the number of bankruptcy filings in the State has more than doubled. While the entire nation has witnessed a surge in bankruptcy filings over the past several years, the increase in Maryland has dwarfed the national average increase. Bankruptcy filings in Maryland in the second quarter of 1998 grew at eight times the national rate of increase for that period; for the 12-month period ending June 30, 1998, the rate of increase in Maryland was the tenth greatest of the 90 federal judicial districts in the Nation. The District of Maryland ranks first among federal judicial districts in filings per judge. As noted earlier, each House of Congress authorized two additional bankruptcy judges for Maryland during the 105th Congress. Simply put, however, the problem has outpaced this solution.

The need for the four additional judgeships sought in this legislation becomes even more evident when one considers it in the context of the case-weighting system adopted by the Judicial Conference in 1991 to assess requests for additional bankruptcy judges. Under this system, different types of bankruptcy cases are assigned different degrees of difficulty and overall weighted case-hour goals are established for the judges.

The Judicial Conference begins to consider requests for additional judges when a district's per-judge weighted caseload reaches 1500 hours. The average United States Bankruptcy Judge had a weighted case-hour load of 1429 hours per year for the 12-month period ending June 30, 1998. For that same period, Maryland's bankruptcy judges averaged a weighted case-hour load of 3020 hours--an astounding 211 percent of the national average. Not only do the Maryland figures dwarf the national average; they also dwarf the prior Maryland figures which led to legislation passed by each Houses of Congress authorizing additional judgeships. Indeed, Maryland's overall weighted case load for the 12-month period ending June 30, 1998, represented a 25% increase over its load for the prior 12-month period alone.

I ask my colleagues to consider these telling statistics:

If Maryland were to receive two additional judgeships tomorrow, its per-judge weighted caseload would still be 2013 hours--41 percent greater than the national average last year, and 34 percent greater than the 1500-hour benchmark used by the Judicial Conference to evaluate requests for additional judgeships.

If Maryland were to receive three additional judgeships tomorrow, its per-judge weighted caseload would still be 1725 hours--21 percent more than the national average, and 15 percent greater than the Judicial Conference benchmark.

Only if Maryland were to receive four additional judgeships, as requested in this bill, would the per-judge caseload in Maryland approximate the national average. And even then each Maryland judge would have a caseload of 1510 case-weighted hours--still above the 1429-hour national average, and still above the 1500-hour Judicial Conference benchmark.

The additional judgeships sought in this bill are essential not only for effective judicial administration, but also for Maryland's economy. Bankruptcy laws foster orderly, constructive relationships between debtors and creditors during times of economic difficulty. Their effective and expeditious implementation results in businesses being reorganized, jobs (provided by creditors and debtors) preserved, and debts managed fairly. Overworked bankruptcy courts have a destabilizing effect on this system, and the inevitable delays occasioned by the lack of judges harm creditors and debtors, imperiling Maryland's businesses and the people they employ.

It is expected that bankruptcy reform legislation will be one of the first items on the Senate's agenda now that it has resumed legislative business. Adding judgeships in Maryland's and other bankruptcy courts in need of relief is an essential component of any such reform, given that the legislation we are contemplating will not only not ease the burdens on these courts, but in fact will increase these burdens by imposing new responsibilities on our nation's bankruptcy judges. And even if comprehensive bankruptcy reform fails or is delayed, the current state of affairs facing Maryland's bankruptcy court requires immediate action in the form of adding judges to that court.

In closing let me once again commend the efforts of Maryland's four sitting bankruptcy judges--Chief Judge Paul Mannes and Judges Duncan Keir, James Schneider, and Steve Derby. Their dedication to the administration of justice is especially impressive given the extraordinary burdens placed on them--burdens which the Senate ought to ease at the earliest possible instance.

  • [End insert]

---
Description:

To improve pay and retirement equity for members of the Armed Forces\; and for other purposes.

Description:

To make chapter 12 of title 11, United States Code, permanent, and for other purposes.

Description:

To combat waste, fraud, and abuse in payments for home health services provided under the Medicare program, and to improve the quality of those home health services.
Home Health Integrity Preservation Act of 1999 (Introduced in
Senate)


S 255 IS

106th CONGRESS

1st Session

S. 255

To combat waste, fraud, and abuse in payments for home health
services provided under the Medicare program, and to improve the quality
of those home health services.

IN THE SENATE OF THE UNITED STATES

January 20, 1999

Mr. GRASSLEY (for himself and Mr. BREAUX) introduced the following
bill; which was read twice and referred to the Committee on Finance


A BILL

To combat waste, fraud, and abuse in payments for home health
services provided under the Medicare program, and to improve the quality
of those home health services.

    Be it enacted by the Senate and House of Representatives of
    the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) SHORT TITLE- This Act may be cited as the `Home Health
    Integrity Preservation Act of 1999'.

    (b) TABLE OF CONTENTS- The table of contents of this Act is as
    follows:

      Sec. 1. Short title; table of contents.

      Sec. 2. Additional conditions of participation for home
      health agencies.

      Sec. 3. Surveyor training in reimbursement and coverage
      policies.

      Sec. 4. Surveys and reviews.

      Sec. 5. Prior patient load.

      Sec. 6. Establishment of standards and procedures to improve
      quality of services.

      Sec. 7. Notification of availability of a home health
      agency's most recent survey as part of discharge planning
      process.

      Sec. 8. Home health integrity task force.

      Sec. 9. Application of certain provisions of the bankruptcy
      code.

      Sec. 10. Study and report to Congress.

      Sec. 11. Effective date.

SEC. 2. ADDITIONAL CONDITIONS OF PARTICIPATION FOR HOME HEALTH
AGENCIES.

    (a) QUALIFICATIONS OF MANAGING EMPLOYEES- Section 1891(a) of
    the Social Security Act (42 U.S.C. 1395bbb(a)) is amended by adding at
    the end the following:

      `(7) The agency shall have--

        `(A) sufficient knowledge, as attested by the managing
        employees (as defined in section 1126(b)) of the agency (pursuant to
        subsection (c)(2)(C)(iv)(II)) using standards established by the
        Secretary, of the requirements for reimbursement under this title,
        coverage criteria and claims procedures, and the civil and criminal
        penalties for noncompliance with such requirements; and

        `(B) managing employees with sufficient prior education
        or work experience, according to standards determined by the Secretary,
        in the delivery of health care.'.

    (b) COMPLIANCE PROGRAM- Section 1891(a) of the Social Security
    Act (42 U.S.C. 1395bbb(a)) (as amended by subsection (a)) is amended by
    adding at the end the following:

      `(8) The agency has developed and implemented a fraud and
      abuse compliance program.'.

    (c) AVAILABILITY OF SURVEY- Section 1891(a) of the Social
    Security Act (42 U.S.C. 1395bbb(a)) (as amended by subsection (b)) is
    amended by adding at the end the following:

      `(9) The agency, before the agency provides any home health
      services to a beneficiary, makes available to the beneficiary or the
      representative of the beneficiary a summary of the pertinent findings
      (including a list of any deficiencies) of the most recent survey of the
      agency relating to the compliance of such agency. Such summary shall be
      provided in a standardized format and may, at the discretion of the
      Secretary, also include other information regarding the agency's
      operations that are of potential interest to beneficiaries, such as the
      number of patients served by the agency.'.

    (d) NOTICE OF NEW HOME HEALTH SERVICE, NEW BRANCH OFFICE, AND
    NEW JOINT VENTURE- Section 1891(a)(2) of the Social Security Act (42
    U.S.C. 1395bbb(a)(2)) is amended to read as follows:

      `(2)(A) The agency notifies the agency's fiscal
      intermediary and the State entity responsible for the licensing or
      certification of the agency--

        `(i) of a change in the persons with an ownership or
        control interest (as defined in section 1124(a)(3)) in the
        agency,

        `(ii) of a change in the persons who are officers,
        directors, agents, or managing employees (as defined in section 1126(b))
        of the agency,

        `(iii) of a change in the corporation, association, or
        other company responsible for the management of the
        agency,

        `(iv) that the agency is providing a category of
        skilled service that it was not providing at the time of the agency's
        most recent standard survey,

        `(v) that the agency is operating a new branch office
        that was not in operation at the time of the agency's most recent
        standard survey, and

        `(vi) that the agency is involved in a new joint
        venture with other health care providers or other business
        entities.

      `(B) The notice required under subparagraph (A) shall be
      provided--

        `(i) for a change described in clauses (i), (ii), and
        (iii) of such subparagraph, within 30 calendar days of the time of the
        change and shall include the identity of each new person or company
        described in the previous sentence,

        `(ii) for a change described in clause (iv) of such
        subparagraph, within 30 calendar days of the time the agency begins
        providing the new service and shall include a description of the
        service,

        `(iii) for a change described in clause (v) of such
        subparagraph, within 30 calendar days of the time the new branch office
        begins operations and shall include the location of the office and a
        description of the services that are being provided at the office,
        and

        `(iv) for a change described in clause (vi) of such
        subparagraph, within 30 calendar days of the time the agency enters into
        the joint venture agreement and shall include a description of the joint
        venture and the participants in the joint venture.'.

SEC. 3. SURVEYOR TRAINING IN REIMBURSEMENT AND COVERAGE
POLICIES.

    Section 1891(d)(3) of the Social Security Act (42 U.S.C.
    1395bbb(d)(3)) is amended--

      (1) by striking `relating to the performance' and inserting
      `relating to--

      `(A) the performance';

      (2) by striking the period at the end and inserting `;
      and'; and

      (3) by adding at the end the following:

      `(B) requirements for reimbursement and coverage of
      services under this title.'.

SEC. 4. SURVEYS AND REVIEWS.

    (a) ADDITIONAL REQUIREMENTS FOR SURVEY- Section 1891(c)(2)(C)
    of the Social Security Act (42 U.S.C. 1395bbb(c)(2)(C)) is
    amended--

      (1) in clause (i)(I)--

        (A) by striking `purpose of evaluating' and inserting
        `purpose of--

          `(aa) evaluating'; and

        (B) by adding at the end the following:

          `(bb) evaluating whether the individuals are
          homebound for purposes of qualifying for receipt of benefits for home
          health services under this title; and';

      (2) in clause (ii), by striking `and' at the end;

      (3) in clause (iii), by striking the period at the end and
      inserting `; and'; and

      (4) by adding at the end the following:

      `(iv) shall include--

        `(I) an assessment of whether the agency is in
        compliance with all of the conditions of participation and requirements
        specified in or pursuant to section 1861(o), this section, and this
        title;

        `(II) an assessment that the managing employees (as
        defined in section 1126(b)) of the agency have attested in writing to
        having sufficient knowledge, as determined by the Secretary, of the
        requirements for reimbursement under this title, coverage criteria and
        claims procedures, and the civil and criminal penalties for
        noncompliance with such requirements; and

        `(III) a review of the services provided by
        subcontractors of the agency to ensure that such services are being
        provided in a manner consistent with the requirements of this
        title.'.

    (b) ADDITIONAL EVENTS TRIGGERING A SURVEY- Section
    1891(c)(2)(B) of the Social Security Act (42 U.S.C. 1395bbb(c)(2)(B)) is
    amended--

      (1) by striking `and' at the end of clause (i);

      (2) by striking the period at the end of clause (ii) and
      inserting a comma; and

      (3) by adding at the end the following:

          `(iii) shall be conducted not less than annually
          for the first 2 years after the initial standard survey of the
          agency,

          `(iv) after the agency's first 2 years of
          participation under this title, shall be conducted within 90 calendar
          days of the date that the agency notifies the Secretary that it is
          providing a category of skilled service that the agency was not
          providing at the time of the agency's most recent standard
          survey,

          `(v) if the agency is operating a new branch office
          that was not in operation at the time of the agency's most recent
          standard survey, shall be conducted within the 12-month period following
          the date that the new branch office began operations to ensure that such
          office is providing quality care and that it is appropriately classified
          as a branch office, and shall include direct scrutiny of the operations
          of the branch office, and

          `(vi) shall be conducted on randomly selected
          agencies on an occasional basis, with the number of such surveys to be
          determined by the Secretary.'.

    (c) REVIEW BY FISCAL INTERMEDIARY- Section 1816 of the Social
    Security Act (42 U.S.C. 1395h) is amended by adding at the end the
    following:

    `(m) An agreement with an agency or organization under this
    section shall require that the agency or organization conduct a review
    of the overall business structure of a home health agency submitting a
    claim for reimbursement for home health services, including any related
    organizations of the home health agency.'.

SEC. 5. PRIOR PATIENT LOAD.

    Section 1891 of the Social Security Act (42 U.S.C. 1395bbb) is
    amended by adding at the end the following:

    `(h) PRIOR PATIENT LOAD-

      `(1) IN GENERAL- The Secretary shall not enter into an
      agreement for the first time with a home health agency to provide items
      and services under this title unless the Secretary determines that,
      before the date the agreement is entered into, the agency--

        `(A) had been in operation for at least 60 calendar
        days; and

        `(B) had at least 10 patients during that period of
        prior operation.

      `(2) EXCEPTIONS-

        `(A) BENEFICIARY ACCESS- If the Secretary determines
        appropriate, the Secretary may waive the requirements of paragraph (1)
        in order to establish or maintain beneficiary access to home health
        services in an area.

        `(B) CHANGE OF OWNERSHIP- The requirements of paragraph
        (1) shall not apply to a home health agency at the time of a change in
        ownership of such agency.'.

SEC. 6. ESTABLISHMENT OF STANDARDS AND PROCEDURES TO IMPROVE
QUALITY OF SERVICES.

    (a) IN GENERAL- Section 1891 of the Social Security Act (42
    U.S.C. 1395bbb) (as amended by section 5) is amended by adding at the
    end the following:

    `(i) ESTABLISHMENT OF STANDARDS AND PROCEDURES-

      `(1) SCREENING OF EMPLOYEES- The Secretary shall establish
      procedures to improve the background screening performed by a home
      health agency on individuals that the agency is considering hiring as
      home health aides (as defined in subsection

(a)(3)(E)) and licensed health professionals (as defined in
subsection (a)(3)(F)).

      `(2) COST REPORTS- The Secretary shall establish additional
      procedures regarding the requirement for attestation of cost reports to
      ensure greater accountability on the part of a home health agency and
      its managing employees (as defined in section 1126(b)) for the accuracy
      of the information provided to the Secretary in any such cost
      reports.

      `(3) MONITORING AGENCY AFTER EXTENDED SURVEY- The Secretary
      shall establish procedures to ensure that a home health agency that is
      subject to an extended (or partial extended) survey is closely monitored
      from the period immediately following the extended survey through the
      agency's subsequent standard survey to ensure that the agency is in
      compliance with all the conditions of participation and requirements
      specified in or pursuant to section 1861(o), this section, and this
      title.

      `(4) ADDITIONAL AUDITS-

        `(A) IN GENERAL-

          `(i) STANDARDS- The Secretary shall establish
          objective standards regarding the determination of--

            `(I) whether an agency is a home health agency
            described in subparagraph (B); and

            `(II) the circumstances that trigger an audit
            for a home health agency described in subparagraph (B), and the content
            of such an audit.

          `(ii) INFORMATION- In establishing standards under
          clause (i), the Secretary shall ensure that the individuals performing
          the audits under this section are provided with the necessary
          information, including information from intermediaries, carriers, and
          law enforcement sources, in order to determine if a particular home
          health agency is an agency described in subparagraph (B) and whether the
          circumstances triggering an audit for such an agency has
          occurred.

        `(B) AGENCY DESCRIBED- A home health agency is
        described in this subparagraph if it is an agency that
        has--

          `(i) experienced unusually rapid growth as compared
          to other home health agencies in the area and in the
          country;

          `(ii) had unusually high utilization patterns as
          compared to other home health agencies in the area and in the
          country;

          `(iii) unusually high costs per patient as compared
          to other home health agencies in the area and in the
          country;

          `(iv) unusually high levels of overpayment or
          coverage denials as compared to other home health agencies in the area
          and in the country; or

          `(v) operations that otherwise raise concerns such
          that the Secretary determines that an audit is
          appropriate.

      `(5) BRANCH OFFICES-

        `(A) SURVEYS- The Secretary shall establish standards
        for periodic surveys of branch offices of a home health agency in order
        to assess whether the branch offices meet the Secretary's national
        criteria for branch office designation and for quality of care. Such
        surveys shall include home visits to beneficiaries served by the branch
        office (but only with the consent of the beneficiary).

        `(B) UNIFORM NATIONAL DEFINITION- The Secretary shall
        establish a uniform national definition of a branch office of a home
        health agency.

      `(6) CERTAIN QUALIFICATIONS OF MANAGING EMPLOYEES- The
      Secretary shall establish standards regarding the knowledge and prior
      education or work experience that a managing employee (as defined in
      section 1126(b)) of an agency must possess in order to comply with the
      requirements described in subsection (a)(7).

      `(7) CLAIMS PROCESSING-

        `(A) IN GENERAL- The Secretary shall establish
        standards to improve and strengthen the procedures by which claims for
        reimbursement by home health agencies are identified as being
        fraudulent, wasteful, or abusive.

        `(B) PROCEDURES- The standards established by the
        Secretary pursuant to subparagraph (A) shall include, to the extent
        practicable, standards for a minimum number of--

          `(i) intensive focused medical reviews of the
          services provided to beneficiaries by an agency;

          `(ii) interviews with beneficiaries, employees of
          the agency, and other individuals providing services on behalf of the
          agency; and

          `(iii) random spot checks of visits to a
          beneficiary's home by employees of the agency (but only with the consent
          of the beneficiary).

        `(C) REPORT TO CONGRESS- Not later than 90 days after
        the date of enactment of the Home Health Integrity Preservation Act of
        1999, the Secretary shall submit a report to Congress containing a
        detailed description of--

          `(i) the current levels of activity by the
          Secretary with regard to the reviews, interviews, and spot checks
          described in subparagraph (B); and

          `(ii) the Secretary's plans to increase those
          levels pursuant to the procedures described in subparagraphs (A) and
          (B).

      `(8) EXPANSION OF FINANCIAL STATEMENT- The Secretary shall
      establish procedures to expand the financial statement audit process to
      include compliance and integrity reviews.'.

    (b) EFFECTIVE DATE- By not later than 180 calendar days after
    the date of enactment of this Act, the Secretary shall establish the
    standards and procedures described in paragraphs (1) through (8) of
    section 1891(i) of the Social Security Act (42 U.S.C. 1395bbb(i)) (as
    added by subsection (a)) by regulation or other sufficient means.

SEC. 7. NOTIFICATION OF AVAILABILITY OF A HOME HEALTH AGENCY'S
MOST RECENT SURVEY AS PART OF DISCHARGE PLANNING PROCESS.

    Section 1861(ee)(2)(D) of the Social Security Act (42 U.S.C.
    1395x(ee)(2)(D)) (as amended by section 4321(a) of the Balanced Budget
    Act of 1997) is amended--

      (1) by striking `including the availability' and inserting
      `including--

        `(i) the availability'; and

      (2) by inserting before the period the following: `;
      and

        `(ii) the availability of (and procedures for obtaining
        from a home health agency) a summary document described in section
        1891(a)(9)'.

SEC. 8. HOME HEALTH INTEGRITY TASK FORCE.

    (a) ESTABLISHMENT- The Secretary of Health and Human Services
    (in this section referred to as the `Secretary') shall establish within
    the Office of the Inspector General of the Department of Health and
    Human Services

a home health integrity task force (in this section referred to as
the `Task Force').

    (b) DIRECTOR- The Inspector General of the Department of Health
    and Human Services shall appoint the Director of the Task Force.

    (c) DUTIES- The Task Force shall target, investigate, and
    pursue any available civil or criminal actions against individuals who
    organize, direct, finance, or are otherwise engaged in fraud in the
    provision of home health services (as defined in section 1861(m) of the
    Social Security Act (42 U.S.C. 1395x(m))) under the medicare program
    under such Act.


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Description:

To improve options for excellence in education.

House - Introduced Bills

Description:

To extend for 3 additional months the period for which chapter 12 of title 11 of the United States Code is reenacted. (Engrossed in House

Description:

H.R. 4718 To extend for 3 additional months the period for which chapter 12 of title 11 of the United States Code is reenacted. (Introduced in the House)

Description:

To amend title 49, United States Code, to reauthorize programs of the Federal Aviation Administration, and for other purposes.

Description:

An Updated Analysis of the Consumer Bankruptcy Provisions
of H.R. 833 Bankruptcy Reform Act of 1999, As passed by the House of Representatives
Prepared for the American Bankruptcy Institute


Web posted and Copyright ©

November 1, 1999, American Bankruptcy Institute.

An Updated Analysis of the Consumer Bankruptcy Provisions
of H.R. 833

Bankruptcy Reform Act of 1999,

As passed by the House of Representatives


Written by:

Hon. Eugene R. Wedoff

United States Bankruptcy Court

Northern District of Illinois

Chicago, Illinois

H.R. 833, passed by the House of Representatives on May 5, 1999, proposes major
changes in the Bankruptcy Code (Title 11, U.S.C.). A parallel bill, S. 625, is pending in the
Senate. H.R. 833 and S. 625 build on two bills—H.R. 3150 and S. 1301—that were passed by
the separate houses of the 105th Congress last year, but which were not enacted into law. The
American Bankruptcy Institute published analyses of the consumer provisions of each of the prior
bills, see http://www.abiworld.org/legis/bills/98julhr3150.html and http://www.abiworld.org/legis/bills/98julnew1301a.html.

This analysis of H.R. 833 follows the format of the prior analyses: first, by identifying
each of the changes that the bill would make in the current consumer law; second, by assessing the
impact that these changes would have on the operation of the law; and third, by suggesting
alternative approaches, where appropriate, to achieving the goals of the legislation. Several of the
suggested alternatives reflect work done by the Consumer Bankruptcy Legislative Group—a group
of individuals assembled to represent diverse interests affected by consumer bankruptcy law. The
complete recommendations of the group have also been published by ABI:

http://www.abiworld.org/legis/reform/rec4000.html.

Introduction to current consumer bankruptcy law.(1)


An Introduction to Proposed Bankruptcy Reform
http://www.abiworld.org/legis/bills/s1301intro.html provides a description of the operation of
current consumer bankruptcy law, which may be helpful in understanding the changes proposed in
H.R. 833.

Summary: major effects of the consumer bankruptcy provisions of H.R. 833.


The major effects that H.R. 833 would have on consumer bankruptcy law include the
following (with reference made to the relevant section(s) of the bill):

Chapter 7


1. Means testing. §102. Section 707(b) of the Bankruptcy Code would be amended to
provide for dismissal of Chapter 7 cases or (with the debtor's consent) conversion to Chapter 13,
upon a finding of abuse. Abuse would be presumed if the debtor had more than $100 in monthly
income available to pay general unsecured debt, based on a formula incorporating collection
standards of the Internal Revenue Service. The case trustee would be required to file a statement
as to the calculation under the formula in each case, which the court would be required to serve on
creditors, and, if the presumption applied, the trustee would be required to file either a motion
under §707(b) or a statement explaining why the motion was not being filed. There are conflicting
provisions regarding standing to bring §707(b) motions, but such standing would be extended to
all parties in interest in cases where the debtor's income is above a defined median.



2. Compensation of trustees for means testing. §§102, 607, 614. No additional
compensation would be provided to trustees for work involving means testing that does not
involve conversion or dismissal of the case. Section 707(b) would be amended both to require the
court to award damages if it finds that a Chapter 7 filing violates Fed.R.Bankr.P. 9011, and to
specify that these damages may include an award of fees and costs from debtor's counsel to the
trustee or a civil penalty payable to the trustee. Moreover, §§101 and 607 of H.R. 833 are
intended to extend Rule 9011 to the debtor's lists and schedules. In the event that the actions of
the trustee result in conversion or dismissal of a Chapter 7 case, the trustee would be allowed an
administrative claim for compensation and expense reimbursement for these actions. This claims
would not be subject to the fee cap of §326 and would be payable if the case converted to Chapter
13 case or in any subsequently filed Chapter 13 case.

3. Support priority. §139. Family support obligations of the debtor would have the first
priority in distribution, ahead of the costs of administering the estate.

4. Nonsubordination of property tax liens to family support claims. §801. Section 724(b)
of the Bankruptcy Code currently allows a Chapter 7 trustee to pay family support obligations
from funds that would otherwise be used to satisfy a property tax lien, with the tax lien being
subordinated to other liens on the affected property. This type of subordination would be
eliminated, so that if the debtor owed both property taxes (secured by a lien on the debtor's
property) and support obligations, the proceeds of any sale of the property would be used to pay
the taxes before the support obligations.

Chapter 13



1. Stripdown of secured claims. §§122, 123. Claims secured by purchase money security
interests arising within five years of the bankruptcy filing would not be subject to stripdown under
§506(a). Where stripdown remained applicable, collateral would be valued at its retail price.

2. Preconfirmation adequate protection. §135. Prior to distributions to creditors under a
confirmed Chapter 13 plan, debtors would be required both to make proposed plan payments and
adequate protection payments to lessors of personal property and holders of secured claims. The
adequate protection payments would have to be made at least monthly and in at least the contract
amounts.

3. Delay in confirmation. §605. Even in the absence of objections to confirmation, the
confirmation hearing could not take place until at least 20 days after the §341 meeting of creditors.

4. Plan length. §606. Debtors whose income is above a defined median would be
required to pay their creditors either in full or through a plan with a length of five years.

5. Exceptions to discharge. §§127, 807. In addition to those debts excepted from a
Chapter 13 discharge under current law, there would also be exceptions to discharge for debts
defined by § 523(a)(1), (2), (3)(b), (4), and—insofar as personal injury or wrongful death is
concerned—(6).

General

1. Tax returns. §§603(b), 604. Individual debtors would generally be required to file
with the court copies of their tax returns for the three year period preceding the bankruptcy as well
as all returns filed with taxing authorities while the bankruptcy case is pending. The returns could
be inspected by any party in interest, subject to regulations designed to prevent use other than in
the bankruptcy case. Failure to file the prebankruptcy returns within 45 days of the bankruptcy
filing (or within one extension for a maximum of 45 days) would result in automatic dismissal of
any voluntary filing.

2. Audits. §602. Audits, conducted by certified or licensed public accounts in accordance
with generally accepted auditing standards, would be required (1) of all information provided by
the debtors in at least 0.4% of consumer cases, randomly selected, and (2) of any schedules of
income and expenses that "reflect greater than average variances from the statistical norm."

3. Credit counseling. §302(a). Individuals would be ineligible for relief under any
chapter of the Code unless they had, within 90 days of their bankruptcy filing, received credit
counseling—through a service approved by the United States trustee or bankruptcy administrator
—that included, at least, a briefing on the opportunities for credit counseling and assistance in
performing an initial budget analysis. Exceptions would be made (1) for districts in which
adequate services were unavailable and (2) for debtors with exigent circumstances requiring filing
before the counseling could be obtained (in which case the debtor would be required to complete
the counseling within 30 days after the bankruptcy filing).



4. Debtor education. §§104, 302(b)-(c). Pilot educational programs for debtor financial
management would be tested in six judicial districts over an 18 month period, and thereafter
evaluated for effectiveness and cost. At the same time, all Chapter 7 debtors would be subject to
denial of discharge under §727, and Chapter 13 debtors would not be granted a discharge, if they
failed to complete an instructional course concerning personal management, unless the United
States trustee or bankruptcy administrator determined that approved courses were inadequate.



5. Successive discharges. § 137. Debtors would be denied discharge in any Chapter 13
case filed within five years of the order of relief in any other bankruptcy case in which the debtor
received a discharge. A Chapter 7 case would be subject to denial of discharge under §727 if the
debtor received a Chapter 7 or 11 discharge in a case filed within 8 years of the filing of the
pending case.

6. Notice to creditors. §603(a). Notice to a creditor would not be effective unless served
at the address filed by the creditor with the court or at the address stated on the last communication
from the creditor to the debtor.

7. Exemptions. §§ 124, 147. There would be a 730-day residency requirement before a
debtor could claim state exemptions. A $250,000 cap would be placed on homestead exemptions,
but would be able to be waived by express state legislation.

8. Reaffirmations. §108. Reaffirmations of unsecured debt would require a court hearing
unless the debtor was represented by counsel and waived the hearing requirement.

9. Appeals. §612. Final decisions of bankruptcy judges would be appealable directly to
the circuit courts of appeal unless the circuit had established bankruptcy appellate panels (BAPs).
Where BAPs were established, the appeal would be presented to the BAP unless a party to the
appeal elected to have the court of appeals hear the case.


The consumer bankruptcy provisions of H.R. 833: specific proposals.


H.R. 833 is divided into 12 titles, seven of which contain provisions that affect consumer
bankruptcy. Most of the relevant provisions are included in Title I, "Consumer Bankruptcy
Provisions." However, provisions affecting consumer bankruptcy are also included in Title II,
"Discouraging Bankruptcy Abuse"; Title III, "General Business Bankruptcy Provisions"; Title VI,
"Streamlining the Bankruptcy System"; Title VII, "Bankruptcy Data"; Title VIII, "Bankruptcy Tax
Provisions"; and Title XI, "Technical Corrections." This analysis discusses only those sections of
these titles that would have a significant effect on consumer bankruptcy. Finally, there is a
discussion of the single section of Title XII, "General Effective Date; Application of
Amendments." For each section discussed, a reference is made to any section of S. 625 dealing
with the same subject.


Title I ("Consumer Bankruptcy Provisions")


Subtitle A—"Needs based bankruptcy"

§101 ("Conversion") (See S. 625, §101)

Changes. Section 706(c) of the Bankruptcy Code currently provides that the court may
not convert a Chapter 7 case to a case under Chapter 12 or 13 unless the debtor requests such a
conversion. As amended, Section 101 provides that conversion could also be ordered when the
debtor consents to it.

Impact. This section would operate primarily in connection with motions to dismiss
Chapter 7 cases brought against a debtor under §707(b) of the Code. Under current law, there
may be a question of whether, instead of ordering dismissal in connection with such a motion, the
court, with the debtor's consent, could order conversion of the case to Chapter 13. Section 101
would clarify that the option of conversion is available to the debtor in such situations. Because
H.R. 833 expands the circumstances under which Chapter 7 cases are subject to dismissal under
§707(b)—see the discussion of §102, below—this clarification may be helpful.



§102 ("Dismissal or conversion") (See S. 625, §102)


This provision is the subject of Recommendations 1 and 2 of the Consumer Bankruptcy
Legislative Group.

Changes. Section 102, the central provision for the "needs-based" bankruptcy approach
of H.R. 833, operates by broadening §707(b) of the Bankruptcy Code. Section 707(b) currently
provides for dismissal of Chapter 7 cases if granting relief under Chapter 7 would be a "substantial
abuse" of the provisions of Chapter 7. "Substantial abuse" is not defined, and standing to bring a
motion for dismissal under §707(b) is limited—it may be brought only by the United States trustee
or by the court, and "not at the request or suggestion of any party in interest." Section 102 would
change §707(b) in the following respects:

(1) The proposal would change the ground for relief from "substantial abuse" to simple
"abuse" of the provisions of Chapter 7, and would remove the current presumption in favor of the
form of bankruptcy relief chosen by the debtor.

(2) If abuse is found, the proposal would allow, with the debtor's consent, conversion to
Chapter 13 (but not Chapter 11) as an alternative to dismissal.

(3) Although "abuse" would continue to be undefined, two sets of considerations would
apply in a court's determination of §707(b) motions: (a) a presumption of abuse would arise in
defined circumstances, and (b) general factors would be applicable where the presumption did not
arise.



(4) The presumption of abuse would arise under an amended §707(b)(2) where the
debtor's "current monthly income"—after specified deductions—was at least $100 ($6,000 over
60 months). "Current monthly income" would be defined as the monthly income received by the
debtor (and the debtor's spouse in a joint case), averaged over the 180 days "preceding the date of
determination," together with amounts regularly contributed by others to the debtor's household
expenses, but not including war crime reparations or Social Security benefits. Five deductions
would be made from this amount:

(a) "Estimated administrative expenses and attorneys' fees." This deduction would
be defined as "10 percent of projected payments under a chapter 13 plan."
(b) Monthly living expenses as prescribed under standards issued by the Internal
Revenue Service for collection of unpaid taxes, with modifications. The expense
allowances under the IRS collection standards fall into three categories: National
Standards,
covering food, housekeeping supplies, clothing, services, personal care
products, and miscellaneous expenses; Local Standards, covering housing and
transportation; and Other Necessary Expenses, covering taxes, health care, court
ordered payments, involuntary wage deductions, accounting and legal fees, and
other expenses necessary to produce the debtor's income.(2)
Debtors would be
limited to deducting the amounts set out in the national IRS standards—except that
the IRS allowances for food and clothing could be increased by up to 5% "if it is
demonstrated that it is reasonable and necessary." Debtors would also be limited to
deductions for housing and transportation set out in the IRS local standards,
without including payment of debt (such as home mortgages and auto loans).
Finally, for items in the IRS's "other necessary expenses" category, debtors would
be allowed to deduct their actual expenses, including "the continuation of actual
expenses of a dependent child under the age of 18 for tuition, books, and required
fees at a private elementary or secondary school, not exceeding $10,000 per year."
(c) Monthly secured debt payments, defined as all secured debt payments
contractually due in the 60 months following the filing of the bankruptcy petition,
divided by 60.
(d) Monthly priority debt payments, defined as the total amount of priority debt
divided by 60.
(e) Monthly charitable contributions. Section 707(b),as amended by H.R. 833,
would continue to provide that in determining whether to dismiss a case under
§707, the court may not "take into consideration whether a debtor has made, or
continues to make, charitable contributions." "Charitable contributions" are defined
to allow up to 15% of a debtor's gross income to be paid to any tax-qualified
charitable organization.



(5) Where the presumption arose—that is, where the debtor's "current monthly income,"
less the five categories of deductions, was at least $100—the debtor would be able to prevail
against a §707(b) motion only "by demonstrating extraordinary circumstances that require additional expenses or adjustment of current monthly income" and showing that these extraordinary circumstances were sufficient to reduce the debtor's income after allowable expenses to less than $100
monthly. In order to make such a demonstration, the debtor would have to "itemize each
additional expense or adjustment of income and provide documentation for such expenses or
adjustment of income and a detailed explanation of the extraordinary circumstances which make
such expenses or adjustment of income necessary and reasonable," and the accuracy of all such
itemized information would have to be attested to, under oath, by the debtor and the debtor's
attorney.

(6) Where the presumption did not arise—that is, where the debtor's "current monthly
income," less the five categories of deductions, was less than $100—or where the presumption
was rebutted, a court ruling on a §707(b) motion would be required to consider (a) whether the
debtor filed the petition in bad faith, and (b) whether the "totality of the circumstances . . . demonstrates abuse."

(7) The debtor's schedules of current income and expenses (currently set out on Schedules
I and J) would be required to include a statement of "current monthly income," together with
calculations showing whether there would be a presumption of abuse under §707(b). The Federal
Rules of Bankruptcy Procedure would be required to be amended so as to prescribe a form for
these schedules. The trustee would be required to review the materials submitted by the debtor,
and, within 10 days after the §341 meeting of creditors, file a statement with the court as to
whether the debtor's schedules would give rise to a presumption of abuse. The court would be
required to provide a copy of the statement regarding the presumption to all creditors within five
days of its filing.

(8) If the presumption applied, and if the debtor's income was at least equal to a defined
national median, then the trustee would have the obligation to file either a motion under §707(b) or
a statement as to why such a motion was not being filed.(3)

(9) The current limitation on standing to bring a motion under §707(b) would be reversed,
with amended §707(b)(1) affirmatively providing that the motion could be made by "the trustee or
any party in interest." However, there would be different and inconsistent limitations on standing
to bring a motion under §707(b), depending on whether the presumption was involved. In order
for the presumption to be invoked by any party, the debtor's income would have to be above a
defined regional median.(4)
But for a creditor to bring any motion under §707(b)—even a motion
that did not involve the presumption—the debtor's income would have to at least equal to the
national median applicable to the trustee's mandatory filing.(5)

(10) If a panel trustee brought a successful motion under §707(b), and if the debtor's
attorney violated Fed.R.Bankr.P. 9011 by filing the case under Chapter 7, the court would be
required to award damages against the debtor's attorney, which could include both reimbursement
of the trustee's expenses and an award of a civil penalty to the trustee. The signature of the
debtor's attorney on a bankruptcy petition would be declared to constitute a certificate that the
debtor's "petition, lists, schedules, and documents" are "well grounded in fact."

(11) If a party other than a trustee or United States trustee brought an unsuccessful motion
under §707(b), and if the court found that the motion was not substantially justified or that the
party brought the motion solely to coerce the debtor into waiving a right under the Bankruptcy
Code, the court would be authorized to award the debtor all reasonable costs in contesting the
motion, including attorneys' fees.

(12) Within three years of the enactment of the amendments, the Director of the Executive
Office for the United States Trustees (EOUST) would be required to submit a report to Congress
on the utility of the IRS collection standards in measuring abuse under §707(b).

Impact. The purpose of means-testing is to deal with debtors who have the ability to
make substantial payments, from current income, to their general unsecured creditors. Under
means-testing, these debtors would be denied the right to obtain an immediate discharge of their
indebtedness in Chapter 7, under which (depending on the applicable exemption law) they may
make little or no payments to general unsecured creditors. The means-testing procedures of H.R.
833, as passed, address several of the problems of earlier proposals, but still present significant
difficulties in accomplishing the goal of means-testing:


(1) The presumption of abuse would frequently be difficult to apply or arbitrary. At each
step in its application, there are problems with H.R. 833's formula for determining whether a
debtor has at least $100 per month available to pay general unsecured debt, and hence should be
presumed to be abusing Chapter 7.

  • Determining the total income available to the debtor. In applying the presumption
    formula, the first step is to determine the debtor's current gross monthly income. There are
    several problems in this step.
    First, there is no apparent justification for excluding Social Security benefits from
    income—the source of funds received by a debtor in no way affects the debtor's ability to
    pay debts. Thus, for example, there would seem to be no reason why a debtor who
    chooses early retirement and lives on a combination of investment earnings and social
    security benefits should be treated as having less income than an individual who obtains the
    same amount of money through continued employment.
    Second, the bill directs that income be averaged over the 180 days preceding the
    "date of determination." It is unclear whether this date would be the date of the preparation
    of the debtor's schedules (which could be substantially before filing the bankruptcy case),
    the date of filing (which could require last-minute changes in the debtor's schedules), or
    some later date, such as the date of a hearing in which the application of the presumption is
    being determined (in which case, the schedules would often be unable to reflect the
    appropriate income figure).
    Third, a 180-day period would often produce anomalous results. Because 180
    days is always less than six months, debtors who are paid monthly will often have only
    five paydays during the 180-day period preceding their bankruptcy filing, artificially
    reducing current monthly income.
    Fourth, and similarly, the 180-day average will produce anomalous results for
    seasonal workers; for example, debtors who earn most of their income during the summer
    would show an artificially high total income if the 180-day period ended in the middle of
    fall, and an artificially low income if the period ended in mid-spring.
    Fifth, and most significantly, the total income determined by a 180-day average will
    simply be inaccurate whenever the debtor's income has permanently changed during the
    180-day period. For example, a debtor may file a bankruptcy case after a prolonged period
    of unemployment, but shortly after getting a new permanent job, in which case the salary
    of the new job would be artificially reduced by the lower income during the period of
    unemployment. Conversely, a debtor who files a Chapter 7 case shortly after obtaining a
    new permanent job with substantially reduced income, would have the presumption
    calculated based on an artificially high income. H.R. 833 provides for a debtor to show
    extraordinary circumstances justifying a reduction from the 180-day average, but there is
    no provision for disclosure of factors indicating that a debtor's actual income is higher than
    the average.
  • Deduction of administrative expenses and attorneys' fees. Once a debtor's current
    monthly income is determined, the formula for the presumption requires that several
    expense items be deducted. The first of these is administrative expenses and attorneys'
    fees, defined as "10 percent of projected payments under a chapter 13 plan." This
    definition is ambiguous. It could mean (a) all payments that a debtor would make under
    the plan, including direct payments to creditors like mortgagees, (b) only the payments that
    the debtor would make to the Chapter 13 trustee, or (c) the payments that the Chapter 13
    trustee would make to creditors. Of these possibilities, the second is perhaps the most
    likely, since this would approximate the actual administrative expenses that would be
    incurred by a trustee in disbursing funds to creditors under a Chapter 13 plan, pursuant to
    28 U.S.C. §586(e)(1)(B). However, even with this understanding, there would still be
    substantial questions about how much would be paid by the debtor to the trustee in a
    Chapter 13 case. Most significantly, this sum would vary greatly depending on whether
    the debtor would have current mortgage payments made by the Chapter 13 trustee or paid
    directly. For example, if the debtor had a monthly mortgage payment of $2000, the
    administrative expense deduction would be $200 greater if it assumed that the mortgage
    would be paid by the trustee in a Chapter 13 plan.

  • Deduction under IRS "National Standards." The first of the monthly living expenses to
    be deducted under the means-test formula are the "National Standards" that allowed by the
    Internal Revenue Service. These standards set out specific allowances— regardless of the
    debtors' actual expenditures—for items such as food, clothing, and household supplies, on
    a nationwide basis. Because the standard is nationwide, it would discriminate against
    debtors in areas with a higher-than-average cost of living. Moreover, because the statute
    would allow an increase of up to 5% for food and clothing allowances "if it is
    demonstrated that it is reasonable and necessary," a discretionary determination of
    reasonableness will be required whenever a debtor claims the increase.
  • Deduction under IRS "Local Standards." The IRS "Local Standards" include deductions
    from income for housing and transportation costs, set out on a regional basis. In contrast
    to the national standards, the IRS Manual states that the local standards are maximum
    allowances—if the debtor's actual housing or transportation costs are less, then the actual
    costs are to be applied. Thus, in order to apply the local standards, the debtor's actual
    housing and transportation costs must be determined in every case. Another set of
    problems would arise from the bill's requirement that "the debtor's monthly expenses shall
    not include any payments for debts." The IRS's local standards include payments for debt.
    The local standards for transportation include an "ownership" component to cover monthly
    loan or lease payments and the housing standards are intended to cover the cost of
    obtaining housing, including rent or mortgage payments. Thus, in order to apply the local
    standards under the bill, the auto loan and home mortgage payments must be deleted from
    the amounts allowed by the standards. For the transportation standards, this can be done,
    because the standards separate ownership costs from operating costs. A debtor who
    owned an automobile would therefore be allowed only actual operating costs, up to the
    maximum specified by the standards. However, it is not possible to similarly apply the
    local standards for housing to debtors who pay home mortgages, since the IRS provides a
    single allowance to cover the cost both of acquiring and maintaining housing. For
    example, the housing allowance for a family of four in Cuyahoga County, Ohio is $1069
    monthly. There is no way to know what part of this allowance should be deducted in order
    to account for a mortgage payment. If the debtor's mortgage payment is $500 per month,
    it is not clear that $569 should be allowed as a maximum cost for items such as insurance,
    utilities and repairs. On the other hand, if the debtor's mortgage is $1100, it can hardly be
    that the debtor should receive no monthly allowance for maintaining the home. For debtors
    with mortgages, the IRS local standard simply cannot be meaningfully applied in the
    manner directed by H.R. 833.
  • Deduction for "Other Necessary Expenses." The IRS collection standards recognize that
    there are a number of expenses that debtors may have, that (1) are either necessary to
    provide for the health and welfare of the debtor and the debtor's family or necessary for the
    production of income, but (2) are not covered by the national and local standards. The IRS
    allows for such expenses in the amounts established as necessary by the taxpayer. The
    IRS Manual (at §5323.434) sets out two different lists of categories into which these "other
    necessary expenses" may fall, but the Manual also states: "The expenses listed . . . do not
    exhaust the category of necessary expenses. Other expenses may be considered if they
    meet the necessary expense test: health and welfare and /or production of income." The
    incorporation of the IRS's "Other Necessary Expenses" into H.R. 833's presumption
    formula raises several questions. The bill specifies that the debtor should be allowed
    "actual monthly expenses for the categories specified as Other Necessary Expenses." This
    appears to imply if the debtor's expenses fit within categories specified in the Manual as
    Other Necessary Expenses, then they should be allowed in the amounts actually expended
    by the debtor, even if these amounts are not shown to be necessary. For example, one
    category specified in the Manual in the "Other Necessary Expenses" category is child care.
    Exhibit 5300-46 of the IRS Manual states: "Care should be taken to ensure that only a
    reasonable amount is allowed. Costs of child care can vary greatly. We should not allow
    expensive child care if more reasonable alternatives are available." The bill would appear to
    contradict this provision of the Manual, requiring a deduction for purposes of the
    presumption formula for whatever child care expenses are actually incurred by the debtor.
    On the other hand, a debtor may have an expense necessary for the welfare of the family
    but not specifically identified in the IRS Manual. For example, the debtor may own a
    rental unit, and incur costs of maintaining that unit in order to obtain rental income. The
    costs of maintaining a rental unit are not specifically listed in the IRS Manual as a category
    of necessary expenses, but would plainly be included under the "production of income"
    test set out in the Manual. The bill could be interpreted to disallow such expenses in
    applying the presumption formula. In any event, it can be anticipated that debtors will
    assert as "other necessary expenses" many items that might be questioned, such as life
    insurance premiums, special diets for health reasons, and contributions for the care of
    elderly relatives. For all such questionable claims, a determination will have to be made
    before the presumption formula can be applied. The bill does specify, contrary to the IRS
    Manual, that the expenses of private primary and secondary education should be deducted,
    up to $10,000 annually for each dependent child under 18 years of age.
  • Deduction for secured debt. The bill provides a deduction for secured debt, calculated as
    1/60th of all the secured debt that will be "contractually due" in the 60 months following
    the date of the petition. It is unclear whether this would include payments that are in
    default at the time of the petition. However, unless such defaulted amounts are deducted,
    the presumption formula would not give an accurate picture of the debtor's ability to make
    payments in a Chapter 13 plan. In any event, the deduction discriminates against those
    who do not have secured debt. For example, a debtor who drives an old car, with no
    outstanding loan, will receive no allowance for ownership costs under the IRS local
    standards; a debtor who leases a car will have ownership costs capped by the local
    standards; but a debtor who buys a new car on credit will have the entire cost of the loan,
    in an unlimited amount, deducted from income. Similarly, a debtor would not be allowed a
    special deduction for monthly cable television fees, but would be allowed to deduct the cost
    of a satellite dish purchased on credit.
  • Deduction for priority debt. The deduction for priority debt is defined as "the total
    amount of unsecured debts entitled to priority" divided by 60. In order for this deduction
    to apply meaningfully, it would have to include not only the priority debt outstanding at the
    time of the bankruptcy filing, but also any interest that would accrue on the debt during the
    period after the bankruptcy filing.
  • Deduction for charitable contributions. Charitable contributions of up to 15% of the
    debtor's gross income are deducted only if it can be found that the debtor "continues to
    make the contributions." This may lead to questions about whether charitable contributions
    proposed by the debtor are a "continuation" of a prior practice.



In summary, the presumption formula is problematic in that (1) calculation of current monthly
income has no fixed period for determination, and would often produce a figure different from the
debtor's actual monthly income; (2) the deductions for food, clothing, and other necessary
expenses would require discretionary determinations; (3) the IRS local standard for housing cannot
be applied to debtors with home mortgages; (4) debtors without secured indebtedness would be
substantially disadvantaged; and (5) debtors would be encouraged to increase secured
indebtedness, charitable donations, and expenditures on discretionary "other necessary expenses"
in order to avoid the presumption of abuse.

(2) The presumption of abuse is subject to manipulation. Due to some of the features of
the means-testing formula outlined above, debtors would be able to avoid an otherwise applicable
presumption of abuse by prebankruptcy planning. For example, a debtor might, at the time of
consulting a bankruptcy attorney, have gross monthly income of $10,000 and "current monthly
income" after the allowed deductions, of $1,500. The debtor could remove this remaining income
by commencing a program of charitable contributions or by incurring additional secured debt (for
example, by trading in a used car for a new one, purchased on credit). Current estimates indicate
that the means-testing of H.R. 833 would result in no more than 10% of currently filed Chapter 7
cases being subject to a presumption of abuse.(6)
However, these estimates are based on filing made
under current law, which presents little incentive to increase charitable contributions and secured
indebtedness prior to filing under Chapter 7. Under the means test of H.R. 833, it can be expected
(1) that the percentage of affected cases would be lower than anticipated because of the ability of
debtors to work around the means-testing formula, and (2) that courts will be required to make
substantial numbers of discretionary determinations as to whether prebankruptcy actions of the
debtor were undertaken in good faith.

(3) The proposal requires significant additional work by trustees and the court, with no
provision for additional funding.
As noted in the previous paragraph, the means-testing
provisions of H.R. 833 are likely to result in only a small percentage of Chapter 7 cases being
converted to Chapter 13. The vast majority of Chapter 7 cases are "no-asset" cases, in which no
funds are available for paying administrative expenses. Nevertheless, the bill would mandate that
Chapter 7 trustees file with the court in every case a report as to application of the presumption.
This would add to the cost of the trustee's processing of routine no-asset cases, with no provision
for additional compensation. Moreover, in each case, the bill would require the court to serve
creditors with a copy of the report. Assuming 15 to 25 creditors in each of 1.4 million cases, this
requirement would burden the clerk's office and the postal service with the handling of 20 to 37
million additional pieces of mail annually. This additional activity, in the great majority of cases,
will merely inform creditors that the presumption is inapplicable.

(4) The complex standing limitations would be difficult to apply and arbitrary. H.R. 833
would apply two different definitions of median income to issues of standing to bring motions
under §707(b). If a debtor's current monthly income is less than a defined national median,
standing to bring any motion under §707(b) would be limited to the court, the United States trustee
and the case trustee. But if the debtor's income is not greater than a defined regional income, no
party (including the court and trustees) would be able to invoke the exemption. This system of dual
standing limitations will require calculation and maintenance of multiple lists of median income,
with resulting uncertainty in application. Moreover, where the national and regional medians
differ, there will be standing limitations with no apparent basis in policy: (a) for debtors whose
income is at least equal to the national median but is not greater than the regional median, any party
could bring a §707(b) motion, but the motion could not assert the presumption of abuse; (b) for
debtors whose income is greater than the regional median but less than the national, only the court
and trustees could bring a §707(b) motion, but they would be allowed to assert the presumption.

(5) The relationship between the proposed statutory language and Fed.R.Bankr.P. 9011 is
confused.
Fed.R.Bankr.P. 9011 is the bankruptcy equivalent of Rule 11 of the Federal Rules of
Civil Procedure. It requires, among other things, that an attorney representing a debtor sign every
petition filed under the Bankruptcy Code, and it provides that this signature constitutes a
certificate, among other things, "that the attorney . . . has read the document [and] that to the best
of the attorney's . . . knowledge, information, and belief formed after reasonable inquiry it is well
grounded in fact and is warranted by existing law or a good faith argument for the extension,
modification, or reversal of existing law." The rule requires sanctions for its violation that may,
but need not, include a civil penalty. The rule does not apply to lists, schedules, and statements.
The proposed change to §707(b) contains language that (1) requires a civil penalty if the court
finds a violation of Rule 9011 in connection with a §707(b) motion filed by a panel trustee or
bankruptcy administrator, and (2) states that the signature of an attorney in connection with a
Chapter 7 petition constitutes a certification of the kind specified in Rule 9011, applicable to lists,
schedules and statements. Under these provisions, where a Rule 9011 motion is brought in
connection with a Chapter 7 petition, it would be unclear whether: (1) the terms of the rule or the
terms of the proposed statute would apply; (2) whether the civil penalty required by the statute
applies only to violations of the terms of Rule 9011, or whether it applies to violations of the
signature requirement set out in the proposed statutory language; and (3) whether, if Rule 9011
were amended in the future, the mandatory civil penalty imposed by the statute would apply to the
amended language of the rule.

Alternatives.


1. Method for determining income available for payment of general unsecured debt.

Scheduling of monthly income. The debtor's schedules should list "current
monthly income," as defined in H.R. 833, except that the "180-day" average should be the average
income during the six calendar months preceding the date of filing. If current monthly income does
not reflect the income that will actually be available to the debtor at the time of the bankruptcy
filing, the debtor should be required to state the amount of income that will actually be available,
and the reasons why current monthly income does not reflect the actually available monthly
income.(7)

Scheduling of expenses. Deductions from income should be scheduled for (1)
secured debt payments, including arrearages, (2) priority debt payments, and (3) charitable
contributions, again, as each of these categories is defined in the bill. Finally, the other living
expenses of the debtor should be measured against average expenditure levels, based on data
compiled by the Bureau of Labor Statistics (BLS).(8)

Specifically, (1) Federal Rules of Bankruptcy
Procedure and Official Forms should be adopted to require the scheduling of expenses in
categories corresponding to those in which consumer expenditure data is collected by BLS;(9)
(2)
the United States trustees and bankruptcy administrators should be required to designate and
publish, on an annual basis, tables of average expenditure levels, applicable within their districts,
for the categories specified in the rules and forms, based on BLS data; (3) a reasonable allowance
should be designated by law for discretionary expenditures;(10)
and (4) debtors should be required
to schedule their living expenses within the specified categories, compare their expenditures to the
designated level in each category, and provide a specific explanation for any expenditure that is
greater than the designated level. Debtors should also be required to enumerate and explain any
necessary expenses for which average expenditure data cannot be designated, such as costs of
child care, future support payments, and the expenses of operating a business owned by the
debtor.(11)

2. Procedure for dismissal or conversion.

Filing obligations. There should be no additional filing obligations imposed on
case trustees, United States trustees, or bankruptcy administrators. Rather, case trustees should be
given an incentive to pursue meritorious motions under §707(b) (as proposed in Point 3, below).

Standing and time for filing. Standing to bring §707(b) motions should be as
provided in the H.R. 833, but a single, national median income test should apply: case trustees
(not limited to panel trustees) as well as judges, bankruptcy administrators, and United States
trustees should be allowed to bring §707(b) motions in any Chapter 7 case. Other parties in
interest, in all Chapter 7 cases, should be allowed to suggest specific grounds for the filing of a
§707(b) motion to the judge, bankruptcy administrator, United States trustee or case trustee, but
they should be allowed to bring such motions themselves only in cases where the debtor's current
monthly income exceeds the national median income, adjusted for inflation. A deadline for filing
§707(b) motions should be fixed at 10 days after the conclusion of the meeting of creditors,
subject to extension of time for cause.

Burden of proof. On a motion brought under §707(b), the court would be required
to convert or dismiss the Chapter 7 case if the debtor's schedules themselves reflected income
available to pay general unsecured claims in excess of the defined level, unless the debtor
established that reductions in current income or increases in appropriate expenses, resulting from
events subsequent to the filing of the schedules, reduced available income below the defined level.
Where the debtor's schedules reflected less than the defined amount of income available to pay
general unsecured debts, but where the debtor's current monthly income exceeded the applicable
median, the debtor, in responding to a §707 motion, would bear the burden of establishing (1) the
income actually available to the debtor, (2) the appropriateness of any expenditures in excess of the
designated amounts, and (3) the appropriateness of any expenditures in categories for which there
is no designated amount. Where the debtor's schedules reflected less than the defined amount of
income to pay general unsecured debt and the debtor's current monthly income was below the
applicable median, the moving party would bear the burden of establishing that the debtor's
actually available income and appropriate expenses result in available income to pay general
unsecured claims in excess of the defined amount.

3. Compensation for successful motions under §707(b).


There should be no special provisions for awards of costs and fees against debtors'
counsel. Rather, trustees and bankruptcy administrators who bring any successful §707(b) motion
should be awarded an administrative claim against the debtor that is not subject to discharge in the
pending case or in any subsequently filed case. There should be no special provisions for
application of Fed.R.Bankr.P. 9011.



§103 ("Notice of alternatives") (See S. 625, §103)

Changes. Section 342(b) of the Bankruptcy Code currently requires that the clerk of
court provide each consumer debtor with a notice indicating the chapters of the Code under which
the debtor may proceed. This subsection would be changed to require further information in the
notice—(1) the "purpose, benefits, and costs" of each chapter, (2) "the types of services available
from credit counseling agencies," and (3) warnings, regarding both the penalties for false
statements in connection with bankruptcy cases and the fact that information supplied by debtors is
subject to examination by the Attorney General.

Impact. This change has the potential for providing useful information at little additional
cost to the bankruptcy system.



§104 ("Debtor financial management training test program") (See S. 625, §104)

Changes. The Executive Office of the United States Trustee would be required (1) to
develop a program to educate debtors on the management of their finances, (2) to test the program
for 18 months in six judicial districts, (3) to evaluate the effectiveness of the program during that
period,(12)
and (4) to submit a report of the evaluation to Congress within three months of the conclusion of the evaluation. There is no authorization given to bankruptcy courts to require debtors
to participate in financial management training.

Impact. A test program of the kind outlined in H.R. 833 could be very helpful in
determining what types of debtor education would be effective. The only apparent problem with
the proposal is that 18 months may not be a long enough time to assess the effectiveness of an
educational program. Success in financial management would be indicated by such factors as
completion of a Chapter 13 plan, ability to reestablish high quality credit, and (most importantly)
avoidance of further financial overspending. These factors are unlikely to be measurable after one
year.

Alternatives. The legislation might better provide for an interim report within 3 months
of the completion of the test program, with a follow-up reports at intervals of two and four years
thereafter.

Subtitle B—"Consumer bankruptcy protections"

§105 ("Definitions") (See S. 625, §221)

§106 ("Enforcement") (See S. 625, §§222-24)

Changes. These two sections of H.R. 833 set up a new system for regulating the
providers of consumer bankruptcy services. Section 105 defines the term "debt relief agency" to
include both lawyers and non-lawyer providers of consumer bankruptcy goods or services
(excluding tax-exempt nonprofit organizations, creditors, and depository institutions and credit
unions). Section 106 would establish, in a new § 526 of the Bankruptcy Code, a set of
regulations bearing on "debt relief agencies" and a mechanism for enforcing the regulations.

The regulations would prohibit "debt relief agencies" from (1) failing to perform promised
services, (2) negligently making or counseling to be made any false statement in a bankruptcy
filing, (3) misrepresenting the services to be provided, or the benefits or detriments of bankruptcy,
and (4) advising the incurring of debt to pay for bankruptcy related services. Waivers of these
prohibitions by debtors would be invalid.

There would be three distinct mechanisms for enforcing the prohibitions. First, a debtor
would have a private cause of action against a "debt relief agency" (1) for intentional or negligent
failure to comply with the prohibitions, (2) for dismissal or conversion of a bankruptcy case due to
the agency's intentional or negligent failure to make required filings, and (3) for any intentional or
negligent "disregard" of "the material requirements" of the Bankruptcy Code and Rules "applicable
to such debt relief agency." In any such action, the debt relief agency would be liable for the fees
and charges it received in connection with services rendered to the debtor, as well as actual
damages and reasonable attorneys' fees and costs. Second, state governments would be
authorized (through their chief law enforcement officers or designated agencies) to bring actions to
enjoin violations of the new §526 or to pursue the private cause of action granted to debtors on
their behalf (with an award of fees and costs awarded to the state in any successful action). Any
district court in the state would be given "concurrent jurisdiction" over such actions by the state.(13)

Third, the bankruptcy court, on its own motion or on motion of the United States trustee or the
debtor, would be authorized to enjoin both intentional violations of the new §526 and any "clear
and consistent pattern or practice" of violating the section. Civil penalties would also be authorized
in connection with such motions.State consumer protection laws would be superseded only to the
extent that they were inconsistent with the new federal debtor protections specified for the
Bankruptcy Code.

Impact. The proposed prohibitions and enforcement mechanisms would strengthen the
ability of the courts to deal with dishonest and incompetent providers of bankruptcy-related
services. However, the prohibition against advising the incurring of debt to fund a bankruptcy
filing is overbroad. While a debtor should never be counseled to borrow money fraudulently, with
the intent of discharging the debt, it may be entirely appropriate to enter into a secured loan for the
purposes of financing a bankruptcy filing, and a loan from a friend or relative (intended to be
repaid despite the discharge) may also be proper. Moreover, the exclusion of nonprofit
organizations may unnecessarily weaken the effectiveness of the proposal. Such
organizations—which may be sponsored by debtors' attorneys as well as by creditor-funded
organizations—also have the potential for engaging in dishonest or incompetent provision of
services.

Alternatives. (1) The prohibition against counseling the incurring of debt to pay for a
bankruptcy filing should be limited to fraudulent incurred debt. (2) The exclusion of nonprofit
organizations should be removed.



§107 ("Sense of the Congress") (no parallel in S. 625)

Changes. None. The section simply expresses the sense of Congress that the states
should develop courses in personal finance for grade school and high school. No action is
required.



§108 ("Discouraging abusive reaffirmation practices") (See S. 625, §204)

This provision is the subject of Recommendation 7 of the Consumer Bankruptcy Legislative
Group.

Changes. This section would impose special requirements for the reaffirmation of
wholly unsecured debts. Unless such a debt was owed to a credit union (in which case the special
provisions would not apply), the reaffirmation agreement could only go into effect after a court
hearing, at which the debtor would be required to appear in person, and at which the court would
determine whether the agreement (1) was an undue hardship, (2) was in the debtor's best interest,
and (3) was a result of a threat by the creditor to take action that was either illegal or that the
creditor did actually intend to take. The reaffirmation agreement for such debts would be required
to contain a clear and conspicuous statement of the right of the debtor to such a hearing. A debtor
represented by counsel would be able to waive the right to the hearing by signing a written
statement of waiver, identifying the debtor's counsel.

Impact. This proposal is directed at the potential for creditor abuse in obtaining
reaffirmations of unsecured debt. This focus is reasonable. Abuse of the reaffirmation process is
much more likely to occur when the claim in question is not secured by collateral with substantial
value, since there is often little need for debtors to reaffirm such debt. Nevertheless, the proposal
is unlikely to have a major impact. Under current law (§524(c) and (d)), a court hearing on reaffirmations is already required for unrepresented debtors, so the requirement of a hearing for unsecured debt reaffirmations makes little difference for such debtors. Debtors represented by counsel may currently enter into binding reaffirmation agreements, under current law, if their attorneys
execute a declaration stating, among other things, that the reaffirmation would not impose an
undue hardship on the debtor. It can be anticipated that debtors whose counsel have executed such
a declaration will almost always waive the "right" to a court hearing (and thus avoid the need to
make an appearance at court). It is likely that hearings would only be held where conscientious
debtors' counsel, rather than simply refusing to approve a reaffirmation agreement, execute the
required declaration only if their clients agree not to waive hearing. This would have the effect of
leaving to the court the question of whether the reaffirmation agreement is in the debtor's best
interests.

The proposal would create uncertainty by failing to indicate how the required hearing
would be initiated. Finally, the proposal excludes debts owing to credit unions, for no apparent
reason, since reaffirmations of unsecured credit union debt may also be against a debtor's best
interests.

Alternatives.

1. Unless a reaffirmation agreement involves a claim secured by a valid, perfected and
enforceable purchase money security interest in property with an original selling price to the debtor
(exclusive of costs of financing) of not less than $3,000, the agreement should be effective only
(a) after a hearing, on motion by the creditor, attended by the debtor, and (b) upon findings by the
court (1) that the agreement is in the best interest of the debtor and (2) that, in light of the income
and expenses set forth on the debtor's schedules filed in the case, the debtor has the ability both to
pay the reaffirmed debt and to provide support to all of the persons for whom he or she is
responsible, including all court-ordered support payments.

2. For all reaffirmations as to which a court hearing is not conducted, the debtor's
attorney's certificate should include a representation that the debtor has the ability to pay the
reaffirmed debt as well as provide necessary support, including all court-ordered support
payments, in light of the income and expenses set forth on the debtor's schedules filed in the case.



§109 ("Promotion of alternative dispute resolution") (See S. 625, §201)

Changes. Two distinct changes would be effected by this section of H.R. 833. First,
an additional ground for partial disallowance of claims would be created. Claims based on wholly
unsecured consumer debts could be reduced by up to 20 percent upon a showing by the debtor (by
clear and convincing evidence) (1) that the debtor offered the creditor an alternative repayment
schedule through an approved credit counseling agency within 60 days before filing bankruptcy,
(2) that the offer provided for payment to the claimant of at least 60 percent of the amount of the
debt over 'the repayment period of the loan, or a reasonable extension thereof," (3) that no part of
the debt is nondischargeable, or entitled to priority, or "would be paid a greater percentage in a
chapter 13 plan than offered by the debtor," and (4) that "the creditor unreasonably refused to
consider the debtor's proposal."

The second change would prohibit trustees from using preference theory (under §547 of
the Code) to recover any sums paid to creditors as part of a repayment plan created by an approved
credit counseling agency.

Impact. The additional ground for partial disallowance is unlikely to have a substantial
impact, for several reasons: (1) A debtor is only affected by the allowance of unsecured claims in
situations where unsecured creditors are paid in full. Otherwise, any reduction in one creditor's
claim merely results in other creditors receiving a higher dividend. (2) The maximum reduction is
only 20% of the claim, unlikely to be a significant amount in most consumer cases. (3) A heavy
burden of proof (clear and convincing evidence) is placed on the debtor, as to elements such as the
reasonableness of the debtor's proposal and whether the creditor refused to "consider" the
proposal. Such a burden is likely to be difficult to meet in most situations. (4) No provision is
made for any award of a debtor's costs and fees in pursuing the claim reduction. A debtor
following a bankruptcy filing is unlikely to have funds available to prosecute the objection.

A debtor who enters into a credit counseling plan may very well exclude certain creditors
whom the debtor does not wish to have paid. Unless payments to other creditors can be recovered
as preferences, the credit counseling plan will have the effect of ratifying the debtor's
discrimination.

Alternatives. (1) The grounds for disallowance of claims under §502(b) could include
failure of a creditor to negotiate in good faith when presented with a repayment plan proposed by
the debtor in consultation with an approved credit counseling service. This ground for
disallowance could be limited (as in the proposal) to general unsecured debt, and could provide for
partial disallowance at a fixed rate of 50%. Any party in interest would have standing to assert the
objection.

(2) Payments made under a repayment plan proposed through an approved credit
counseling service should only be exempt from preference recovery if the plan was proposed by
the debtor in good faith.

§110 ("Enhanced disclosure for credit extensions secured by a dwelling") (no
parallel in S. 625)

Changes. None. The Federal Reserve Board would be directed to conduct a study and
submit a report to Congress regarding the need for additional disclosures to consumers entering
into home equity

Description:

To extend for 6 additional months the period for which chapter 12 of title 11 of the United States Code is reenacted.

Description:

To extend for 6 additional months the period for which chapter 12 of title 11 of the United States Code is reenacted.

Description:

To extend for 6 additional months the period for which chapter 12 of title 11 of the United States Code is reenacted.

Description:

To amend title 11 of the United States Code to permit all debtors to exempt certain payments receivable on account of discrimination based on race, color, religion, national origin, or gender, and for other purposes.

Description:

To amend the Truth in Lending Act to prohibit the distribution of any negotiable check or other instrument with any solicitation to a consumer by a creditor to open an account under any consumer credit plan or to engage in any other credit transaction which is subject to such Act, and for other purposes.
Unsolicited Loan Consumer Protection Act (Introduced in
House)

HR 1576 IH

106th CONGRESS

1st Session

H. R. 1576

To amend the Truth in Lending Act to prohibit the
distribution of any negotiable check or other instrument with any
solicitation to a consumer by a creditor to open an account under any
consumer credit plan or to engage in any other credit transaction which
is subject to such Act, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

April 27, 1999

Mr. HINCHEY introduced the following bill; which was referred to the
Committee on Banking and Financial Services


A BILL

To amend the Truth in Lending Act to prohibit the
distribution of any negotiable check or other instrument with any
solicitation to a consumer by a creditor to open an account under any
consumer credit plan or to engage in any other credit transaction which
is subject to such Act, and for other purposes.

    Be it enacted by the Senate and House of Representatives of
    the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the `Unsolicited Loan Consumer
    Protection Act'.

SEC. 2. UNSOLICITED CHECKS PROHIBITED.

    (a) IN GENERAL- Chapter 2 of the Truth in Lending Act (15
    U.S.C. 1631 et seq.) is amended by adding at the end the following new
    section:

`SEC. 140. SOLICITATIONS FOR CONSUMER LOANS.

    `(a) IN GENERAL- No consumer credit which is otherwise subject
    to this title may be extended by any creditor through the use of a check
    or other negotiable instrument which has been sent by the creditor to
    the consumer in connection with a solicitation by the creditor for such
    extension of credit, unless the consumer has submitted an application
    for, or otherwise requested, such extension of credit before receiving
    the check or instrument.

    `(b) CONSUMER NOT LIABLE FOR ANY UNSOLICITED CHECK UNLESS THE
    CONSUMER ACTUALLY RECEIVES AND NEGOTIATES SUCH CHECK-

      `(1) IN GENERAL- If any creditor violates subsection (a)
      and includes an unsolicited check or other negotiable instrument in a
      solicitation to a consumer for an extension of credit which the consumer
      has not applied for or requested, the consumer shall not be liable for
      the amount of any such check or other instrument unless the consumer
      actually receives and negotiates such check or instrument.'.

      `(2) BURDEN ON CREDITOR- Notwithstanding any rule of
      evidence or other provision of law--

        `(A) the issuance of a check or other negotiable
        instrument by a creditor in violation of subsection (a) creates a
        rebuttable presumption that such check or instrument was not received or
        negotiated by the consumer to whom it was issued; and

        `(B) the burden of proof, in any action by a creditor
        to enforce liability of the consumer for the amount of any such check or
        instrument, shall be upon the creditor to show that such check or
        instrument was received by the consumer and was negotiated by the
        consumer with the knowledge that such negotiation was creating a
        liability for such amount.

      `(3) INFORMATION ON LIABILITY CREATED IN VIOLATION OF
      SUBSECTION (a) MAY NOT BE REPORTED TO OR RECEIVED BY ANY CONSUMER
      REPORTING AGENCY- No information on any liability alleged by a creditor
      to have been established through the issuance of a check or other
      negotiable instrument in violation of subsection (a) may be reported to
      or received by any credit reporting agency (as defined in section 603 of
      the Fair Credit Reporting Act) or included in any consumer credit report
      under such Act.'.

    (b) CLERICAL AMENDMENT- The table of sections for chapter 2 of
    the Truth in Lending Act is amended by adding at the end the following
    new item:

      `140. Solicitations for consumer loans.'.



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Description:

To amend title 11 of the United States Code to include the earned income credit in property that the debtor may elect to exempt from the estate. (Introduced in House)

Description:

To amend title 11, United States Code, to limit the value of certain real and personal property that an individual debtor may elect to exempt under State or local law\; to make nondischargeable consumer debts for luxury goods and services acquired in the 90-day period ending on the date a case is commenced under such title\; and to permit parties in interest to request the dismissal of cases under chapter 7 of such title.

Description:

To amend the Truth in Lending Act to expand protections for consumers by adjusting statutory exemptions and civil penalties to reflect inflation, to eliminate the Rule of 78s accounting for interest rebates in consumer credit transactions, and for other purposes.

Description:

To amend the Truth in Lending Act to protect consumers from certain unreasonable practices of creditors which result in higher fees or rates of interest for credit cardholders, and for other purposes.
Credit Card Consumer Protection Act of 1999 (Introduced in
House)

HR 1276 IH

106th CONGRESS

1st Session

H. R. 1276

To amend the Truth in Lending Act to protect consumers from
certain unreasonable practices of creditors which result in higher fees
or rates of interest for credit cardholders, and for other
purposes.

IN THE HOUSE OF REPRESENTATIVES

March 24, 1999

Ms. ROYBAL-ALLARD (for herself, Mr. LUTHER, Mr. SHOWS, Mr. GREEN of
Texas, Mr. PASTOR, Mr. BROWN of California, Ms. LEE, Mr. STARK, Mr.
DAVIS of Illinois, Mr. FILNER, Mr. DIXON, Mr. OLVER, Mr. GEORGE MILLER
of California, Mr. HINCHEY, and Ms. WOOLSEY) introduced the following
bill; which was referred to the Committee on Banking and Financial
Services


A BILL

To amend the Truth in Lending Act to protect consumers from
certain unreasonable practices of creditors which result in higher fees
or rates of interest for credit cardholders, and for other
purposes.

    Be it enacted by the Senate and House of Representatives of
    the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the `Credit Card Consumer Protection
    Act of 1999'.

SEC. 2. FEES FOR ON-TIME PAYMENTS PROHIBITED.

    Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is
    amended by adding at the end the following new subsection:

    `(h) FEES FOR ON-TIME PAYMENTS PROHIBITED-

      `(1) IN GENERAL- In the case of any credit card account
      under an open-end consumer credit plan, no minimum finance charge for
      any period (including any annual period), and no fee in lieu of a
      minimum finance charge, may be imposed with regard to such account or
      credit extended under such account solely on the basis that any credit
      extended has been repaid in full before the end of any grace period
      applicable with respect to the extension of credit.

      `(2) SCOPE OF APPLICATION- Paragraph (1) shall not be
      construed as--

        `(A) prohibiting the imposition of any flat annual fee
        which may be imposed on the consumer in advance of any annual period to
        cover the cost of maintaining a credit card account during such annual
        period without regard to whether any credit is actually extended under
        such account during such period; or

        `(B) otherwise affecting the imposition of the actual
        finance charge applicable with respect to any credit extended under such
        account during such annual period at the annual percentage rate
        disclosed to the consumer in accordance with this title for the period
        of time any such credit is outstanding.'.

SEC. 3. FREEZE ON INTEREST RATE TERMS AND FEES ON CANCELED
CARDS.

    Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is
    amended by inserting after subsection (h) (as added by section 2 of this
    Act) the following new subsection:

    `(i) FREEZE ON INTEREST RATE TERMS AND FEES ON CANCELED
    CARDS-

      `(1) ADVANCE NOTICE OF INCREASE IN INTEREST RATE REQUIRED-
      In the case of any credit card account under an open-end consumer credit
      plan, no increase in any annual percentage rate of interest (other than
      an increase due solely to a change in another rate of interest to which
      such rate is indexed) applicable to any outstanding balance of credit
      under such plan may take effect before the beginning of the billing
      cycle which begins not less than 15 days after the accountholder
      receives notice of such increase.

      `(2) INCREASE NOT EFFECTIVE FOR CANCELED ACCOUNTS- If an
      accountholder referred to in paragraph (1) cancels the credit card
      account before the beginning of the billing cycle referred to in such
      paragraph and surrenders all unexpired credit cards issued in connection
      with such account--

        `(A) an annual percentage rate of interest applicable
        after the cancellation with respect to the outstanding balance on such
        account as of the date of cancellation may not exceed any annual
        percentage rate of interest applicable with respect to such balance
        under the terms and conditions in effect before the increase referred to
        in paragraph (1); and

        `(B) the repayment of such outstanding balance after
        the cancellation shall be subject to all other terms and conditions
        applicable with respect to such account before the increase referred to
        in such paragraph.

      `(3) NOTICE OF RIGHT TO CANCEL- The notice referred to in
      paragraph (1) with respect to an increase in annual percentage rate of
      interest shall

contain a brief description of the right of the consumer--

        `(A) to cancel the account before the effective date of
        the increase; and

        `(B) after such cancellation, to pay any balance
        outstanding on such account at the time of cancellation in accordance
        with the terms and conditions in effect before the
        cancellation.'.

SEC. 4. DISCLOSURE OF FEES AND INTEREST RATES ON CREDIT ADVANCES
THROUGH THE USE OF 3d PARTY CHECKS.

    Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is
    amended by inserting after subsection (i) (as added by section 3 of this
    Act) the following new subsection:

    `(j) FEES AND INTEREST RATES ON CREDIT ADVANCES THROUGH THE USE
    OF 3d PARTY CHECKS-

      `(1) IN GENERAL- In the case of any credit card account
      under an open-end consumer credit plan, a creditor may not provide the
      accountholder with any negotiable or transferable instrument for use in
      making an extension of credit to the accountholder for the purpose of
      making a transfer to a 3d party, unless the creditor has fully satisfied
      the notice requirements of paragraph (2) with respect to such
      instrument.

      `(2) NOTICE REQUIREMENTS- A creditor meets the notice
      requirements of this paragraph with respect to an instrument referred to
      in paragraph (1) if the creditor provides, to an accountholder at the
      same time any such instrument is provided, a notice which prominently
      and specifically describes--

        `(A) the amount of any transaction fee which may be
        imposed for making an extension of credit through the use of such
        instrument, including the exact percentage rate to be used in
        determining such amount if the amount of the transaction fee is
        expressed as a percentage of the amount of the credit extended;
        and

        `(B) any annual percentage rate of interest applicable
        in determining the finance charge for any such extension of
        credit.'.

SEC. 5. PROHIBITION ON OVER-THE-LIMIT FEES IN CREDITOR-APPROVED
TRANSACTIONS.

    Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is
    amended by inserting after subsection (j) (as added by section 4 of this
    Act) the following new subsection:

    `(k) LIMITATION ON IMPOSITION OF OVER-THE-LIMIT FEES- In the
    case of any credit card account under an open-end consumer credit plan,
    a creditor may not impose any fee on the accountholder for any extension
    of credit in excess of the amount of credit authorized to be extended
    with respect to such account if the extension of credit is made in
    connection with a credit transaction which the creditor approves in
    advance or at the time of the transaction.'.

SEC. 6. PROHIBITION ON 2-CYCLE BILLING.

    Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is
    amended by inserting after subsection (k) (as added by section 5 of this
    Act) the following new subsection:

    `(l) PROHIBITION ON 2-CYCLE BILLING- In the case of any credit
    card account under an open-end consumer credit plan, if the creditor
    provides, with regard to any new extension of credit under such account,
    a period during which such extension of credit may be repaid without
    incurring a finance charge for such extension of credit, no finance
    charge may subsequently be imposed for such period with regard to any
    unpaid balance (as of the end of such period) of such extension of
    credit.'.

SEC. 7. DISCLOSURES RELATED TO `TEASER RATES'.

    Section 127(c) of the Truth in Lending Act (15 U.S.C. 1637(c))
    is amended--

      (1) by redesignating paragraph (5) as paragraph (6);
      and

      (2) by inserting after paragraph (4) the following new
      paragraph:

      `(5) ADDITIONAL NOTICE CONCERNING `TEASER RATES'-

        `(A) IN GENERAL- If any application or solicitation for
        a credit card for which a disclosure is required under this subsection
        offers, for an introductory period of less than 1 year, an annual
        percentage rate of interest which--

          `(i) is less than the annual percentage rate of
          interest which will apply after the end of such introductory period;
          or

          `(ii) in the case of an annual percentage rate
          which varies in accordance with an index, which is less than the current
          annual percentage rate under the index which will apply after the end of
          such period,

        the application or solicitation shall contain the
        disclosure contained in subparagraph (B) or (C), as the case may
        be.

        `(B) FIXED ANNUAL PERCENTAGE RATE- If the annual
        percentage rate which will apply after the end of the introductory
        period will be a fixed rate, the application or solicitation shall
        include the following disclosure: `The annual percentage rate of
        interest applicable during the introductory period is not the annual
        percentage rate which will apply after the end of the introductory
        period. The permanent annual percentage rate will apply after (insert
        date) and will be (insert percentage rate).'.

        `(C) VARIABLE ANNUAL PERCENTAGE RATE- If the annual
        percentage rate which will apply after the end of the introductory
        period will vary in accordance with an index, the application or
        solicitation shall include the following disclosure: `The annual
        percentage rate of interest applicable during the introductory period is
        not the annual percentage rate which will apply after the end of the
        introductory period. The permanent annual percentage rate will be
        determined by an index and will apply after (insert date). If the index
        which will apply after such date were applied to your account today, the
        annual percentage rate would be (insert percentage
        rate).'.

        `(D) FORM OF DISCLOSURE- The disclosure required under
        this paragraph shall be made in a clear and conspicuous manner in a form
        at least as prominent as the disclosure of the annual percentage rate of
        interest which will apply during the introductory
        period.'.

SEC. 8. DISCLOSURES RELATING TO THE DATES PAYMENTS ARE DUE.

    Section 127(b)(9) of the Truth in Lending Act (15 U.S.C.
    1637(b)(9)) is amended by striking `The date by which or the period (if
    any) within which, payment must be made to avoid additional finance
    charges,' and inserting `In a prominent place on the face of the
    statement, the date of the last full business day on which payment may
    be received before the imposition of late fees or additional finance
    charges (without regard to whether payment may be received on a
    subsequent nonbusiness day or during a portion of a subsequent business
    day before any such fee or charge is imposed) and a conspicuous notice
    that the failure to remit payment in sufficient time for the payment to
    be processed by such date may result in substantial late fees or
    additional finance charges,'.

SEC. 9. PROHIBITION ON MINIMUM PAYMENT AMOUNTS THAT RESULT IN
NEGATIVE AMORTIZATION.

    Section 127 of the Truth in Lending Act (15 U.S.C. 1637) is
    amended by inserting after subsection (l) (as added by section 6 of this
    Act) the following new subsection:

    `(m) PROHIBITION ON MINIMUM PAYMENT AMOUNTS THAT RESULT IN
    NEGATIVE AMORTIZATION-

      `(1) IN GENERAL- In the case of any credit card account
      under an open-end consumer credit plan, the minimum amount of any
      periodic payment required to be made on any outstanding balance may not
      be less than the finance charge applicable with respect to such
      outstanding balance for such period.

      `(2) DISCLOSURES REQUIRED IN CASE OF LOW AMORTIZATION RATE-
      If, in the case of any credit card account under an open-end consumer
      credit plan, the minimum amount of any periodic payment required to be
      made on any outstanding balance reduces the outstanding balance by less
      than 2 percent of such balance, after payment of any finance charge and
      fees imposed for such period, the periodic statement required under
      subsection (b) with respect to such account shall include a conspicuous
      notice in a prominent place on the statement of--

        `(A) the fact that the outstanding balance will be
        reduced by less than 2 percent if the consumer only pays the minimum
        amount; and

        `(B) the period of time which would be required to pay
        off the outstanding balance if the consumer paid only the minimum amount
        of each periodic payment required until such balance is fully
        repaid.

      `(3) EXCEPTION UNDER EXIGENT CIRCUMSTANCES- In addition to
      any other authority of the Board under this title to prescribe
      regulations, the Board may prescribe regulations which permit exceptions
      to the application of paragraph (1) with respect to any consumer who
      requests a creditor to agree to a payment deferral plan for a limited
      period of time due to loss of employment, illness, or incapacity, or
      such other exigent circumstances the Board may describe in such
      regulations.'.



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Description:

Dear Representative Nadler:
Thank you for your letter of March 4, 1999, to the President regarding bankruptcy reform. He has asked me to respond on his behalf. The President appreciates your kind words about the role that he and the First Lady played during last year’s debate on bankruptcy reform. He also appreciates your continued dedication to this issue.
Web posted and Copyright © March 24,
1999, American Bankruptcy Institute.

EXECUTIVE OFFICE OF THE PRESIDENT

OFFICE OF MANAGEMENT AND BUDGET

WASHINGTON, D.C. 20503


March 23, 1999

The Honorable Jerrold Nadler

Subcommittee on Commercial and Administrative Law

Committee on the Judiciary

U.S. House of Representatives

Washington, DC 20515

Dear Representative Nadler:

Thank you for your letter of March 4, 1999, to the President regarding bankruptcy
reform. He has asked me to respond on his behalf. The President appreciates your kind
words about the role that he and the First Lady played during last year’s debate on
bankruptcy reform. He also appreciates your continued dedication to this issue.

As you know, the President supports responsible bankruptcy reform that is balanced,
would reduce abuses of the bankruptcy system, and would require debtors and creditors
alike to act responsibly. The President was disappointed that the last Congress failed to
produce legislation that he could support. He remains hopeful that bipartisan consultation
and compromise will result in legislation that he can enthusiastically sign this year.

Last year the Administration expressed its strong opposition to the House-passed
version of H.R. 3150. We encouraged passage of the Senate bill "as an important step
toward balanced bankruptcy reform," but noted that the Administration would support
its enactment "only if the essential reforms incorporated by the Senate
managers’ amendment [were] preserved and strengthened and the unbalanced and
arbitrary elements of the current House bill [were] omitted." Although we thought
that the Senate bill could be further improved, we believed that the extraordinary
bipartisan support for the Senate bill was an endorsement of balance and moderation. We
were disappointed that the Conference Report failed to include key provisions of the
Senate bill, thus failing the test of balance. In my letter to Congressional leadership
dated October 9, 1998, I noted that the President’s senior advisors recommended that
the President veto the Conference Report. Our position from last year has not changed.

During this year’s debate, the Administration will continue to encourage Congress
to find an appropriate balance. Among the issues that must be addressed are:

  • Access to Chapter 7: Any "means test" imposed should deny access to
    Chapter 7 only to those who genuinely have the capacity to repay a portion of their debts
    successfully under a Chapter 13 repayment plan. Thus, debtors affected by a means test
    must be given a meaningful opportunity to have their specific circumstances considered by
    bankruptcy courts with discretion to determine whether they genuinely have the capacity to
    repay a portion of their debts. In addition, the time periods and thresholds used in any
    means test should be set to ensure that only those debtors with a strong likelihood of
    success are denied access to Chapter 7.
  • Nondischargeable Debts: It is generally inappropriate to make
    post-bankruptcy credit card debt a new category of nondischargeable debt. The Bankruptcy
    Code makes debts nondischargeable only where there is an overriding public purpose, as
    with debts for child support and alimony payments, education loans, tax obligations, or
    debts incurred by fraud. We remain skeptical that the current protections against fraud
    and debt run-up prior to bankruptcy are ineffective and that the additional debts made
    nondischargeable by this bill meet the standard of an overriding public purpose. If new
    categories of nondischargeable debt are to be created, however, they should be narrowly
    tailored and limited to situations where the debtor is clearly abusing the system, such as
    when the debtor: (1) incurred the debt to pay nondischargeable debt with an intent to
    avoid the debt in bankruptcy; and/or (2) incurred the debt on the eve of bankruptcy for
    goods and services that are not reasonably acquired to support the debtor's household.
  • Coercive Credit Practices: Particularly if we are to provide new
    opportunities for creditors to challenge debtors' use of the bankruptcy system under the
    707(b) abuse test, it is imperative that we adequately limit prevalent abusive creditor
    practices such as coercive reaffirmations and violations of the automatic stay. While the
    Senate bill initially took laudable steps in this direction, the Conference Report rolled
    back existing consumer protections by denying consumers an effective means for remedying
    the harm from such practices and eliminating the current authorization for penalties for
    intentional violation of debtor rights.
  • Consumer Information and Protection: The challenge posed by the
    unprecedented level of bankruptcy filings requires us to ask greater responsibility of
    both debtors and creditors. Credit card companies must give consumers more and better
    information so that they can understand and better manage their debts.
  • Homestead Exemptions: At the same time that we are creating a system
    that will deny certain moderate-income Americans access to the traditional "fresh
    start," we should also close the loopholes that allow the wealthy to shield hundreds
    of thousands of dollars of wealth from their creditors.

We look forward to working with you and your colleagues on both sides of the aisle to
address these and other important concerns and to produce responsible, balanced bankruptcy
reform.

Sincerely,

Jacob J. Lew

Director

Identical Letter Sent to the Honorable John Conyers, Jr.

Description:

To revise the banking and bankruptcy insolvency laws with respect to the termination and netting of financial contracts, and for other purposes.

Description:

To revise the banking and bankruptcy insolvency laws with respect to the termination and netting of financial contracts, and for other purposes.

Description:

To revise the banking and bankruptcy insolvency laws with respect to the termination and netting of financial contracts, and for other purposes.

Description:

To increase the availability and choice of quality health care.

Description:

H.R. 900--Consumer Credit Card Protection Amendments of 1999
March 2, 1999
Section-by-section summary
Sponsor: Rep. John LaFalce
H.R. 900--Consumer Credit Card Protection Amendments of 1999
March 2, 1999

[-------------------------------]

Section-by-section summary


Sponsor: Rep. John LaFalce

Sec. 1. Short Title/References: "Consumer Credit Card Protection Amendments of 1999"

Sec. 2. Disclosures Regarding Minimum Monthly Payments: Requires new consumer disclosures regarding required minimum monthly payments-

  • In card agreements-how minimum payments are to be calculated;
  • In card solicitations--the charges or penalties to be imposed for failure to pay a minimum payment;
  • In billing statements-estimates of the months required and the total cost to the consumer of repaying card balance in full if payment is made only at level of the required minimum monthly payment.
  • Sec. 3. Disclosure of Late Payment Fees: Requires card issuers that impose a penalty on card holders that fail to make a monthly payment by a required payment due date to state the date that payment is due in bold print in a prominent place on the monthly billing statement, together with the amount of the fee or charge that will be assessed if payment is received after that date.

    Sec. 4. Worldwide Web-Based Credit Card Solicitations: Requires that all disclosures regarding the terms and costs of credit card accounts that are required for direct mail solicitations also be included in solicitations on internet sites or web pages. These disclosures must be clear and conspicuous, readily accessible to consumers and updated regularly to reflect all current credit card terms and costs.

    Sec. 5. Disclosures Relating to "Teaser" Rates: Require more clear and conspicuous disclosure regarding special or introductory interest rates used to entice consumers to open credit card accounts, including--

  • the date that the introductory "teaser" rate will expire;
  • the permanent rate or rates that will be applied to the account after the introductory "teaser" rate expires;
  • any conditions under which the "teaser" rate may be revoked or otherwise conditioned on actions by the card holder (e.g., failure to make the minimum payment or to make payment on time) and the interest rate to be applied to the account as a result of such action.
  • Sec. 6. Limit on Inactivity Fees: Prohibits card issuers from imposing an "inactivity" fee for any monthly billing period where a card holder has an outstanding balance that is subject to finance charges.

    Sec. 7. Issuance of Credit Cards to Underage Consumers: Prohibits issuance of a credit card account to persons who have not reached the age of 21, except where the person submits a written application that is either co-signed by a parent or legal guardian or provides evidence of independent means for repaying any debt obligation.

    Sec. 8. Penalties for On-Time Payment: Prohibits card issuers from canceling credit cards, reimposing annual fees, imposing maintenance fees or minimum finance charges, misrepresenting payment due dates to gain early payment on the account, or other actions which are intended to penalize any card holder solely on the basis that the card holder routinely pays off their monthly credit balances on time without incurring interest charges..

    Sec. 9. Freeze on Interest Rate Terms and Fees on Canceled Cards: Requires that credit card holders who receive notice of an increase in the interest rate applicable to their account be permitted to cancel the account prior and repay any balance at the interest rate and terms applicable at the time of the rate increase. Requires card issuers to provide notice of the consumers' right to cancel the account as part of any notice of an increase in annual interest rates.

    Sec. 10. Disclosures on Credit Advances through Third-Party Checks: Prohibits card issuers from providing card holders with any negotiable or transferable "convenience" check for use in making payment or transfer to a third-party unless the issuer also provides prominent notice of any additional fees and interest costs applicable to any use of these checks.

    Sec. 11. Limitation on Over-The-Limit Fees: Prohibits a card issuer from charging a fee or penalty for an extension of credit that exceeds a card holder's maximum credit limit where the issuer had provided specific prior approval for the extension of credit.

    Sec. 12. Unsolicited Dual Purpose Cards: Prohibits card issuers that seek to avoid current prohibitions against mailing unsolicited credit cards to consumers from sending unsolicited cards that have multiple purposes (i.e., calling cards, stored value, check guarantee, discount/award cards, etc.) but are connected to a credit plan and can be used, either initially or upon later activation, to obtain credit.

    Sec. 13. Civil Liability: Extends civil liability protections under the Truth in Lending by incorporating specific references to new protections authorized by the legislation and by striking language that restricts issuer liability in credit card solicitations only to consumers that use credit cards and pay annual fees.

    Sec. 14. Regulations: Requires the Federal Reserve, within six months of enactment, to issue final regulations implementing the amendments and authorizes the Fed to issue such staff commentary and publish model disclosure statements and forms as it determines necessary.

    [-------------------------------]

    Description:

    To amend the Truth in Lending Act to enhance consumer disclosures regarding credit card terms and charges, to restrict issuance of credit cards to students, to expand protections in connection with unsolicited credit cards and third-party checks and to protect consumers from unreasonable practices that result in unnecessary credit costs or loss of credit, and for other purposes.

    Description:

    To amend title 11 of the United States Code, and for other purposes.

    Description:

    Committee on the Judiciary
    Hearing Testimony Presented to
    Subcommittee on Commercial & Administrative Law
    Jurisdiction Oversight Plan

    Description:

    Rep. Rick Boucher (D-Va.)
    Click here to email Congressman Boucher
    'The typical American family pays a hidden tax of $550 each year because of increased charges for credit and higher prices for goods and services attributed to bankruptcies of mere convenience.
    Web posted and Copyright © February 25,
    1999, American Bankruptcy Institute.

    Statements Made Upon the Introduction of the

    "Bankruptcy Reform Act of 1999"

    February 24, 1999



    Congressmen*

    Rep. Rick Boucher (D-Va.)

    Click
    here to email Congressman Boucher

    "The typical American family pays a hidden tax of $550 each year because of
    increased charges for credit and higher prices for goods and services attributed to
    bankruptcies of mere convenience.

    "Bankruptcies of convenience are driving this enormous increase. Bankruptcy was
    never meant to be used as a financial planning tool, but it is becoming a first stop
    rather than a last resort because our current bankruptcy system encourages people to walk
    away from their debts regardless of whether they have the ability to repay any portion of
    what they owe."



    Rep. Steve Chabot (R-Ohio)

    "We probably would have passed this bill in the last Congress but essentially ran
    out of time."



    Rep. George Gekas (R-Pa.)

    "Our bill then and now provides for the fresh start that is required for the
    individual and family that finds itself in financial bedlam that they have no choice by to
    get a fresh start.

    "With the overwhelming margin voting in favor of the bill, it could not be
    anything but a bipartisan result."



    Rep. Henry Hyde (R-Ill.)

    "Our nation’s bankruptcy system is one of the world’s most progressive,
    and we must keep it that way. ... Congress must confront the [bankruptcy] issue directly
    and curb abusive and predatory practices of those who would game the system."



    Rep. Sheila Jackson-Lee (D-Texas)

    Click
    here to email Congresswoman Jackson-Lee

    "This is old legislation that has risen its unseemly head. ...The bill
    doesn’t deal with the constant pounding of credit card opportunities and the
    opportunity for debt.

    "The constituents used to support this legislation last year need to really wake
    up and find out if this is the way you want to go."



    Rep. Bill McCollum (R-Fla.)

    Click
    here to email Congressman McCollum

    "Bankruptcy will cost consumers more than $50 billion in 1998 alone. That
    translates into over $550 per household in higher costs for goods, services and credit. If
    we do not make reforms now, responsible borrowers and consumers will continue to pay the
    prices in the form of higher costs for goods, services and credit."


    Rep. Jim Moran (D-Va.)

    Click
    here to email Congressman Moran

    "The current bylaws are in dire need of reform. ... No one’s rights will be
    taken away; a judge will always make the final call on all of these matters.

    "[Bankruptcy] should not be an easy way to pile up debts people have no interest
    paying on."

    Rep. Jerrold Nadler (D-N.Y.)

    Click
    here to email Congressman Nadler

    "This bill would still allow credit card companies to have their debts survive
    bankruptcy and force children to compete with the credit card companies for the
    debtor’s post-bankruptcy income–something they do not have to do now.

    "The bill uses an inflexible, one-size-fits all formula for deciding how much
    families can repay, which relies on guidelines written by IRS bureaucrats for an entirely
    different purpose.

    "This bill is the purest case study of why we are in need of campaign finance
    reform."



    Rep. Pete Sessions (R-Texas)

    Click
    here to email Congressman Sessions

    "Companies, banks, credit unions and other financial institutions who loan money
    to people do that with the expectation that the person is going to pay back that which
    they have taken. ... Reasonableness is what this bill is all about.

    "The Rules Committee is aware of this bill and we’ll shepherd than on through
    very quickly."



    Rep. Ellen Tauscher (D-Calif.)

    Click
    here to email Congresswoman Tauscher

    "There are two reasons why it is important to pass this bill: 1. It is important
    to show the American people that we can work together. ... 2. It’s important to show
    the American people that we can fix a law prejudiced against people who clearly want to do
    the right thing."


    *While not all Congressmen have email
    addresses, communications can be sent to them by U.S. mail, care of

    U.S. House of Representatives

    Washington, DC 20515


    Organizations

    Coalition for Financial Responsibility

    "We support this bill because it embodies the principles of fairness and personal
    responsibility. No one wants to take away the option of filing for bankruptcy by those who
    have suffered a serious financial crisis and need the opportunity for a fresh start. This
    bill will ensure that those individuals have access to the bankruptcy system just as they
    always have.

    "But the bill will also ensure that higher-income filers re required to repay what
    they can afford."



    Consumer Federation of America, Consumers Union and National Consumer Law Center

    "This version of bankruptcy reform would be disastrous for American families with
    financial problems. Instead, we urge you to consider a more targeted and balanced
    approach, which ends abuse by debtors and creditors, while preserving meaningful access
    for those in need of bankruptcy protection."



    National Bankruptcy Conference

    "Re-introduction of this omnibus bankruptcy bill is especially disappointing
    because it disregards the policy concerns expressed by the Administration, over 20 groups
    representing the interest of women and children, civil rights groups, and consumer
    advocates, along with a variety of other groups."


    National Retail Federation

    "[The] legislation provides complete relief for those consumers who encounter
    serious financial difficulties. However, the legislation would also ensure that those who
    blatantly misuse the system to wipe out debts that they can afford to pay would not be
    allowed to do so."



    National Women’s Law Center and National Partnership for Women & Families

    "Contrary to claims by some, the child support enforcement provisions included in
    the bill do not adequately protect women and children. Although in some cases they will
    simplify the procedures for collecting child support during bankruptcy, they do not
    address the fundamental problems created by the bill: the fewer debtors will be able to
    get their finances re-ordered in bankruptcy, that more non-child support debts will
    survive bankruptcy and compete with the payment of child support, and that custodial
    parents forced into bankruptcy will lose protections against eviction and other coercive
    practices."


    U.S. Chamber of Commerce

    "[T]he bill would close a number of loopholes in current law that encourages
    debtors to take advantage of the system and avoid paying their debts. This legislation
    provides a fair needs-based system that takes debtors’ special circumstances into
    account while assuring that those who can afford to pay are required to do so.

    Individuals

    Philip Strauss, Assistant District Attorney

    Family Support Bureau for the City and County of San Francisco

    "Congress, in working with the states, has closed all loopholes [to avoid
    repayment of child support] but those permitted by [the bankruptcy process]. This bill
    will keep family support out of the bankruptcy system.

    "This bill will drastically improve the ability of people like myself to enforce
    child support obligations while people are in bankruptcy."

    Description:

    To extend for 3 additional months the period for which chapter 12 of title 11 of the United States Code is reenacted.

    Description:

    To extend for 3 additional months the period for which chapter 12 of title 11 of the United States Code is reenacted.

    Description:

    To extend for 3 additional months the period for which chapter 12 of title 11 of the United States Code is reenacted.

    Description:

    To extend for 3 additional months the period for which chapter 12 of title 11 of the United States Code is reenacted.

    Description:

    To extend for 3 additional months the period for which chapter 12 of title 11 of the United States Code is reenacted.

    Description:

    To make chapter 12 of title 11, United States Code, permanent, and for other purposes.

    Description:

    To extend for 6 additional months the period for which chapter 12 of title 11 of the United States Code is reenacted. (Introduced in House)

    Description:

    To amend section 101 of title 11 of the United States Code to modify the definition of single asset real estate and to make technical corrections.

    Description:

    To reduce waste, fraud, and error in Government programs by making improvements with respect to Federal management and debt collection practices, Federal payment systems, Federal benefit programs, and for other purposes.

    Description:

    To provide new patient protections under group health plans.

    Description:

    To reduce waste, fraud, and error in Government programs by making improvements with respect to Federal management and debt collection practices, Federal payment systems, Federal benefit programs, and for other purposes.

    Description:

    To reduce waste, fraud, and error in Government programs by making improvements with respect to Federal management and debt collection practices, Federal payment systems, Federal benefit programs, and for other purposes.

    Description:

    To reduce waste, fraud, and error in Government programs by making improvements with respect to Federal management and debt collection practices, Federal payment systems, Federal benefit programs, and for other purposes.

    Description:

    First Means-testing Bill of New Congress Introduced in House
    First Means-testing Bill of New Congress Introduced in House




    Prepared for the American Bankruptcy Institute


    Web posted and Copyright ©
    January 25, 1999, American Bankruptcy Institute.

    Rep. Rob Andrews (D-NJ) has introduced the first "Needs Based" bankruptcy bill of the new Congress. The bill, which was previously introduced during the 105th Congress, would limit the availability of chapter 7 relief for certain consumer debtors who have current monthly income exceeding 75 percent of the state median family income for a family of equal size. The language of the bill (H.R. 333) on means testing tracks closely H.R. 3150 (section 101) as passed by the House in the 105th Congress, except the new bill relates to "state" median family income, rather than "national" median family income. Both statistics are maintained by the Census Bureau. H.R. 3150 was also amended during the committee process to apply only to those making at least 100 percent of the national median, thus H.R. 333 would likely apply to more debtors. ABI's December 1998 study on the repayment capacity of debtors found substantially fewer debtors impacted by the means test when the number was changed to 100 percent of the national median.

    Like H.R. 3150 as passed by the House, the new bill sets up a three-stage eligibility test. The test under H.R. 333 is (a) current monthly income exceeding 75 percent of the State median family income for a family of equal size or, in the case of a household of 1, exceeding 75 percent of the State median household income for 1 earner; (b) projected monthly net income exceeding $50; and (c) projected monthly net income sufficient to repay 20 percent or more of unsecured nonpriority claims during a 5-year repayment plan. Those who meet all three elements of the test would be ineligible for chapter 7. Net income would be determined by reference to IRS standards, as in the House-passed version of H.R. 3150. Exceptions for extraordinary circumstances would be provided for, as in H.R. 3150.

    The bill would apply to all cases filed after the date of enactment. The bill makes no other changes to the Code. The bill was referred to the House Judiciary Committee.

    Rep. Andrews voted for H.R. 3150 in the last Congress. He does not serve on the Judiciary Committee. Thus this bill is not likely to be the principal vehicle for bankruptcy reform this Congress.

    A more comprehensive bill is expected to be introduced by Rep. George Gekas, the sponsor of H.R. 3150 last session. It is expected that this bill will track closely H.R. 3150, as reported by a House-Senate conference committee last year. The time frame for introduction is not yet clear.

    Rep. Andrews can be reached via email at rob.andrews@mail.house.gov

    Description:

    To amend title 11 of the United States Code to modify the application of chapter 7 relating to liquidation cases. (Introduced in House)

    Description:

    To provide for the retirement of all Americans.

    Description:

    To enhance competition in the financial services industry by providing a prudential framework for the affiliation of banks, securities firms, and other financial service providers, and for other purposes.

    Description:

    To enhance competition between airlines and reduce airfares, and for other purposes.