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   The SPEAKER pro tempore (Mr. Sessions). Pursuant to House Resolution 503 and rule XVIII, the Chair declares the House in the Committee of the Whole House on the State of the Union for the consideration of the Senate bill, S. 1920.

[Time: 13:43]

   IN THE COMMITTEE OF THE WHOLE

   Accordingly, the House resolved itself into the Committee of the Whole House on the State of the Union for the consideration of the Senate bill (S. 1920) to extend for 6 months the period for which chapter 12 of title 11 of the United States Code is reenacted, with Mr. LaHood in the chair.

   The Clerk read the title of the Senate bill.

   The CHAIRMAN. Pursuant to the rule, the Senate bill is considered as having been read the first time.

   Under the rule, the gentleman from Wisconsin (Mr. Sensenbrenner) and the gentleman from North Carolina (Mr. Watt) each will control 30 minutes.

   The Chair recognizes the gentleman from Wisconsin (Mr. Sensenbrenner).

   Mr. SENSENBRENNER. Mr. Chairman, I yield myself such time as I may consume.

   Mr. Chairman, the amendment in the nature of a substitute to S. 1920 made in order by the rule replaces the text of that bill with the text of H.R. 975, the bankruptcy bill passed by the House by an overwhelming bipartisan vote of 315-113 on March 19, 2003.

   The administration has without qualification endorsed this legislation. Nevertheless, this bill has languished in the other body now for almost a year. The question that has been asked is, why are we engaged in what admittedly may appear to be a redundant undertaking? While the other body is often described as the saucer in which the coffee cools, H.R. 975 has become nearly frozen in that proverbial saucer.

[Time: 13:45]

   Today I seek to reignite congressional consideration of bankruptcy reform.

   Some of my colleagues may also ask, ``Why now? What's the rush?'' There are many answers. A major reason is that the current bankruptcy system is broken, and it gets worse every day that we fail to act. Bankruptcy filings continue to break record after record, straining the system's resources. The proliferation of bankruptcy filings is not just a temporary event, but part of a consistent upward trend. In 4 years, the number of bankruptcy filings has jumped by 150 percent to nearly 1.7 million cases as of fiscal year 2003.

   Another reason has to do with the growing extent of fraud and abuse in the current bankruptcy system. Bankruptcy relief should be available to honest debtors, but current law allows, if not encourages, dishonest debtors to file abusive bankruptcies that overburden the system. According to the Justice Department, bankruptcy fraud and abuse is ``serious and far-reaching.''

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   While some debtors fraudulently conceal assets, others try to discharge debt despite their ability to repay their obligations. The current system is overburdened and ill equipped to aggressively detect and deter identity theft and other basic forms of bankruptcy fraud, let alone more creative schemes such as the so-called ``credit card bust-outs.'' The Justice Department reports that debtors are obtaining credit cards despite having little or no income, incurring huge debts, paying those debts with worthless checks, and then filing for bankruptcy relief to discharge their massive liabilities. We need to give our law enforcement agencies and the judiciary the tools necessary to fight fraud and abuse in the bankruptcy system.

   A third reason, I admit, has to do with money. According to some analyses, the increase in consumer bankruptcy filings has significant adverse financial consequences for our Nation's economy and the economic well-being of our citizens. For instance, it has been estimated that in 1997 alone, more than $40 billion of debt was discharged as a result of bankruptcy cases. These losses, according to one estimate, translate into a $400 annual ``tax'' on every household in our Nation in the form of higher prices and higher interest rates. For the sake of our family farmers, we ought to relieve them of this $400 tax so that they can do a better job in producing food and fiber for our Nation's tables as well as for export.

   More importantly, there are moral reasons for supporting the need for bankruptcy reform. The current system allows deadbeat parents to use bankruptcy to avoid their child support obligations. Likewise, it permits corporate criminals to use bankruptcy to shield their mansions from the claims of those whom they have defrauded.

   Let me be perfectly clear. If this bill is voted down in the substitute amendment that has been made in order by the Committee on Rules, deadbeat parents will have a better opportunity to use bankruptcy to escape their court-ordered child support enforcement obligations. That means that the people who are opposing this move are giving these deadbeat parents a get-out-of-obligation-free card so that they can stiff their custodial former spouses. We plug that loophole.

   Furthermore, this bill plugs the so-called ``homestead exemption'' that has allowed corporate criminals to be able to use bankruptcy to shield their assets and huge mansions in the States that have unlimited homestead exemptions from bankruptcy and leave employees in the lurch, employees that could use those assets to be able to allow them to find new jobs as a result of a corporation going bankrupt as a result of executive and management abuse.

   Perhaps among the most important reasons to support bankruptcy reform is that it will help some of the most needy and deserving members of our society. As the title of the bill indicates, these reforms are not just about preventing abuse, but they also provide long overdue consumer protections. For example, domestic support claimants will receive very much-needed, special protections under this legislation. These reforms will ensure that families with pensions and education IRAs will not have to use these assets to pay creditors. Those protections will not be there if this bill is voted down.

   As part of their monthly credit card billing statements, consumers will be given more meaningful disclosures about the consequences of making minimum monthly payments. It will require the appointment of an ombudsman to serve as a watchdog for patients in health care facilities in bankruptcy. It more than doubles employee priority wage claims.

   If this bill is voted down, those that vote ``no'' turn their back on all of these improvements. These are just a few examples of the many benefits that consumers will finally be able to enjoy once bankruptcy reforms are enacted.

   I urge my colleagues to move forward with bankruptcy reform. This is a comprehensive bill. It is a good bill. It does not hurt the ability of somebody who is truly down and out to be able to file for bankruptcy and get their discharge and start anew. But what it will do is plug the loophole of those who wish to use the Bankruptcy Code as a financial planning tool, a financial planning tool that ends up stiffing every family that pays their bills on time and, as agreed upon, $400 a year in a hidden tax. That is a hidden tax that the lack of bankruptcy reform has stuck on all of our constituents who ought to be our special interest.

   I urge my colleagues to support the enactment of the amendment in the nature of a substitute to S. 1920.

   Mr. Chairman, I reserve the balance of my time.

   Mr. WATT. Mr. Chairman, I yield myself such time as I may consume.

   Mr. Chairman, let me begin by offering my unequivocal support for S. 1920 that would provide for an extension of chapter 12 of the Bankruptcy Code which expired last December. That piece of legislation is noncontroversial and necessary to ensure that the farmers in our country have access to the bankruptcy protections they so earnestly deserve as they struggle to keep our food supply thriving and to maintain their farms.

   As ranking member of the Subcommittee on Commercial and Administrative Law and a former conferee on H.R. 975, I continue to oppose the substance of H.R. 975 and further believe that the current maneuver to force the hand of the Senate is irresponsible and will only result in further delay in extending the family farmer protections everyone agrees should be extended.

   The gentleman from Wisconsin's amendment tacks on to this otherwise noncontroversial bill H.R. 975, the product of a conference on which I served last term minus the negotiated provision that would prevent those who commit acts of violence against women and abortion clinics from avoiding penalties by declaring bankruptcy. This bill did not pass last year, and I believe it will meet the same fate this year. Therefore, the only result will be that the family farmer will be held hostage to efforts to leverage support for the larger bankruptcy reform.

   My opposition to H.R. 975 has not changed. I believe that the omnibus bankruptcy reform bill is an unfortunate convergence of expedience and politics. There obviously is abuse in the bankruptcy system and reform is necessary, but I continue to believe that H.R. 975 is not a rational way to respond to abuse to set up a separate set of rules for what is, in effect, a pauper's bankruptcy court system and a different set of rules for a higher income bankruptcy court system.

   Mr. Chairman, I believe that we should stop playing games with the family farmer. Like the National Farmers Union, and I quote from their letter to the House leadership, I ``reject this legislative strategy as an insensitive, cruel and malicious effort that will only serve to increase the level of distress of farm families who are already experiencing severe financial difficulties.'' I urge my colleagues to vote against this bill and for a process that will respect the plight of the farmers of this country.

   In response to the comments of the gentleman from Wisconsin, let me submit to this body that the primary reason we have an increasing number of bankruptcies, although there may be some abuse and I do not argue with that, but the primary reason we are having an increase in the number of bankruptcies in this country is job loss and economics which is being driven by this administration.

   Second, I want to know how many times the House has to beat itself on the chest on this issue and try to force this issue. We have got a bill that is already in conference, I thought, in the other body; and this bill, if the Senate wanted to take it up, would take it up. So what are we doing beating our chests again this year saying we support bankruptcy reform?

   And finally, I would just submit that this is an effort to find someone to blame for the failure to pass the bankruptcy reform legislation. The last time I checked, the Republicans were in control of the House, the Republicans were in control of the Senate, the Republicans were in control of the Presidency. It would seem to me, if you are in control of this process and you want to pass the bankruptcy reform bill, you would pass the bankruptcy reform bill and we would not be here going through this charade, blaming it on somebody else for failure to pass this bill. It is a convenient way to blame others, but it is a terrible way to do business.

   NATIONAL FARMERS UNION,

   January 23, 2004.
Hon. DENNIS J. HASTERT,
Speaker, House of Representatives, Washington, DC.
Hon. NANCY PELOSI,
Democratic Leader, House of Representatives, Washington, DC.

   DEAR SPEAKER HASTERT AND DEMOCRATIC LEADER PELOSI: On behalf of the family farmer and rancher members of the National Farmers Union I write to encourage the House of Representatives to immediately adopt the language contained in S. 1920 which passed the Senate late last year and extended the chapter 12 provisions of title 11 of the United States Code for an additional six months retroactive to January 1, 2004.

   The Chapter 12 provisions, which allow the development of alternative financial reorganization plans for farmers and ranchers within the bankruptcy code, expired at the end of 2003 when the House failed to take action on the Senate bill even though these provisions have been considered non-controversial by both parties over the course of several years. Any delay in approving an extension of Chapter 12 places agricultural producers and their families who are faced with bankruptcy in a serious and untenable position.

   We understand there are some in Congress who wish to utilize the extension of the agriculture provisions as a means to leverage support for a broader bankruptcy reform measure that contains highly controversial and divisive provisions unrelated to the farm bankruptcy law. We reject this legislative strategy as an insensitive, cruel and malicious effort that will only serve to increase the level of distress of farm families who are already experiencing severe financial difficulties.

   Thank you for your attention to this important issue.

   Sincerely,

   David J. Frederickson,
President.

   Mr. Chairman, I reserve the balance of my time.

   Mr. SENSENBRENNER. Mr. Chairman, I yield myself such time as I may consume.

   There have been times when I have been the chairman of the committee where we have given the other body a choice. I seem to recall that in the last Congress the House passed two versions of the visa and border security bill. One contained provisions extending section 245(i) of the Immigration and Nationality Act and one did not, and the Senate chose to take up the bill that did not contain section 245(i) and passed it. Both bills, I believe, were supported both by the gentleman from North Carolina and myself. So sometimes giving the other body a choice speeds things along, and that is what this bill proposes to do.

   Mr. Chairman, I yield 1 minute to the gentlewoman from Tennessee (Mrs. Blackburn).

   Mrs. BLACKBURN. Mr. Chairman, I would like to rise in support of the amendment and to commend the chairman of the Committee on the Judiciary for offering this important amendment.

   As we have noted, last March this body did pass important bankruptcy reform; and that is very important to my folks in Tennessee, but unfortunately it has languished over on the Senate side. I have heard from credit unions and banks in Tennessee. Their message is very clear. Bankruptcy is all too often used as the first resort instead of the last resort, and this makes it increasingly difficult for them to operate in a State where small business is our major employer. As the number of bankruptcy filings continues to rise, bankruptcy losses have a heavier impact upon those credit union members and on the banks who are fiscally responsible. What we have seen since 1998 when bankruptcies topped 1 million in their filings, they are up over 150 percent. We know the trend is continuing upward.

   I do feel this amendment is a compassionate one. People who seek bankruptcy because of job loss, medical problems, divorce and other personal problems will be unaffected.

   Mr. Chairman, it is time for us to move forward.

   ANNOUNCEMENT BY THE CHAIRMAN

   The CHAIRMAN. Members are reminded not to criticize the Senate.

[Time: 14:00]

   Mr. WATT. Mr. Chairman, I yield 4 minutes to the gentleman from New York (Mr. Nadler).

   Mr. NADLER. Mr. Chairman, I rise to plead for our Nation's family farmers and family fishing operations. And some people may ask why the representative from Manhattan and Brooklyn is rising to plead for family farmers. When I was a child, we had a family farm which we lost to foreclosure because of policies similar to what the majority party is urging on us today. This is the 11th time we have been here to debate a temporary extension of chapter 12. To string farmers along, especially in these very hard times, is simply unconscionable; but this is even worse. Instead of passing this bill last year, the chapter 12 extension bill, when we could have sent it directly to the President, the majority refused to act and allow chapter 12 to sunset. Even now they refuse to act and instead are using family farmers again to try to pass an overall bankruptcy bill that is not going to pass again because the Senate will not go along with it; so they are just using it as a charade and putting at risk all the farmers. But a bill that should not pass anyway. A bill whose main and essentially only effect is to enable the big banks and the credit card companies to reach their hands into the pockets of low- and middle-income people who, because usually of either a divorce or being laid off from their jobs or health emergency, are in bankruptcy and at that time to enable the big banks and the credit card companies to put their hands into these low- and middle-income pockets and take more money out of it for the big banks and the credit card companies in 60 or 70 different ways. That is what this bill does. And this bill is a lot more important, the majority would have us believe, than extending chapter 12 for the benefits of family farmers and family fishing operators.

   Even if we pass this bill as amended by putting on the entire bankruptcy reform bill, so-called, on the back of the chapter 12 extension, and even if the Senate agrees to allow the House to circumvent them entirely, family farmers would still have to sit and wait while Congress fiddles.

   We do have another choice. We could reject this maneuver entirely and send the 6-month extension to the President today. We could adopt the gentlewoman from Wisconsin's (Ms. Baldwin) substitute and enact a part of this bill that is both uncontroversial and necessary immediately to make chapter 12 permanent and update it to provide needed relief. But the Republican leadership appears unwilling to do either. They appear intent on using the plight of family farmers yet again to advance the agenda of the credit industry and to do so by threatening and hurting the family farmers by engaging in a legislative maneuver that has already resulted in chapter 12's expiring and that they know will now result in its being allowed to lapse further.

   This is simply wrong. I urge my colleagues to reject this outrageous stunt. This bill has been on the verge of passing ``any minute'' since 1997. How much longer must our farmers and fishermen and women wait? They have waited long enough. I urge my colleagues to support the gentlewoman from Wisconsin and save our family farms and stop using the plight of the family farmers to try to put the entire agenda of the banks and the credit card companies on the backs of the family farmers. Pass a family farm bill; then bring in a bankruptcy bill. We will debate it on the merits or demerits of that, I would say the demerits; but stop trying to put that entire burden on the family farmers' backs because their backs are already broken.

   Mr. SENSENBRENNER. Mr. Chairman, I yield 5 minutes to the gentleman from Alabama (Mr. Bachus).

   Mr. BACHUS. Mr. Chairman, I thank the chairman for yielding me this time.

   Mr. Chairman, I rise in strong support of this bill and would urge this body to adopt it. I would like to adopt the words of Edith Jones, who served on the Bankruptcy Commission and is on the Fifth Circuit Court of Appeals, when she said ``bankruptcy reform legislation is essential to restoring integrity to personal and business bankruptcies, redressing the imbalances and opportunities for manipulation that plague current law, and encouraging individual responsibility in financial affairs.'' However, and I say this to the gentleman from Wisconsin (Chairman Sensenbrenner), he has done an outstanding job on this legislation. It is very much a thankless job, and it is with some hesitancy that I rise simply to point out one provision that I share with Judge Jones when she says, however, ``Section 414, in removing investment bankers from a rigorous standard of disinterestedness, is out of character

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   Section 414 of the present legislation, I think, is a large snake. It is the proverbial fox in the henhouse. And what section 414 does is it eliminates the disinterested rule. That rule has existed in bankruptcy law for 66 years. Under current law, a person that advises the trustee must be ``disinterested'' in order to avoid conflicts of interest. Section 414 eliminates that exclusion. Consequently, section 414 would allow the same entities that may be engaged in negligence or even fraud prior to bankruptcy to advise the trustee during the bankruptcy process.

   Our experience alone with the recent wave of corporate scandals means that we need to carefully examine any provision that would weaken the conflict of interest standards. Weakening those standards in the bankruptcy code promotes conflicts of interest rather than corporate reform.

   Let me quote the Wall Street Journal addressing this section 414: ``Relaxing the disinterestedness rules will serve to reward firms that had some part of the company's demise ..... By allowing firms that helped the company into bankruptcy continue to stay on the payroll, the firms are being rewarded for essentially failing at the task for which they were hired.''

   Eliot Spitzer has testified against section 414. He says, ``The inherent conflict of interest created by section 414 and the perverse incentives created by such a section ought to be clear to all,'' and I would agree with him. And here we have the Attorney General of New York and we have the very conservative Judge Jones agreeing on this point, as did almost all the bankruptcy commissioners.

   No convincing case has been made for drastically weakening the current standard as section 414 does. Indeed, one would be hard pressed to offer any public policy rationale for this change. As Judge Jones said, section 414 is totally out of character with the rest of this important legislation. And I include a copy of her letter.

   Let me conclude by saying that section 414, which is contrary to the legislation's goal of creating a fair and more streamlined bankruptcy system, must be addressed at conference. Nonetheless, I strongly support this much-needed bankruptcy reform legislation which will limit abuses of the bankruptcy system without affecting bankruptcy protection to all who truly need it.

   U.S. COURT OF APPEALS FIFTH CIRCUIT,

   March 11, 2003.
Hon. F. JAMES SENSENBRENNER, JR.,
Chairman, House Committee on the Judiciary, Rayburn House Office Building, Washington, DC.

   DEAR MR. CHAIRMAN: I understand that the House Committee on the Judiciary will consider H.R. 975, bankruptcy reform legislation, on the morning of March 11, 2003. I also understand that the Committee may consider whether or not to retain Section 414 of the bill, which would amend the ``disinterested person'' standard codified at 11 U.S.C. §101(14). As a former member of the National Bankruptcy Review Commission and, in that capacity, a consistent advocate of maintaining strict disinterestedness standards for bankruptcy professionals, I urge the Committee not to change existing law. I support Congressman Bachus's effort to remove Section 414.

   The National Bankruptcy Review Commission was asked to recommend a modification of the disinterestedness standard in order to accommodate, as I recall, the geographic growth and increasing sophistication of professional firms of all kinds involved in Chapter 11 bankruptcy practice. Despite fervent lobbying by prominent bankruptcy professionals and scholars, the Commission resisted making such a recommendation. We voted (by a lopsided majority, I believe) to retain the standard as it has existed since the 1930's.

   The Commission report cites two reasons for retaining a strict prophylactic standard for all bankruptcy professionals. These are worth brief restatement. First, such a standard can alone protect integrity in the bankruptcy process. If professionals who have previously been associated with the debtor continue to work for the debtor during a bankruptcy case, they will often be subject to conflicting loyalties that undermine their foremost fiduciary duty to the creditors. Strict disinterestedness, required by current law, eliminates such conflicts or potential conflicts.

   Second, enforcing a strict standard of disinterestedness is necessary to maintain public confidence in the integrity of the bankruptcy system. A bankruptcy case should not be subject to the criticism that professional fees are generated to no purpose or for a bad purpose such as delay. The courts' efforts to ensure that fees remain reasonable are enhanced when, because of the complete disinterestedness of participating professionals, no hidden motives may be imputed to the actors in the case.

   One need not focus solely on today's high-profile bankruptcy cases to realize that the challenge of maintaining disinterested professional services has permeated modern corporate reorganization law. The Commission, for instance, voted to retain the original standard in the wake of the criminal conviction of a prominent bankruptcy lawyer and several well-known instances in which law firms were required to disgorge part of their fees--all for violating disinterestedness standards. Given the ongoing nature of the problem, I do not see how any professional group can advocate, consistent with the public interest, eliminating the statutory requirement of disinterestedness. Moreover, as it appears likely that many future complex bankruptcy cases will arise in which the role of investment bankers will have to be explored, it seems particularly unwise to grant that group--alone among bankruptcy professionals--a status insulated from the strict disinterestedness requirement.

   Since the close of the Commission's work in October 1997, I have been a proponent of the bankruptcy reform legislation that has been repeatedly passed by Congress. I still believe the bankruptcy reform legislation is essential to restoring integrity to personal and business bankruptcies, redressing the imbalances and opportunities for manipulation that plague current law, and encouraging individual responsibility in financial affairs. Section 414, in removing investment bankers from a rigorous standard of disinterestedness, is out of character with the rest of this important legislation, however, and it should be eliminated.

   Very truly yours,
EDITH H. JONES.

   Mr. WATT. Mr. Chairman, I yield myself 30 seconds.

   I am a little perplexed by the gentleman's statement. He was yielded 4 minutes. He took 3 minutes and 50 seconds to talk about the problems with the bill and 10 seconds to praise the bill; yet he is going to support it. If there is no public policy justification for this provision, it seems to me that the gentleman would be voting against this bill.

   Mr. Chairman, I yield 4 minutes to the gentlewoman from the District of Columbia (Ms. Norton).

   Ms. NORTON. Mr. Chairman, I thank the gentleman for yielding me this time, and I want to thank the chairman and all who have worked so hard on this bill and have been delayed for so long.

   I rise to take strong exception to putting this bill once again in jeopardy by reinserting anti-choice language, language that was agreed upon in a bipartisan fashion and that again would put this bill in jeopardy.

   As I understand the anti-choice movement, and I respect them for the view which I believe is sincere, the movement disavows violence. Each and every time there is violence in their name, the movement is clear that violence shall not occur in their name. And not only do I not have any reason to doubt them, I have every reason to believe they are sincere.

   Why in the world then would we want to take out the bipartisan Hatch-Schumer language that was agreed upon and do so unilaterally? After all, the point of this bill is to remedy the abuse of the bankruptcy laws. Is it not an abuse to avoid a lawful judgment of a court of law rendered through imposition of fines after finding that a party had, for example, committed violence? Would anybody condone going into bankruptcy in order to avoid that lawful judgment? I see no reason why anybody would want to sign up for that, much less jeopardize this bill.

   Mr. Chairman, I just want to say at the beginning of this session we have gotten to the point where bipartisan compromise does not matter anymore in this House. We know conference reports do not matter. We know that Democrats did not even get to conference. But the notion that Mr. Schumer and Mr. Hatch could reach a compromise on something as controversial in its underlying content as choice and then have that torn up by the House should be unthinkable. I do not think Mr. Hatch would have agreed to it, and as I understood it, the gentleman from Illinois (Mr. Hyde) agreed to it, that it was a kind of compromise. The gentleman from Wisconsin (Mr. Sensenbrenner), all of them agreed that this was what should be done to get the bill through. Why throw it in their face and in our face by taking that compromise out of the bill? This used to be known as breaking one's word; and one thing I thought good politicians, let alone ethical men and women, never did was to

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   Mr. SENSENBRENNER. Mr. Chairman, I yield 2 minutes to the gentlewoman from Pennsylvania (Ms. Hart).

   Ms. HART. Mr. Chairman, I thank the gentleman from Wisconsin (Chairman Sensenbrenner) for his patience with trying to get this bankruptcy legislation through in a form that can be supported across the board and in fact in a form where it deals with the issue of bankruptcy. The Congress has been working on this legislation for a number of years, actually since before I got here; and this passage of this bill is long overdue.

   Since Congress began working on this legislation, bankruptcy filings continue to rise. In fact, data recently released by the Administrative Office of United States Courts showed personal bankruptcies continued to rise at a record-setting pace of 7.4 percent last year.

   Some of this is necessary. Some of this is abuse of the bankruptcy system. It has had a negative impact on our economy, amounting to a loss of $110 million a day. The abuse of the bankruptcy code continues with opportunistic filings and abusive loopholes in the code. One most notable, as I serve on the Committee on Financial Services, dealing with corporate crooks, this bill closes the mansion loophole for greedy corporate culprits.

[Time: 14:15]

   Under current bankruptcy law, debtors living in certain States can shield from their creditors virtually all of the equity in their homes. That includes a $3 million estate.

   Congress spent a considerable amount of time discussing the issue of corporate responsibility, and this bill closes that loophole to continue the work we began last year. Some debtors have moved to particular States in order to take advantage of this loophole. This bill closes the loophole. It requires those debtors to reside in the State for at least 2 years before they can claim a homestead exemption; they have to have owned that home for at least 40 months; and most importantly, it caps the amount at $125,000, a reasonable amount for a family to keep a roof over their heads, but certainly not $3 million that they can just save from their prosecution.

   This legislation also helps women and children in bankruptcy. It prioritizes the collection and payment of spousal and child support, giving them the highest payment priority under the bankruptcy law. The legislation also allows child and domestic violence proceedings to continue, notwithstanding the debtor's filing for bankruptcy protection.

   Mr. Chairman, it is crazy for us not to move this bill at our, finally, hopefully, last opportunity.

   Mr. WATT. Mr. Chairman, I yield 5 minutes to the gentleman from Michigan (Mr. Conyers) the ranking member of Committee on the Judiciary.

   Mr. CONYERS. Mr. Chairman, I thank the gentleman from North Carolina, the manager of the bill, and I rise and take this time not to go over a piece of legislation that has been around here since 1997, started in 1996 with a commission, has been up and down and around, and here we are today taking the bill up yet another time.

   Well, is it sufficient that 35 national organizations, civil rights groups, unions, public interest research groups, consumer organizations, women's organizations, law organizations, the Neighborhood Assistance Corporation, Legal Defense and Education Fund, 34 organizations, I would appreciate it if anybody could tell me why they think all of these organizations do not get the picture, do not understand why this bill should be rejected yet another time?

   But my emphasis this evening is upon the parliamentary process by which the bankruptcy bill was brought to the floor today, and that is to say that the bill is being brought to a conference and the Senate has never passed this bill. This bill is being brought on the sham of a Chapter 12, 6-month, noncontroversial extension entitled ``The Debts of the Family Farmer,'' and that is being used to force a several-hundred-page bill into conference.

   The Senate has not acted. It is shameful that the leadership, the Committee on Rules of this House, would permit this bill, as large, as controversial, as complex as it is, to be taken, that little tale, and brought in here yet again. In other words, we are holding the farm families of America hostage by substituting the controversial omnibus bankruptcy bill to push anticonsumer changes to bankruptcy laws and bypass the Senate debate on the bill.

   So I would like to point out that there happens to be a very big problem on the other side. Notwithstanding the parliamentary shenanigans in the House, again with this attempt to end-run around the Senate, the antichoice lawmakers have to answer this one question: Why do they oppose the compromise of Hyde-Schumer that would hold people who illegally harass, intimidate, commit crimes of violence, blockade and blow up clinics and innocent people, who abuse the bankruptcy system, to evade their lawful debts?

   Will somebody on this floor, to whom I will yield, explain to me why they would support criminal conduct as a reason not to allow this bill to go through? I will yield to anybody.

   And I would like someone else, further, to explain to me, who has stronger views on abortion than the gentleman from Illinois (Chairman Hyde) of the Committee on International Relations? He is the cosponsor of the bill that you are trying so desperately to keep this provision out of.

   I think this is another example of the disgraceful, dishonest tactics being used in this House to get through anything by any means necessary, and I object to it very strenuously.

   Mr. SENSENBRENNER. Mr. Chairman, I yield myself such time as I may consume.

   Mr. Chairman, the gentleman from Michigan (Mr. Conyers) is very right in saying that there were extensive negotiations relative to the so-called Hatch-Schumer abortion protestors' amendment during the conference in the last Congress. Those negotiations lasted the better part of a year. There were both public and private meetings with the principals involved.

   At the end of the process, the gentleman from Illinois (Mr. Hyde) and the Senator from New York, Mr. Schumer, reached an agreement on compromise language that was put into the conference report on H.R. 333, which was the bankruptcy bill in the last Congress.

   The gentleman from Illinois (Mr. Hyde) lived up to his word. He supported the rule that made that conference report in order. Unfortunately, that rule was rejected on November 14, 2002, by a roll call vote of 172 ``yes'' to 243 ``no.'' I notice my friend from Michigan was one of the 243 that voted ``no.'' If he wanted to get that language enacted into law, he could have supported bringing up the conference report on H.R. 333. For whatever reason, he chose not to do so.

   But to answer the arguments that he made on the merits, it is that fines and forfeitures from offenses, both criminal and civil, have never been dischargeable in bankruptcy, irrespective of the offense that gave rise to the fine and forfeiture being imposed. So to say that the omission of language relating to abortion clinic protestors is a way of shielding criminal activity is a complete red herring. Fines and forfeitures that are imposed on abortion clinic protestors in a court of law are not dischargeable in bankruptcy today under the existing law nor, should this bill be enacted, under the provisions of this bill.

   Now, having said that, I feel very strongly that abortion really should not become an issue in the debate on a bankruptcy bill. The position of this House has always been that abortion is not a part of the bankruptcy debate. There is a time and place to debate issues relating to abortion, but this is not it.

   The other body has always disagreed. At some times in the last Congress we had a provision in the conference report that did reach a compromise on this issue. The House refused to consider it. There are other times when the conference in previous Congresses omitted the Schumer language that was passed by the Senate, and the conference report was passed by the Senate by a vote of 70-to-28 on December 7,

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   So I just do not like to see the entire issue of abortion being mixed into it. But I think that the arguments that are made that the omission of the Hyde-Schumer language is an issue of bad faith is a complete red herring. We were not able to pass the bill with it in; we were able to pass it without it.

   Mr. Chairman, I yield 1 1/2 minutes to the gentleman from Michigan (Mr. Smith).

   Mr. SMITH of Michigan. Mr. Chairman, with regard to the original bill that came over from the Senate, the gentlewoman from Wisconsin (Ms. Baldwin) and I, have introduced, cosponsored, about six bills either to make the Chapter 12 permanent or to at least extend it. I would just like to tell my colleagues that in calling the bankruptcy judges that handled these farm cases, there has never been a farm case thrown out because the law expired. Sometimes it has been reacting late, but we have always made it retroactive in every case so those farmers that wanted to use the provisions of Chapter 12 have been able to do that.

   So I would like to make Chapter 12 permanent, but I would also like to make some of the corrections that incorporate some of my language in a larger bankruptcy bill. I hope we can do that. I think it is important for our financial institutions to have some of the additional concerns that are addressed in this bill. This bill will also at the same time expand the availability of loaned money, of available credit money, to more people.

   So I would hope we would pass the bill as provided by the Committee on Rules and send the bankruptcy bill in total over to the Senate and, hopefully, resolve it in conference for final passage.

   Mr. WATT. Mr. Chairman, I yield myself such time as I may consume.

   Mr. CONYERS. Mr. Chairman, will the gentleman yield?

   Mr. WATT. I yield to the gentleman from Michigan.

   Mr. CONYERS. Mr. Chairman, I thank the gentleman for yielding to me.

   I would just like to respond to the distinguished chairman of the Committee on the Judiciary, the gentleman from Wisconsin (Mr. Sensenbrenner), who feels very strongly that the abortion consideration has no place in this bill.

   Well, I will be happy to report that to the predecessor chairman of the Committee on the Judiciary, the gentleman from Illinois (Mr. Hyde). He will be happy to know that you do not feel it does and that a whole group of Senators, not to mention a fairly substantial number of Members of the House, all think that it does, and to think that by running an end-run around this provision with an arcane debt farmers provision, it is not going to work.

   Now, for my friend, the gentleman from Michigan (Mr. Smith), who has served with great distinction in the Congress, I will be happy to let his farmers know that everything is okay, that the provision has expired; but somehow he can get into court, or somebody, and they can just continue on, that with the judges, even though the provision has no effect, that the farmers are okay. I am sure they will be very comforted to hear that.

   Mr. WATT. Reclaiming my time, Mr. Chairman, let me also just make a couple of responses to the statement of the gentleman from Wisconsin (Mr. Sensenbrenner).

   Number one, it is interesting that the chairman thinks that the abortion issue should not be part of the bankruptcy bill. Seemingly, everybody who abuses the bankruptcy process other than people who have had judgments against them for destroying or damaging bankruptcy clinics would be an appropriate subject for this. I thought this whole thing was to try to get to people who are abusing the system. If that is not an abuse, then I am not sure I understand what it is.

   Second, in response to the gentleman's comments about this bill preserving criminal discharges, this is not about criminal discharges, this is about people who have gotten judgments against abortion clinic bombers or damagers, civil judgments, and had those defendants thumb their noses at those judgments by saying ``I am just going to declare bankruptcy so I do not have to pay this judgment.''

[Time: 14:30]

   So if that is not an abuse, then I do not understand what an abuse is. If this bill is about dealing with abuse, then it seems to me people who fall into the category of abortion clinic abusers of the process should be equally accountable.

   Mr. Chairman, I yield 4 minutes to the gentleman from Virginia (Mr. Scott).

   Mr. SCOTT of Virginia. Mr. Chairman, I rise in opposition to the bill in its present form. Instead of passing the bipartisan bill to help family farmers, we have substituted a controversial bill that violates traditional bankruptcy principles.

   For centuries, American bankruptcy laws had the principle that if people get over their heads in debt, they can cash in all of their assets, pay off all the debts they can, and then get a fresh start. For policy reasons, a few assets have historically been exempted and a few debts have historically been nondischargeable, especially those that have been incurred by fraud, a result of crime, or through abuse of the bankruptcy system. Yet the principle has always been the same: cash in all you have and get a fresh start.

   This bill violates the basic principle. People who incurred debts because of illness, unemployment, business failure and have debts they can never pay off will be denied an opportunity to get a fresh start. They will be stripped of every penny of income after basic expenses of food and rent without reasonable allowance for unforeseen emergencies such as automobile repairs, which will inevitably come up. People in these circumstances will be in economic slavery for 5 years and will probably be worse off at the end of 5 years than they were before.

   The bill has no rational measure of determining a person's ability to pay off debts. If someone can pay off $10,000 in his debts over 5 years, that is $167 a month, then he is not entitled to a discharge. A person could cosign a spouse's business loan only to have the spouse die or disappear. If that person has a $50,000 salary, he may find himself owing $1 million, never even able to make interest payments, and that person would be denied relief under this bill. A person with hospital bills could have hospital bills of hundreds of thousands of dollars. That person will be denied relief under this bill. This will cause many Americans who have unforeseen business failures, health problems, or unemployment to find themselves unable to pay their debts and be trapped with no way out. And for 5 years that person would have nothing to lose.

   Mr. Chairman, if our goal is to create a situation where people are stressed out with nothing to lose and to maximize the chances that a person would totally lose control and terrorize a community or its coworkers, this is it. Last year in Washington, D.C., we saw the impact of financial distress. A North Carolina farmer drove his tractor into the pond near the National Mall and was quoted as saying, ``I am broke. I am busted. I am out.'' No one in the community is safe when we have increased the number of neighbors who feel like they have nothing to lose.

   Finally, Mr. Chairman, we have to consider the impact the bill will have on small business entrepreneurs. How many people will be willing to take a chance on a new business if any failure will result not just in bankruptcy but no relief for the family for 5 years? No bank in the future will lend a business any cash, especially one in financial distress that actually needs the money without the personal signature of the owner. And so who will risk not only loss of everything but also risk family poverty with no relief for 5 years if the business fails?

   Long ago we decided that there would be no debtors prisons in America. This bill represents an effort to take a giant step backwards towards that bygone era.

   So I urge my colleagues to reject this bill in its present form so that we can return to the original bill and help family farmers.

   Mr. SENSENBRENNER. Mr. Chairman, I yield myself such time as I may consume.

   The gentleman from North Carolina (Mr. Watt) seemed to imply that because this bill does not contain the so-

[Page: H154]

   Now, the current law, Bankruptcy Code section 523(a)(6) makes nondischargeable debts incurred by willful or malicious injury by the debtor to another entity or to the property of another entity. That law is not changed in this bill. So if somebody trashes an abortion clinic for whatever reason and gets a civil judgment against them, that civil judgment is nondischargeable because the actions were willful and malicious.

   Mr. Chairman, again, I looked at this roll call when the rule was voted down to bring up the legislation that did what the gentleman wanted to do, and that was the compromise Schumer-Hyde language in last Congress's bankruptcy bill. We did what my colleague asked, and he still voted ``no.''

   So I think that the arguments that have been made are really a red herring to try to defeat an overall bankruptcy reform that the House has supported overwhelmingly on many occasions since this issue first came up at least 7 years ago.

   Mr. Chairman, I yield 2 minutes to the gentleman from Utah (Mr. Cannon).

   Mr. CANNON. Mr. Chairman, first of all I would like to associate myself with the comments of the gentleman from Wisconsin (Mr. Sensenbrenner) on these two points that he has just made and then point out in response to the gentleman from Virginia (Mr. Scott) this bill is about getting money from people who have it. It is not about oppressing the poor. And I think the structure of the bill, if you look at it fairly, will show that I rise in support of Senate 1920.

   The amendment in the nature of a substitute of the gentleman from Wisconsin (Mr. Sensenbrenner) merely makes technical corrections to H.R. 975, which was passed by the House early last year. Given the uncontroversial nature of these revisions, I urge my colleagues to support the amendment.

   Last March the House passed H.R. 975 by an overwhelming bipartisan vote of 315 to 113. The administration has endorsed this legislation. The House has voted affirmatively on five separate occasions to pass this bill. Today we are reconsidering this bill in an attempt to reignite a stalled process. We must take action. America's bankruptcy system is, in fact, broken. It gets worse every day with more filings that break record after record, putting an enormous strain on the judiciary's resources. I have seen numbers that indicate the exponential growth to the number of bankruptcy filings.

   I believe the increase in consumer bankruptcy filings will have adverse financial consequences for the American economy. In 1997 alone, more than $40 billion was discharged as a result of bankruptcy cases. This loss translates into a $400 annual tax on every household in our Nation in the form of higher prices and higher interest rates.

   I urge my colleagues to support the enactment of the amendment in the nature of a substitute to S. 1920.

   Mr. SCOTT of Virginia. Mr. Chairman, will the gentleman yield?

   Mr. CANNON. I yield to the gentleman from Virginia.

   Mr. SCOTT of Virginia. Mr. Chairman, if the gentleman from Utah (Mr. Cannon) suggested that what I said was not accurate, I ask what did I say that was not accurate?

   Mr. CANNON. Mr. Chairman, reclaiming my time, what I would like to point out is if you look at the structure of the bill, this is not intended to keep people in slavery or economic servitude. It is intended to take money from those people who are gaming the system who have a large ability to earn income.

   Mr. SCOTT of Virginia. If the gentleman would yield, I said that people who have $2 million in debt that could pay $10,000 of that debt that they obviously can never pay will not be able to get relief under this bill. Is that true?

   Mr. WATT. Mr. Chairman, I yield as much time as he may consume to the gentleman from Virginia (Mr. Scott) to pursue this discussion.

   Mr. SCOTT of Virginia. Mr. Chairman, I said that somebody who can pay off $10,000 but can never pay off the $2 million, are they denied relief under this bill?

   Mr. CANNON. Mr. Chairman, if the gentleman will continue to yield, will they be able to pay off the $10,000?

   Mr. SCOTT of Virginia. They can pay $10,000 on a $2 million debt. The fact is they can never pay off the debt. They will be denied relief under the bill. Is that right?

   Mr. CANNON. If they can pay off $10,000? In other words, is it possible that someone who owes millions and millions of dollars in debt may be held responsible for $10,000? We would certainly hope so.

   Mr. SCOTT of Virginia. Mr. Chairman, reclaiming my time, so that someone who owes $2 million in debt can pay $10,000 and can never pay it will be in economic slavery because every dime they make over food and rent will go into the fund to help pay the $10,000.

   Mr. WATT. Mr. Chairman, I yield such time as he may consume to the gentleman from New York (Mr. Nadler).

   Mr. NADLER. Mr. Chairman, I think the gentleman from Utah (Mr. Cannon) misunderstands the question of the gentleman from Virginia (Mr. Scott). The question as I understand it was not if someone owes $2 million and can pay $10,000 should be then forced to pay $10,000. Yes. The question was, is it not true that under this bill if he owes $2 million, can afford to pay only $10,000, he can never get relief even if he pays the $10,000 he can afford to.

   Mr. CANNON. Mr. Chairman, will the gentleman yield?

   Mr. NADLER. I yield to the gentleman from Utah.

   Mr. CANNON. Mr. Chairman, it is my understanding of this bill that the court can impose a structured pay-out. And that is $10,000, and he can pay $10,000, then he is relieved under the bill.

   Mr. SCOTT of Virginia. Mr. Chairman, if the gentleman will yield, so every dime that they make over food and rent goes into the fund to help pay the $10,000. If that is all they can pay, they have to pay that so they are down to food and rent for 5 years although they can only pay $10,000 on a $2 million debt. They cannot get relief from the $2 million under this bill. And the gentleman agrees with that.

   Mr. CANNON. Mr. Chairman, I believe I understand the gentleman's question, and the point is that the person can get discharged in the course of bankruptcy including a payment, but that payment is not related to what his grocery bill is. It is related to what he can earn and presumably based upon the judgment and discretion of the court what should be paid in addition to a general discharge.

   Mr. WATT. Mr. Chairman, it is obvious that maybe all of my colleagues need to read this bill. Mr. Chairman, I reserve the balance of my time.

   Mr. SENSENBRENNER. Mr. Chairman, I am prepared to close the general debate.

   Mr. WATT. Mr. Chairman, I yield myself the balance of the time, although I doubt that I will use it.

   Let me just correct a couple of things that have been put out here that seem to me to need correction. First of all, child support and alimony are already nondischargeable and all of the women's and children's advocacy groups oppose this bill. So do not be misled by this claim that somehow or another this bill is going to do something to help women's and children's advocacy groups with child support.

   Second, the implication has been made that there is somehow a cap on the homestead exemption in this bill, and that is not the case. We tried to get one on several occasions. It has never worked. It has always failed. And so anybody who is proceeding on the assumption that there is some kind of cap in this bill should dissuade themselves of that notion.

   Having made those corrections and comments, Mr. Chairman, I presume the gentleman from Wisconsin (Mr. Sensenbrenner) will have the last word. I encourage my colleagues to vote against the bill on the grounds that it will play Russian roulette with family farmers. We ought to proceed with the family farmer bill, which needs to be extended to protect family farmers and not get them caught up in all of this other politics about abortion and in a larger bankruptcy reform bill.

   Mr. Chairman, I yield back the balance of my time.

[Page: H155]

   Mr. SENSENBRENNER. Mr. Chairman, I yield myself the balance of my time.

   Mr. Chairman, the bill that is in the substitute made in order by the Committee on Rules, which is the version of the bill that passed the House last March by about a three to one margin, is better for family farmers than what the Senate sent over to us. But the Senate sent over to us what is merely a 6-month extension of chapter 12 of the bankruptcy code.

   The substitute amendment made in order at the Committee on Rules makes chapter 12 permanent. So you have a choice of saying that the other body's bill should be on the President's desk tonight, which means we will go through this entire debate again in 6 months, the end of June, when the Senate bill's provisions expire, or we will be able to pass this bill and take care of the chapter 12 problem permanently.

   To protect our family farmers and to give them certainty in the law, let us do the permanent extension, pass the substitute amendment, and then pass the bill with its other provisions because that will protect everybody from being stiffed by the $400 per household that is passed down in the cost of higher goods and services and interest rates as a result of the current bankruptcy system.

• [Begin Insert]

   Ms. JACKSON-LEE of Texas. Mr. Chairman, I rise in opposition to S. 1920, the bill to extend for 6 months the period for which Chapter 12 of Title 11 of the United States Code is reenacted. This legislation covers a significant amount of ground-consumer filings, small business bankruptcy, ancillary and cross-border cases, financial contract provisions, amendments to chapter 12 governing family farmer reorganization, and health care and employee benefits. These issues affect many constituents; therefore, we as creators of legislation must not take lightly the consideration of its passage. On its face, S. 1920 temporarily extends Chapter 12, the family farmer bankruptcy protection provision, for 6 months, retroactive to January 1, 2004 through June 30, 2004.

   If we allow the amendment offered by Mr. Sensenbrenner to pass favorably, it will essentially incorporate H.R. 975, the Bankruptcy Abuse Prevention and Consumer Protection Act. H.R. 975 passed the House last March by vote of 315 but did not surpass the Senate by virtue of a contentious debate related to preventing abortion protesters from filing for bankruptcy to avoid civil fines and judgment.

   H.R. 975 is a significant departure from the current bankruptcy laws that would make it more difficult for individuals to obtain relief from their debts through bankruptcy proceedings. Attorneys practicing in this field would be faced with more complicated technical requirements, and judgment debtors would be faced with additional filing requirements and a ``means test.''

   The ``means test'' entails the use of a formula for debtors to determine their eligibility for Chapter 7 or Chapter 13 bankruptcy relief based on their ability to repay debt, relying in part on Internal Revenue Service (IRS) calculations of estimated living expenses. Debtors whose remaining income over a 5-year period--after allowable expenses are deducted--is sufficient to repay at least 25 percent of their unsecured debt or $100 a month over 5 years, whichever is greater, or $10,000, would not be eligible for relief under Chapter 7. Under the measure, the current monthly income of the debtor would be calculated using the 6-month period ending on the last day of the month immediately before the bankruptcy filing was made. Monthly income would not include Social Security benefits and payments to victims of war crimes or crimes against humanity, or victims or international or domestic terrorism. Under the measure, if a debtor's income meets or exceeds the means-test threshold, there would be a ``presumption of abuse.'' Under current law, there is a presumption in favor of granting the debtor a discharge'' i.e., forgiving the debt, so this proposal will severely curtail the rights currently enjoyed by taxpayers. Under this measure, debtors can refute the presumption of abuse by demonstrating ``special circumstances'' that justify additional expenses or adjustment to their income to challenge the means-test formula. The debtors would have to itemize and document each additional expense or income adjustment--a very onerous and laborious ordeal.

   This legislation is simply the wrong measure proffered at the wrong time. It will do nothing to address the critical problems facing our country. It will unfairly benefit the credit card and banking industries, rewarding large financial institutions-those paid for by those least able to afford it. The bill includes an extreme means test to determine whether a family can file for bankruptcy protection that helps them get out of debt, or whether the family must enter into a stringent repayment plan under Chapter 13 of the IRS Code.

   Currenlty, less than one-third of Chapter 13 plans are successfully completed, and this rigid ``one-size-fits-all'' means test would result in an even greater number of failed repayment plans, increased administrative costs to the courts, and unnecessary constraints on families in genuine need of bankruptcy relief. The bill, along with the amendment that incorporates H.R. 975 hurts families. The problem with escalating personal bankruptcy filings is not that families are abusing the bankruptcy system. Ninety percent of bankruptcies are attributable to a crisis in the debtor's family such job loss, divorce, or excessive medical bills. In addition, credit card companies are extending credit far too easily. Credit card companies want all the benefits of a deregulated credit industry, with high interest rates and low minimum-payment requirements. They continue to irresponsibility extend credit to already debt-laden consumers and then run to Congress for help to apply pressure to consumers already struggling in this troubled economy.

   While the bill purports to elevate the priority of child support payments, in reality, credit card companies would receive repayment of debt at the same rate as child support obligations. Those provisions would have a severe impact on the most vulnerable members of society, including women and children who rely on alimony and child support payments to live. The bill's homestead exemption cap does little to address the problem of wealthy debtors shielding their assets from creditors by purchasing million-dollars homes. Sophisticated, wealthy debtors can easily plan ahead and evade the cap. Under the bill, with a little planning, chief executive officers like Ken Lay, formerly of Enron, would be able to keep their homes, while lower-income renters--the former janitors at Enron, for example--could end up homeless.

   The bill also imposes artificial deadlines and cumbersome new paperwork requirements on small businesses trying to reorganize and unnecessarily limits the discretion of bankruptcy judges in crafting the best possible result for small business debtors and creditors. The overbroad requirements called for will force many viable small businesses to permanently close their doors. The bill is great for credit card companies, but bad for everyone else. In fact, it hurts those who most need the second chance offered by bankruptcy.

   I do, however, support amendment No. 2 of House Report No. 108-407 offered by Ms. BALDWIN of Wisconsin. This amendment would make Chapter 12 of Title 11 of the U.S. Bankruptcy Code that deals with ``family farmer'' reorganization permanent and would expand the eligibility requirements found within that Chapter. The number of Chapter 12 filings has risen in the past two years. Allowing this law to lapse would be irresponsible for us as legislators. Farmers with debts up to $1.5 million can qualify for Chapter 12 protection if 80 percent of that debt is related to farm operations. In normal bankruptcy proceedings, all assets are subject to liquidation, but under Chapter 12, land and equipment is exempt, allowing a family farmer to keep farming.

   From its incipiency, this has always been a bad bill--one that kicks honest debtors when they are already down on their luck--but the timing could not be worse. The policy message that is being conveyed with this legislative scheme amounts to a slap in the face of the families of our brave men and women in uniform who fought and are still fighting in the expensive ``Operation Iraqi Freedom,'' a war that has to date not been substantially justified. This bill should be defeated so that Congress instead of using the public's time and money to pay back credit card companies for their campaign contributions, can get back to work addressing the very real problems facing our country.

   For the reasons stated above, Mr. Chairman, I oppose this bill.

   Mr. OXLEY. Mr. Chairman, I rise today in support of S. 1920, and the amendment offered by the distinguished chairman of the Committee on the Judiciary, the gentleman from Wisconsin (Mr. SENSENBRENNER).

   As you know, the gentleman's amendment consists of the text of H.R. 975, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2003. That bill was additionally referred to the Committee on Financial Services, which I chair, based on its jurisdiction over banks and banking, credit, and securities and exchanges.

   Mr. Chairman, this legislation is vitally important to the Nation. In particular, those provisions addressing the ``netting'' of financial contracts are an important part of ensuring that our economic recovery continues, as the Chairman of the Federal Reserve Board of Governors, Alan Greenspan, has said time and time again.

   Accordingly, I wholeheartedly support any effort to move this legislation forward to enactment. For the record, I am submitting an exchange of letters between the Chairman of the Committee on the Judiciary and myself regarding H.R. 975. I appreciate his willingness

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   HOUSE OF REPRESENTATIVES,

   COMMITTEE ON FINANCIAL SERVICES,

   Washington, DC, March 14, 2003.

• [End Insert]

   DEAR JIM: On March 12, 2003, the Committee on the Judiciary ordered reported H.R. 975, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2003. As you know, the Committee on Financial Services was granted an additional referral upon the bill's introduction pursuant to the Committee's jurisdiction under Rule X of the Rules of the House of Representatives over banks and banking, credit, and securities and exchanges.

   Because of your willingness to consult with the Committee on Financial Services regarding this matter, your continuing support for our requested changes, and the need to move this legislation expeditiously, I will waive consideration of the bill by the Financial Services Committee. By agreeing to waive its consideration of the bill, the Financial Services Committee does not waive its jurisdiction over H.R. 975. In addition, the Committee on Financial Services reserves its authority to seek conferees on any provisions of the bill that are within the Financial Services Committee's jurisdiction during any House-Senate conference that may be convened on this legislation. I ask your commitment to support any request by the Committee on Financial Services for conferees on H.R. 975 or related legislation.

   I request that you include this letter and your response as part of your committee's report on the bill and the Congressional Record during consideration of the legislation on the House floor.

   Thank you for your attention to these matters.

   Sincerely,

   Michael G. Oxley,
Chairman.

--

   HOUSE OF REPRESENTATIVES,

   COMMITTEE ON THE JUDICIARY,

   Washington, DC, March 17, 2003.
Hon. MICHAEL G. OXLEY,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.

   DEAR MICHAEL: This letter responds to your letter dated March 14, 2003, concerning H.R. 975, the ``Bankruptcy Abuse Prevention and Consumer Protection Act of 2003.''

   I agree that the bill contains matters within the Financial Services Committee's jurisdiction and appreciate your willingness to be discharged from further consideration of H.R. 975 so we may proceed to the floor.

   Pursuant to your request, a copy of your letter and this letter will be included in the report of the Committee on the Judiciary on H.R. 975.

   Sincerely,

   F. James Sensenbrenner, Jr.
Chairman.

• [Begin Insert]

   Mr. CANTOR. Mr. Chairman, I rise today to speak in favor of bankruptcy reform, an issue this body has voted in favor of time and time again.

   This reform is long overdue and will go a long way to stop abuses of the bankruptcy code.

   This measure will permanently extend the agricultural chapter of the bankruptcy code and will add new protections for the American people, including a ``bill of rights'' for those who file for bankruptcy.

   Additionally, this measure will provide new protections for parents and will strengthen their ability to collect child support. This legislation will also fix the system so that high income debtors attempting to protect their excessive lifestyles will be held accountable and not continue to live lavishly at the expense of working families.

   By establishing a means test for those who file for bankruptcy, this legislation will ensure that those who can repay their debts will no longer be able to abuse the system. These abuses negatively affect the economy by raising the price of goods while simultaneously lowering the availability of credit. This measure is a victory for the majority of Americans who play by the rules over those who choose to play by their own.

   Mr. Chairman, the time has come for us to pass bankruptcy reform. These reforms are necessary to protect the American people; and I urge passage of this legislation.

   Mr. BISHOP of Georgia. Mr. Chairman, I rise today in support of S. 1920 and for the rule which preserves the institution of bankruptcy, and provides an important safety net for American families, individuals, and businesses.

   At first glance, the bill before us, S. 1920, provides for a 6 month extension of Chapter 12 bankruptcy protection for America's family farmers. I am again happy to support this greatly needed extension, but there's more to this bill than that.

   The rule that we are also considering today substitutes into S. 1920 the text of the much larger bankruptcy reform bill (H.R. 975) which we in the House passed on March 19, 2003 by a vote of 315-113. This was great news and progress in preserving the institution of bankruptcy protection. Unfortunately, the bill has not yet been taken up in the Senate--not surprisingly since previous House versions of bankruptcy protection have died on the vine in the Senate when extraneous provisions were included.

   So today we have an opportunity for a second bite at that apple. The provisions in S. 1920 (and H.R. 975 by incorporation) preserve bankruptcy by ensuring this protection to those who really need it as a result of unforeseeable medical bills, unemployment, and other legitimate needs. I am also extremely pleased that it also includes a permanent extension of Chapter 12 family farmer bankruptcy protection, and I'd like to also acknowledge the efforts of Representative BALDWIN, whose amendment we are also considering, similarly makes permanent this important protection. Importantly, H.R. 975 ensures that more family farmers will be eligible for Chapter 12 by easing some of the income and debt limitations that currently restrict access to this type of bankruptcy relief. While reasonable minds may differ as to the best vehicle for family farmer bankruptcy protection, currently family farmers are without the bankruptcy protection they need. This is completely unacceptable.

   Broadly speaking, Mr. Chairman, the bankruptcy system in America is broken and needs to be fixed. Bankruptcy filings have soared in recent years, with thousands of filers who are capable of repaying their debts, simply walking away from their debts and obligations through the current bankruptcy filing system.

   We need a greater and more sustainable safety net for all Americans, and we need it now. The bill before us protects those who truly need it most, while also including protections for business so that they can get back on track and get back to work.

   This bill is a good deal for Americans, Mr. Chairman, saving American taxpayers billions of dollars each and every year. It is a powerful and greatly needed measure that protects consumers and creditors against those who would abuse the system, while ensuring a fresh start to those who legitimately need the safety net that is the bankruptcy system.

   Let me be perfectly clear--one way or another, we must pass family farmer bankruptcy protection now in order to lift up America's farmers by making this protection permanent. I believe that the bill before us holds this promise. But if this bill fails for any number of political obstacles between the House and the Senate, we must still honor our responsibility to ensure that our family farmers are protected. I know that I will, and I urge my colleagues to do the same.

   Mr. BEREUTER. Mr. Chairman, this Member rises today to express his support for S. 1920, as amended. The Rules Committee has reported-out a rule (H. Res. 503) which upon passage, automatically modifies this bill by substituting the text of H.R. 975 which the House passed on March 19, 2003. This Member was a cosponsor of this earlier passed measure.

   It is important to note that bankruptcy reforms bills have passed both the House and Senate in the 105th, 106th, and 107th Congresses. In the 105th Congress, the House passed a bankruptcy reform conference report, while the Senate failed to pass the conference report. In the 106th Congress, former President Bill Clinton pocket vetoed a bankruptcy reform conference report. During the 107th Congress, the rule under which the bankruptcy reform conference report was to be considered was defeated in the House because of a tenuous connection drawn to the subject of abortion clinics by conferees from the other body.

   This Member would thank the distinguished gentleman from Wisconsin (Mr. SENSENBRENNER), the Chairman of the Judiciary Committee, for his efforts in bringing, S. 1920, as amended to the House Floor for consideration. This Member supports S. 1920, as amended, for numerous reasons; however, the most important reasons include the following:

   First, this Member supports the provision which provides for a means testing (needs-based) formula when determining whether an individual should file for Chapter 7 or Chapter 13 bankruptcy. Chapter 7 bankruptcy allows a debtor to be discharged of his or personal liability for many unsecured debts. In addition, there is no requirement that a Chapter 7 filer repay many of his or her debts. However, Chapter 13 bankruptcy filers commit to repay some portion of his or her debts under a repayment plan.

   Some Chapter 7 filers actually have the capacity to repay some of what they owe, but they choose Chapter 7 bankruptcy and are able to walk away from these debts. For example, the stories in which an individual filed for Chapter 7 bankruptcy and then proceeds to take a nice vacation and/or buys a new car are too common. Moreover, the status quo is costing the average American individual and family increased costs for consumer goods and credit because of the amount of debt which is never repaid to creditors.

[Page: H157]

   As a response to these concerns, the needs-based test of this legislation will help ensure that high income filers, who could repay some of what they owe, are required to file Chapter 13 bankruptcy as compared to Chapter 7. This needs-based system takes a debtor's income, expenses, obligations and any special circumstances into account to determine whether he or she has the capacity to repay a portion of their debts.

   Second, this Member supports the additional monthly expense items that are exempted from consideration under the needs-based test which determines, under this legislation, whether a person can file either a Chapter 7 or 13 version of bankruptcy. These expenses include the following: reasonable expenses incurred to maintain the safety of the debtor and debtor's family from domestic violence; an additional food and clothing allowance if demonstrated to be reasonable and necessary; and actual expenses for the care and support of an elderly, chronically ill, or disabled member of the debtor's household or immediate family.

   Third, this Member supports the permanent extension of Chapter 12 bankruptcy in this legislation since it allows family farmers to reorganize their debts as compared to liquidating their assets. Using the Chapter 12 bankruptcy provision has been an important and necessary option for family farmers to reorganize their assets in manner which balances the interests of creditors and the future success of the involved farmer.

   It is important to note that S. 1920, as passed by the other body on November 25, 2003, would extend Chapter 12 bankruptcy for family farms and ranches through July 1, 2004. Chapter 12 bankruptcy expired on January 1, 2004.

   If Chapter 12 bankruptcy provisions are not permanently extended for family farmers, its expiration on January 1, 2004, would continue to be a very painful blow to an agricultural sector already reeling from low commodity prices. Not only will many family farmers have no viable option but to end their operations, it likely will also cause land values to plunge. Such a decrease in value of farmland will affect the ability of family farmers to obtain adequate credit to maintain a viable farm operation. It will impact the manner in which banks conduct their agricultural lending activities. Furthermore, this Member has received many contacts from his constituents supporting the extension of Chapter 12 bankruptcy because of the situation now being faced by our Nation's farm families. It is clear that the agricultural sector is hurting and by a permanent extension of the Chapter 12 authorization, Congress can avoid one more negative possibility.

   Lastly, this Member supports the provisions in this legislation, which requires that people convicted of a felony or who owe a debt from a securities fraud violation in the 5 years before filing for bankruptcy cannot claim an unlimited homestead exemption. This Member believes that this provision in the conference report is imperative in light of the recent corporate scandals at Enron and WorldCom. For example, this provision would apply to the $7 million penthouse in Houston of Kenneth Lay (if he still owns it), the former chairman of Enron, if he both files for personal bankruptcy in the future and owes a debt due to any conviction of securities fraud. In addition, this provision may also be relevant to Scott D. Sullivan, the former chief financial officer of WorldCom, who at one time was building a $15 million mansion in Boca Raton, Florida.

   In closing, for these aforementioned reasons and many others, this Member urges his colleagues to support S. 1920, as amended.

   Mr. SMITH of Texas. Mr. Chairman I support this bill. It allows consumers to benefit from the changes to the bankruptcy system that were approved by this House last year.

   It's time for Congress to enact permanent meaningful bankruptcy reform. Recent surveys show that 70 percent of Americans support reforming our nation's bankruptcy laws. Unless we take action, consumers will continue to be negatively impacted by the current system and fraudulent filings will continue to be rewarded rather than discouraged.

   In 1980, 300,000 bankruptcy petitions were filed. This past year, over 1.2 million were reported during just the first nine months. Many of these filings are legitimate attempts by debtors to pay their debts and obtain a fresh start. However, bankruptcy is too often used as a way to avoid responsibilities.

   Unnecessary Bankruptcy filings continue to increase at dramatic rates. This is bad for consumers and bad for our economy. The costs of these filings are passed on to America's businesses and consumers, who should not have to absorb these debts. We must ensure that debtors actually belong in bankruptcy and are not using the system to avoid their obligations.

   This legislation encourages personal responsibility, protects consumers, and ensures that bankruptcy is used only as a last resort and is not abused by those who can afford to repay their debts.

   Bankruptcy reform is good for consumers, family farmers, and our economy. I urge my colleagues to support this bill.

• [End Insert]

   Mr. SENSENBRENNER. Mr. Chairman, I yield back the balance of my time.

[Time: 14:45]

   The CHAIRMAN. All time for general debate has expired.

   Pursuant to the rule, the amendment in the nature of a substitute consisting of the text of H.R. 975 as passed by the House shall be considered as an original bill for the purpose of amendment under the 5-minute rule and shall be considered read.

   The text of the amendment in the nature of a substitute is as follows:

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

   SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.

    (a) SHORT TITLE.--This Act may be cited as the ``Bankruptcy Abuse Prevention and Consumer Protection Act of 2003''.

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

   Sec..1..Short title; references; table of contents.

   TITLE I--NEEDS-BASED BANKRUPTCY

   Sec..101..Conversion.

   Sec..102..Dismissal or conversion.

   Sec..103..Sense of Congress and study.

   Sec..104..Notice of alternatives.

   Sec..105..Debtor financial management training test program.

   Sec..106..Credit counseling.

   Sec..107..Schedules of reasonable and necessary expenses.

   TITLE II--ENHANCED CONSUMER PROTECTION

   Subtitle A--Penalties for Abusive Creditor Practices

   Sec..201..Promotion of alternative dispute resolution.

   Sec..202..Effect of discharge.

   Sec..203..Discouraging abuse of reaffirmation agreement practices.

   Sec..204..Preservation of claims and defenses upon sale of predatory loans.

   Sec..205..GAO study and report on reaffirmation agreement process.

   Subtitle B--Priority Child Support

   Sec..211..Definition of domestic support obligation.

   Sec..212..Priorities for claims for domestic support obligations.

   Sec..213..Requirements to obtain confirmation and discharge in cases involving domestic support obligations.

   Sec..214..Exceptions to automatic stay in domestic support obligation proceedings.

   Sec..215..Nondischargeability of certain debts for alimony, maintenance, and support.

   Sec..216..Continued liability of property.

   Sec..217..Protection of domestic support claims against preferential transfer motions.

   Sec..218..Disposable income defined.

   Sec..219..Collection of child support.

   Sec..220..Nondischargeability of certain educational benefits and loans.

   Subtitle C--Other Consumer Protections

   Sec..221..Amendments to discourage abusive bankruptcy filings.

   Sec..222..Sense of Congress.

   Sec..223..Additional amendments to title 11, United States Code.

   Sec..224..Protection of retirement savings in bankruptcy.

   Sec..225..Protection of education savings in bankruptcy.

   Sec..226..Definitions.

   Sec..227..Restrictions on debt relief agencies.

   Sec..228..Disclosures.

   Sec..229..Requirements for debt relief agencies.

   Sec..230..GAO study.

   Sec..231..Protection of personally identifiable information.

   Sec..232..Consumer privacy ombudsman.

   Sec..233..Prohibition on disclosure of name of minor children.

   TITLE III--DISCOURAGING BANKRUPTCY ABUSE

   Sec..301..Reinforcement of the fresh start.

   Sec..302..Discouraging bad faith repeat filings.

   Sec..303..Curbing abusive filings.

   Sec..304..Debtor retention of personal property security.

   Sec..305..Relief from the automatic stay when the debtor does not complete intended surrender of consumer debt collateral.

   Sec..306..Giving secured creditors fair treatment in chapter 13.

   Sec..307..Domiciliary requirements for exemptions.

   Sec..308..Reduction of homestead exemption for fraud.

   Sec..309..Protecting secured creditors in chapter 13 cases.

   Sec..310..Limitation on luxury goods.

   Sec..311..Automatic stay.

   Sec..312..Extension of period between bankruptcy discharges.

   Sec..313..Definition of household goods and antiques.

[Page: H158]

   Sec..314..Debt incurred to pay nondischargeable debts.

   Sec..315..Giving creditors fair notice in chapters 7 and 13 cases.

   Sec..316..Dismissal for failure to timely file schedules or provide required information.

   Sec..317..Adequate time to prepare for hearing on confirmation of the plan.

   Sec..318..Chapter 13 plans to have a 5-year duration in certain cases.

   Sec..319..Sense of Congress regarding expansion of rule 9011 of the Federal Rules of Bankruptcy Procedure.

   Sec..320..Prompt relief from stay in individual cases.

   Sec..321..Chapter 11 cases filed by individuals.

   Sec..322..Limitations on homestead exemption.

   Sec..323..Excluding employee benefit plan participant contributions and other property from the estate.

   Sec..324..Exclusive jurisdiction in matters involving bankruptcy professionals.

   Sec..325..United States trustee program filing fee increase.

   Sec..326..Sharing of compensation.

   Sec..327..Fair valuation of collateral.

   Sec..328..Defaults based on nonmonetary obligations.

   Sec..329..Clarification of postpetition wages and benefits.

   Sec..330..Delay of discharge during pendency of certain proceedings.

   TITLE IV--GENERAL AND SMALL BUSINESS BANKRUPTCY PROVISIONS

   Subtitle A--General Business Bankruptcy Provisions

   Sec..401..Adequate protection for investors.

   Sec..402..Meetings of creditors and equity security holders.

   Sec..403..Protection of refinance of security interest.

   Sec..404..Executory contracts and unexpired leases.

   Sec..405..Creditors and equity security holders committees.

   Sec..406..Amendment to section 546 of title 11, United States Code.

   Sec..407..Amendments to section 330(a) of title 11, United States Code.

   Sec..408..Postpetition disclosure and solicitation.

   Sec..409..Preferences.

   Sec..410..Venue of certain proceedings.

   Sec..411..Period for filing plan under chapter 11.

   Sec..412..Fees arising from certain ownership interests.

   Sec..413..Creditor representation at first meeting of creditors.

   Sec..414..Definition of disinterested person.

   Sec..415..Factors for compensation of professional persons.

   Sec..416..Appointment of elected trustee.

   Sec..417..Utility service.

   Sec..418..Bankruptcy fees.

   Sec..419..More complete information regarding assets of the estate.

   Subtitle B--Small Business Bankruptcy Provisions

   Sec..431..Flexible rules for disclosure statement and plan.

   Sec..432..Definitions.

   Sec..433..Standard form disclosure statement and plan.

   Sec..434..Uniform national reporting requirements.

   Sec..435..Uniform reporting rules and forms for small business cases.

   Sec..436..Duties in small business cases.

   Sec..437..Plan filing and confirmation deadlines.

   Sec..438..Plan confirmation deadline.

   Sec..439..Duties of the United States trustee.

   Sec..440..Scheduling conferences.

   Sec..441..Serial filer provisions.

   Sec..442..Expanded grounds for dismissal or conversion and appointment of trustee.

   Sec..443..Study of operation of title 11, United States Code, with respect to small businesses.

   Sec..444..Payment of interest.

   Sec..445..Priority for administrative expenses.

   Sec..446..Duties with respect to a debtor who is a plan administrator of an employee benefit plan.

   Sec..447..Appointment of committee of retired employees.

   TITLE V--MUNICIPAL BANKRUPTCY PROVISIONS

   Sec..501..Petition and proceedings related to petition.

   Sec..502..Applicability of other sections to chapter 9.

   TITLE VI--BANKRUPTCY DATA

   Sec..601..Improved bankruptcy statistics.

   Sec..602..Uniform rules for the collection of bankruptcy data.

   Sec..603..Audit procedures.

   Sec..604..Sense of Congress regarding availability of bankruptcy data.

   TITLE VII--BANKRUPTCY TAX PROVISIONS

   Sec..701..Treatment of certain liens.

   Sec..702..Treatment of fuel tax claims.

   Sec..703..Notice of request for a determination of taxes.

   Sec..704..Rate of interest on tax claims.

   Sec..705..Priority of tax claims.

   Sec..706..Priority property taxes incurred.

   Sec..707..No discharge of fraudulent taxes in chapter 13.

   Sec..708..No discharge of fraudulent taxes in chapter 11.

   Sec..709..Stay of tax proceedings limited to prepetition taxes.

   Sec..710..Periodic payment of taxes in chapter 11 cases.

   Sec..711..Avoidance of statutory tax liens prohibited.

   Sec..712..Payment of taxes in the conduct of business.

   Sec..713..Tardily filed priority tax claims.

   Sec..714..Income tax returns prepared by tax authorities.

   Sec..715..Discharge of the estate's liability for unpaid taxes.

   Sec..716..Requirement to file tax returns to confirm chapter 13 plans.

   Sec..717..Standards for tax disclosure.

   Sec..718..Setoff of tax refunds.

   Sec..719..Special provisions related to the treatment of State and local taxes.

   Sec..720..Dismissal for failure to timely file tax returns.

   TITLE VIII--ANCILLARY AND OTHER CROSS-BORDER CASES

   Sec..801..Amendment to add chapter 15 to title 11, United States Code.

   Sec..802..Other amendments to titles 11 and 28, United States Code.

   TITLE IX--FINANCIAL CONTRACT PROVISIONS

   Sec..901..Treatment of certain agreements by conservators or receivers of insured depository institutions.

   Sec..902..Authority of the FDIC and NCUAB with respect to failed and failing institutions.

   Sec..903..Amendments relating to transfers of qualified financial contracts.

   Sec..904..Amendments relating to disaffirmance or repudiation of qualified financial contracts.

   Sec..905..Clarifying amendment relating to master agreements.

   Sec..906..Federal Deposit Insurance Corporation Improvement Act of 1991.

   Sec..907..Bankruptcy law amendments.

   Sec..908..Recordkeeping requirements.

   Sec..909..Exemptions from contemporaneous execution requirement.

   Sec..910..Damage measure.

   Sec..911..SIPC stay.

   TITLE X--PROTECTION OF FAMILY FARMERS AND FAMILY FISHERMEN

   Sec..1001..Permanent reenactment of chapter 12.

   Sec..1002..Debt limit increase.

   Sec..1003..Certain claims owed to governmental units.

   Sec..1004..Definition of family farmer.

   Sec..1005..Elimination of requirement that family farmer and spouse receive over 50 percent of income from farming operation in year prior to bankruptcy.

   Sec..1006..Prohibition of retroactive assessment of disposable income.

   Sec..1007..Family fishermen.

   TITLE XI--HEALTH CARE AND EMPLOYEE BENEFITS

   Sec..1101..Definitions.

   Sec..1102..Disposal of patient records.

   Sec..1103..Administrative expense claim for costs of closing a health care business and other administrative expenses.

   Sec..1104..Appointment of ombudsman to act as patient advocate.

   Sec..1105..Debtor in possession; duty of trustee to transfer patients.

   Sec..1106..Exclusion from program participation not subject to automatic stay.

   TITLE XII--TECHNICAL AMENDMENTS

   Sec..1201..Definitions.

   Sec..1202..Adjustment of dollar amounts.

   Sec..1203..Extension of time.

   Sec..1204..Technical amendments.

   Sec..1205..Penalty for persons who negligently or fraudulently prepare bankruptcy petitions.

   Sec..1206..Limitation on compensation of professional persons.

   Sec..1207..Effect of conversion.

   Sec..1208..Allowance of administrative expenses.

   Sec..1209..Exceptions to discharge.

   Sec..1210..Effect of discharge.

   Sec..1211..Protection against discriminatory treatment.

   Sec..1212..Property of the estate.

   Sec..1213..Preferences.

   Sec..1214..Postpetition transactions.

   Sec..1215..Disposition of property of the estate.

   Sec..1216..General provisions.

   Sec..1217..Abandonment of railroad line.

   Sec..1218..Contents of plan.

   Sec..1219..Bankruptcy cases and proceedings.

   Sec..1220..Knowing disregard of bankruptcy law or rule.

   Sec..1221..Transfers made by nonprofit charitable corporations.

   Sec..1222..Protection of valid purchase money security interests.

   Sec..1223..Bankruptcy Judgeships.

   Sec..1224..Compensating trustees.

   Sec..1225..Amendment to section 362 of title 11, United States Code.

   Sec..1226..Judicial education.

   Sec..1227..Reclamation.

   Sec..1228..Providing requested tax documents to the court.

   Sec..1229..Encouraging creditworthiness.

   Sec..1230..Property no longer subject to redemption.

   Sec..1231..Trustees.

   Sec..1232..Bankruptcy forms.

   Sec..1233..Direct appeals of bankruptcy matters to courts of appeals.

[Page: H159]

   Sec..1234..Involuntary cases.

   Sec..1235..Federal election law fines and penalties as nondischargeable debt.

   TITLE XIII--CONSUMER CREDIT DISCLOSURE

   Sec..1301..Enhanced disclosures under an open end credit plan.

   Sec..1302..Enhanced disclosure for credit extensions secured by a dwelling.

   Sec..1303..Disclosures related to ``introductory rates''.

   Sec..1304..Internet-based credit card solicitations.

   Sec..1305..Disclosures related to late payment deadlines and penalties.

   Sec..1306..Prohibition on certain actions for failure to incur finance charges.

   Sec..1307..Dual use debit card.

   Sec..1308..Study of bankruptcy impact of credit extended to dependent students.

   Sec..1309..Clarification of clear and conspicuous.

   TITLE XIV--GENERAL EFFECTIVE DATE; APPLICATION OF AMENDMENTS

   Sec..1401..Effective date; application of amendments.

   TITLE XV--PREVENTING CORPORATE BANKRUPTCY ABUSE

   Sec..1501..Employee wage and benefit priorities.

   Sec..1502..Fraudulent transfers and obligations.

   Sec..1503..Payment of insurance benefits to retired employees.

   Sec..1504..Effective date; application of amendments.

   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 11 or 13'';

   and

    (2) in subsection (b)--

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

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

    (i) in the first sentence--

    (I) by striking ``but not at the request or suggestion of'' and inserting ``trustee (or bankruptcy administrator, if any), or'';

    (II) by inserting ``, or, with the debtor's consent, convert such a case to a case under chapter 11 or 13 of this title,'' after ``consumer debts''; and

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

    (ii) by striking the next to last sentence; and

    (C) by adding at the end the following:

    ``(2)(A)(i) In considering under paragraph (1) whether the granting of relief would be an abuse of the provisions of this chapter, the court shall presume abuse exists if the debtor's current monthly income reduced by the amounts determined under clauses (ii), (iii), and (iv), and multiplied by 60 is not less than the lesser of--

    ``(I) 25 percent of the debtor's nonpriority unsecured claims in the case, or $6,000, whichever is greater; or

    ``(II) $10,000.

    ``(ii)(I) The debtor's monthly expenses shall be the debtor's applicable monthly expense amounts specified under the National Standards and Local Standards, and the debtor's actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service for the area in which the debtor resides, as in effect on the date of the order for relief, for the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case, if the spouse is not otherwise a dependent. Notwithstanding any other provision of this clause, the monthly expenses of the debtor shall not include any payments for debts. In addition, the debtor's monthly expenses shall include the debtor's reasonably necessary expenses incurred to maintain the safety of the debtor and the family of the debtor from family violence as identified under section 309 of the Family Violence Prevention and Services Act, or other applicable Federal law. The expenses included in the debtor's monthly expenses described in the preceding sentence shall be kept confidential by the court. In addition, if it is demonstrated that it is reasonable and necessary, the debtor's monthly expenses may also include an additional allowance for food and clothing of up to 5 percent of the food and clothing categories as specified by the National Standards issued by the Internal Revenue Service.

    ``(II) In addition, the debtor's monthly expenses may include, if applicable, the continuation of actual expenses paid by the debtor that are reasonable and necessary for care and support of an elderly, chronically ill, or disabled household member or member of the debtor's immediate family (including parents, grandparents, siblings, children, and grandchildren of the debtor, the dependents of the debtor, and the spouse of the debtor in a joint case who is not a dependent) and who is unable to pay for such reasonable and necessary expenses.

    ``(III) In addition, for a debtor eligible for chapter 13, the debtor's monthly expenses may include the actual administrative expenses of administering a chapter 13 plan for the district in which the debtor resides, up to an amount of 10 percent of the projected plan payments, as determined under schedules issued by the Executive Office for United States Trustees.

    ``(IV) In addition, the debtor's monthly expenses may include the actual expenses for each dependent child less than 18 years of age, not to exceed $1,500 per year per child, to attend a private or public elementary or secondary school if the debtor provides documentation of such expenses and a detailed explanation of why such expenses are reasonable and necessary, and why such expenses are not already accounted for in the National Standards, Local Standards, or Other Necessary Expenses referred to in subclause (I).

    ``(V) In addition, the debtor's monthly expenses may include an allowance for housing and utilities, in excess of the allowance specified by the Local Standards for housing and utilities issued by the Internal Revenue Service, based on the actual expenses for home energy costs if the debtor provides documentation of such actual expenses and demonstrates that such actual expenses are reasonable and necessary.

    ``(iii) The debtor's average monthly payments on account of secured debts shall be calculated as the sum of--

    ``(I) the total of all amounts scheduled as contractually due to secured creditors in each month of the 60 months following the date of the petition; and

    ``(II) any additional payments to secured creditors necessary for the debtor, in filing a plan under chapter 13 of this title, to maintain possession of the debtor's primary residence, motor vehicle, or other property necessary for the support of the debtor and the debtor's dependents, that serves as collateral for secured debts;

   divided by 60.

    ``(iv) The debtor's expenses for payment of all priority claims (including priority child support and alimony claims) shall be calculated as the total amount of debts entitled to priority, divided by 60.

    ``(B)(i) In any proceeding brought under this subsection, the presumption of abuse may only be rebutted by demonstrating special circumstances that justify additional expenses or adjustments of current monthly income for which there is no reasonable alternative.

    ``(ii) In order to establish special circumstances, the debtor shall be required to itemize each additional expense or adjustment of income and to provide--

    ``(I) documentation for such expense or adjustment to income; and

    ``(II) a detailed explanation of the special circumstances that make such expenses or adjustment to income necessary and reasonable.

    ``(iii) The debtor shall attest under oath to the accuracy of any information provided to demonstrate that additional expenses or adjustments to income are required.

    ``(iv) The presumption of abuse may only be rebutted if the additional expenses or adjustments to income referred to in clause (i) cause the product of the debtor's current monthly income reduced by the amounts determined under clauses (ii), (iii), and (iv) of subparagraph (A) when multiplied by 60 to be less than the lesser of--

    ``(I) 25 percent of the debtor's nonpriority unsecured claims, or $6,000, whichever is greater; or

    ``(II) $10,000.

    ``(C) As part of the schedule of current income and expenditures required under section 521, the debtor shall include a statement of the debtor's current monthly income, and the calculations that determine whether a presumption arises under subparagraph (A)(i), that show how each such amount is calculated.

    ``(3) In considering under paragraph (1) whether the granting of relief would be an abuse of the provisions of this chapter in a case in which the presumption in subparagraph (A)(i) of such paragraph does not arise or is rebutted, the court shall consider--

    ``(A) whether the debtor filed the petition in bad faith; or

    ``(B) the totality of the circumstances (including whether the debtor seeks to reject a personal services contract and the financial need for such rejection as sought by the debtor) of the debtor's financial situation demonstrates abuse.

    ``(4)(A) The court, on its own initiative or on the motion of a party in interest, in accordance with the procedures described in rule 9011 of the Federal Rules of Bankruptcy Procedure, may order the attorney for the debtor to reimburse the trustee for all reasonable costs in prosecuting a motion filed under section 707(b), including reasonable attorneys' fees, if--

    ``(i) a trustee files a motion for dismissal or conversion under this subsection; and

    ``(ii) the court--

    ``(I) grants such motion; and

    ``(II) finds that the action of the attorney for the debtor in filing under this chapter violated rule 9011 of the Federal Rules of Bankruptcy Procedure.

    ``(B) If the court finds that the attorney for the debtor violated rule 9011 of the Federal Rules of Bankruptcy Procedure, the court, on its own initiative or on the motion of a party in interest, in accordance with such procedures, may order--

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

    ``(ii) the payment of such civil penalty to the trustee, the United States trustee (or the bankruptcy administrator, if any).

[Page: H160]

    ``(C) The signature of an attorney on a petition, pleading, or written motion shall constitute a certification that the attorney has--

    ``(i) performed a reasonable investigation into the circumstances that gave rise to the petition, pleading, or written motion; and

    ``(ii) determined that the petition, pleading, or written motion--

    ``(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).

    ``(D) The signature of an attorney on the petition shall constitute a certification that the attorney has no knowledge after an inquiry that the information in the schedules filed with such petition is incorrect.

    ``(5)(A) Except as provided in subparagraph (B) and subject to paragraph (6), the court, on its own initiative or on the motion of a party in interest, in accordance with the procedures described in rule 9011 of the Federal Rules of Bankruptcy Procedure, may award a debtor all reasonable costs (including reasonable attorneys' fees) in contesting a motion filed by a party in interest (other than a trustee or United States trustee (or bankruptcy administrator, if any)) under this subsection if--

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

    ``(ii) the court finds that--

    ``(I) the position of the party that filed the motion violated rule 9011 of the Federal Rules of Bankruptcy Procedure; or

    ``(II) the attorney (if any) who filed the motion did not comply with the requirements of clauses (i) and (ii) of paragraph (4)(C), and the motion was made solely for the purpose of coercing a debtor into waiving a right guaranteed to the debtor under this title.

    ``(B) A small business that has a claim of an aggregate amount less than $1,000 shall not be subject to subparagraph (A)(ii)(I).

    ``(C) For purposes of this paragraph--

    ``(i) the term `small business' means an unincorporated business, partnership, corporation, association, or organization that--

    ``(I) has fewer than 25 full-time employees as determined on the date on which the motion is filed; and

    ``(II) is engaged in commercial or business activity; and

    ``(ii) the number of employees of a wholly owned subsidiary of a corporation includes the employees of--

    ``(I) a parent corporation; and

    ``(II) any other subsidiary corporation of the parent corporation.

    ``(6) Only the judge or United States trustee (or bankruptcy administrator, if any) may file a motion under section 707(b), if the current monthly income of the debtor, or in a joint case, the debtor and the debtor's spouse, as of the date of the order for relief, when multiplied by 12, is equal to or less than--

    ``(A) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner;

    ``(B) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable State for a family of the same number or fewer individuals; or

    ``(C) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable State for a family of 4 or fewer individuals, plus $525 per month for each individual in excess of 4.

    ``(7)(A) No judge, United States trustee (or bankruptcy administrator, if any), trustee, or other party in interest may file a motion under paragraph (2) if the current monthly income of the debtor and the debtor's spouse combined, as of the date of the order for relief when multiplied by 12, is equal to or less than--

    ``(i) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner;

    ``(ii) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable State for a family of the same number or fewer individuals; or

    ``(iii) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable State for a family of 4 or fewer individuals, plus $525 per month for each individual in excess of 4.

    ``(B) In a case that is not a joint case, current monthly income of the debtor's spouse shall not be considered for purposes of subparagraph (A) if--

    ``(i)(I) the debtor and the debtor's spouse are separated under applicable nonbankruptcy law; or

    ``(II) the debtor and the debtor's spouse are living separate and apart, other than for the purpose of evading subparagraph (A); and

    ``(ii) the debtor files a statement under penalty of perjury--

    ``(I) specifying that the debtor meets the requirement of subclause (I) or (II) of clause (i); and

    ``(II) disclosing the aggregate, or best estimate of the aggregate, amount of any cash or money payments received from the debtor's spouse attributed to the debtor's current monthly income.''.

    (b) DEFINITION.--Section 101 of title 11, United States Code, is amended by inserting after paragraph (10) the following:

    ``(10A) `current monthly income'--

    ``(A) means the average monthly income from all sources that the debtor receives (or in a joint case the debtor and the debtor's spouse receive) without regard to whether such income is taxable income, derived during the 6-month period ending on--

    ``(i) the last day of the calendar month immediately preceding the date of the commencement of the case if the debtor files the schedule of current income required by section 521(a)(1)(B)(ii); or

    ``(ii) the date on which current income is determined by the court for purposes of this title if the debtor does not file the schedule of current income required by section 521(a)(1)(B)(ii); and

    ``(B) includes any amount paid by any entity other than the debtor (or in a joint case the debtor and the debtor's spouse), on a regular basis for the household expenses of the debtor or the debtor's dependents (and in a joint case the debtor's spouse if not otherwise a dependent), but excludes benefits received under the Social Security Act, payments to victims of war crimes or crimes against humanity on account of their status as victims of such crimes, and payments to victims of international terrorism (as defined in section 2331 of title 18) or domestic terrorism (as defined in section 2331 of title 18) on account of their status as victims of such terrorism;''.

    (c) UNITED STATES TRUSTEE AND BANKRUPTCY ADMINISTRATOR DUTIES.--Section 704 of title 11, United States Code, is amended--

    (1) by inserting ``(a)'' before ``The trusteeÐ shall--''; and

    (2) by adding at the end the following:

    ``(b)(1) With respect to a debtor who is an individual in a case under this chapter--

    ``(A) the United States trustee (or the bankruptcy administrator, if any) shall review all materials filed by the debtor and, not later than 10 days after the date of the first meeting of creditors, file with the court a statement as to whether the debtor's case would be presumed to be an abuse under section 707(b); and

    ``(B) not later than 5 days after receiving a statement under subparagraph (A), the court shall provide a copy of the statement to all creditors.

    ``(2) The United States trustee (or bankruptcy administrator, if any) shall, not later than 30 days after the date of filing a statement under paragraph (1), either file a motion to dismiss or convert under section 707(b) or file a statement setting forth the reasons the United States trustee (or the bankruptcy administrator, if any) does not consider such a motion to be appropriate, if the United States trustee (or the bankruptcy administrator, if any) determines that the debtor's case should be presumed to be an abuse under section 707(b) and the product of the debtor's current monthly income, multiplied by 12 is not less than--

    ``(A) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner; or

    ``(B) in the case of a debtor in a household of 2 or more individuals, the highest median family income of the applicable State for a family of the same number or fewer individuals.''.

    (d) NOTICE.--Section 342 of title 11, United States Code, is amended by adding at the end the following:

    ``(d) In a case under chapter 7 of this title in which the debtor is an individual and in which the presumption of abuse arises under section 707(b), the clerk shall give written notice to all creditors not later than 10 days after the date of the filing of the petition that the presumption of abuse has arisen.''.

    (e) NONLIMITATION OF INFORMATION.--Nothing in this title shall limit the ability of a creditor to provide information to a judge (except for information communicated ex parte, unless otherwise permitted by applicable law), United States trustee (or bankruptcy administrator, if any), or trustee.

    (f) DISMISSAL FOR CERTAIN CRIMES.--Section 707 of title 11, United States Code, is amended by adding at the end the following:

    ``(c)(1) In this subsection--

    ``(A) the term `crime of violence' has the meaning given such term in section 16 of title 18; and

    ``(B) the term `drug trafficking crime' has the meaning given such term in section 924(c)(2) of title 18.

    ``(2) Except as provided in paragraph (3), after notice and a hearing, the court, on a motion by the victim of a crime of violence or a drug trafficking crime, may when it is in the best interest of the victim dismiss a voluntary case filed under this chapter by a debtor who is an individual if such individual was convicted of such crime.

    ``(3) The court may not dismiss a case under paragraph (2) if the debtor establishes by a preponderance of the evidence that the filing of a case under this chapter is necessary to satisfy a claim for a domestic support obligation.''.

    (g) CONFIRMATION OF PLAN.--Section 1325(a) of title 11, United States Code, is amended--

    (1) in paragraph (5), by striking ``and'' at the end;

    (2) in paragraph (6), by striking the period and inserting a semicolon; and

    (3) by inserting after paragraph (6) the following:

    ``(7) the action of the debtor in filing the petition was in good faith;''.

    (h) APPLICABILITY OF MEANS TEST TO CHAPTER 13.--Section 1325(b) of title 11, United States Code, is amended--

    (1) in paragraph (1)(B), by inserting ``to unsecured creditors'' after ``to make payments''; and

    (2) by striking paragraph (2) and inserting the following:

    ``(2) For purposes of this subsection, the term `disposable income' means current

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    ``(A)(i) for the maintenance or support of the debtor or a dependent of the debtor, or for a domestic support obligation, that first becomes payable after the date the petition is filed; and

    ``(ii) for charitable contributions (that meet the definition of `charitable contribution' under section 548(d)(3) to a qualified religious or charitable entity or organization (as defined in section 548(d)(4)) in an amount not to exceed 15 percent of gross income of the debtor for the year in which the contributions are made; and

    ``(B) if the debtor is engaged in business, for the payment of expenditures necessary for the continuation, preservation, and operation of such business.

    ``(3) Amounts reasonably necessary to be expended under paragraph (2) shall be determined in accordance with subparagraphs (A) and (B) of section 707(b)(2), if the debtor has current monthly income, when multiplied by 12, greater than--

    ``(A) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner;

    ``(B) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable State for a family of the same number or fewer individuals; or

    ``(C) in the case of a debtor in a household exceeding 4 individuals, the highest median family income of the applicable State for a family of 4 or fewer individuals, plus $525 per month for each individual in excess of 4.''.

    (i) SPECIAL ALLOWANCE FOR HEALTH INSURANCE.--Section 1329(a) of title 11, United States Code, is amended--

    (1) in paragraph (2) by striking ``or'' at the end;

    (2) in paragraph (3) by striking the period at the end and inserting ``; or''; and

    (3) by adding at the end the following:

    ``(4) reduce amounts to be paid under the plan by the actual amount expended by the debtor to purchase health insurance for the d