Mr. President, we have had quoted on the floor a letter from a group of professors that expressed opposition to this bankruptcy bill. I think we owe it to those who quoted from it to treat the letter seriously and analyze item by item the complaints they have made and discuss it on the floor. I must say that after examining the letter carefully, I must take issue with the professors' conclusions.
I intend to try to go over the points that they raise fairly and honestly, and to state the situation as I see it. In fact, I think it is quite plain. The professors are wrong and they are making misleading statements about it.
For example, the letter from the professors says:
Women and children will have to compete with powerful creditors to collect their claims after bankruptcy.
The fact is, the bill makes currently exempt assets—that is, homestead, household effects, tools of the trade—those kinds of things that normally today cannot be made to be sold to pay alimony or child support—non-exempt. Thus, wives and mothers will not have to compete with anyone before, during, or after bankruptcy for these key assets. In fact, a mother, for child support, can take the home—the homestead notwithstanding—of a deadbeat dad and take other assets that he has that otherwise under current law would be exempt. It is a major step forward for the rights of children.
The letter from the professors further says:
Credit card claims increasingly will be excepted from discharge and remain a legal obligation after bankruptcy.
The fact is, the bill makes only credit card debt incurred by fraud nondischargeable, just like taxes and child support are nondischargeable. Debtors who defraud creditors should not be able to discharge their debts in bankruptcy and not pay them. They only ought to be able to discharge the debts they lawfully incurred. That is the current law. That is the law today. You cannot discharge fraudulent debts. In addition, of course, credit card debt is at the end of the line if you have to pay anything. It is a non-secured debt. It is the last priority to be paid in the list of priorities.
This letter goes on to say:
Large retailers will have an easier time obtaining reaffirmations of debt that legally could be discharged.
That is absolutely false. I was charged by Senator GRASSLEY to meet with Senator REID and the representatives from the White House to develop reaffirmation language that would strengthen protections for people who were asked to reaffirm debts.
Frankly, reaffirmations are not all that bad. Many times, people have every reason to want to reaffirm their debts and keep their washing machine, their TV, their furniture, their automobile they use to get to and from work. They want to keep it. They reaffirm their debt and they do not lose it. So we worked out language to which the White House agreed. It strengthens the protections provided to those debtors. It was language agreed-upon in a bipartisan way.
The letter further says:
Giving first priority to domestic support obligations
— Which is in the bill, giving them first priority of payment
does not address the problem, and that 95 percent of bankruptcy cases make no distributions to any creditors because there are no assets to distribute.
First, the money is going to the bankruptcy court and to lawyers. In our rule, children would be above the courts and the lawyers. "Granting women and children a first priority permits them to stand first in line to collect nothing," the professors say. But the fact is, the means test will place above-median-income-deadbeat dads into Chapter 13 if they can repay some of their debt—median income for a family of four, by the way, is about $45,000. So, to reiterate, deadbeat dads who are above median income, will be forced into chapter 13 (instead of being able to file Chapter 7) if they can afford to pay back some of the debts they owe—maybe it is 20 percent, maybe it is 30 percent—but they will be put into chapter 13 to pay that. And for five years the judge can order them to pay on those debts what percentage he or she believes the debtor is financially able to pay and maintain a decent standard of living.
But what is first? What is first paid by that deadbeat dad? His alimony and child support. He would be under court-monitored supervision and direction to pay the first fruits of his income directly in the form of child support and alimony. In effect, you have a bankruptcy judge helping ensure, for five years, the full payment of child support and alimony. I believe that is going to be a historic step forward. In fact, this will place children and women in a higher level than they have ever been before.
The letter further says:
Under current law, child support and alimony share a protected post-bankruptcy position with only two other recurrent collectors of debt—taxes and student loans. The bill would allow credit card debt and other consumer credit to share that position, thus elbowing aside women trying to collect on their own behalf.
That is not true. I can understand why some of our senators are concerned about the bill after they read this letter. It has a bunch of professors' names on it. They think it is true—but it is not true. The fact is, the bill allows only consumer debt that was incurred by fraud to be nondischargeable, which is fundamentally the law today. Even so, only alimony and child support claimants will be able to levee on any of these assets. No one else can levee or get ahead of a parent or a child to claim these exempt assets. Thus, mothers will not have to compete with the IRS, the student loan companies, credit card companies, or anyone else, to attach exempt assets after bankruptcy.
Further, I believe the bill will provide more assets for distribution to women and children than before, during, and after bankruptcy. Before bankruptcy, debtors will receive credit counseling information which will help keep fathers on a budget, teach them how to maintain a budget, and out of bankruptcy and paying their alimony and child support in the first place. During bankruptcy, deadbeat dads will be required to pay all past due alimony and child support and to undergo court supervision for up to five years under chapter 13, as they pay their No. 1 priority, child support claims.
After bankruptcy it is much more likely that a father who has undergone credit counseling, who has been subjected to five years of court supervision of his finances, and where alimony and child support were the first things he was required to pay and where he knows that he cannot shield his exempt assets from alimony and child support, will be up to date on all his payments if he has gone through that process—much more so than today.
Mr. President, I have at least six or seven more items that I could refer to from the professors' letter that I believe are based on complaints about an early version of the bill, matters that are not even in the bill today, and other items that are completely distorted in how it affects the poor people in America today.
Let me simply say this: We need bankruptcy reform. We have shown a doubling of bankruptcy filings in the last decade.
It is time for us to move this bill forward to create a body of law that is less subject to abuse than current law, to close many of the loopholes or at least partially close them.
The fact we have not been able to do everything is not a basis to object, in my view. The perfect is the enemy of the good. This is a good bill. I would like to see all the homestead exemptions removed, at least as we agreed earlier. Senator GRASSLEY supported that. The House would not agree. We got half the problems of homestead eliminated in this bill.
If we do not pass the bill, we will have the current law which has a host of problems and none of them fixed.
That is where we are. We have a good piece of legislation. Chairman GRASSLEY has done a magnificent job of listening to everybody and working out an agreement that is acceptable. Chairman HATCH has likewise been tough in trying to complete this bill. I believe we have a good piece of legislation, and I hope the vote will be overwhelming again today.
