Copyright 1999
Federal News Service, Inc.
Federal News Service
MARCH 11, 1999, THURSDAY
SECTION: IN THE NEWS
LENGTH: 643 words
HEADLINE: PREPARED STATEMENT OF CONGRESSMAN RICK BOUCHER
BEFORE THE
HOUSE JUDICIARY COMMITTEE
COMMERCIAL AND ADMINISTRATIVE LAW SUBCOMMITTEE
AND THE
SENATE JUDICIARY COMMITTEE
ADMINISTRATIVE OVERSIGHT AND THE COURTS SUBCOMMITTEE
SUBJECT -
BANKRUPTCY REFORM
BODY:
Chairman Grassley and Chairman Gekas, thank you for the opportunity to appear
before you and the Members of the Subcommittee on Commercial and Administrative
Law of the House Judiciary Committee and the Subcommittee on Administrative
Oversight and the Courts of the Senate Judiciary Committee.
I was pleased to join in a bipartisan effort with Chairman Gekas and my friends
and colleagues Rep. Bill McCollum and Rep. Jim Moran in introducing the
Bankruptcy Reform Act of 1999. This legislation is intended to ensure that our
bankruptcy laws operate fairly, efficiently and free of abuse. Our legislation is
virtually identical to last year's conference report which garnered the support
of 300 of our House colleagues. That report was the product of nearly two years
of hearings, mark-ups, deliberation and compromise. In an era where real
per-capita annual disposable income is growing, unemployment rates are low and
the economy is strong,
bankruptcies should be rare. However,
bankruptcy
filings are increasing dramatically. In fact, in 1998, filings reached a record
high of 1.4 million, with an estimated $50 billion in consumer debt discharged.
Bankruptcies of convenience are driving this enormous increase.
Bankruptcy was never meant to be used as a financial planning tool, but it is becoming a
first stop rather than a last resort because our current
bankruptcy system encourages people to walk away from their debts regardless of whether
they have the ability to repay any portion of what they owe.
Responsible borrowers and the consumers of all goods and services pay the price
for
bankruptcies of mere convenience. The typical American family pays a hidden tax of $500
each year because of increased charges for credit and higher prices for goods
and services attributed to
bankruptcies of mere convenience.
Today's consumer
bankruptcy system is fundamentally flawed. The current
Bankruptcy Code makes virtually no attempt to calibrate the level of
bankruptcy protection to the level of each debtor's need. Rather, it allows a debtor to
discharge debts
even if the debtor can repay a large portion of them. Currently, approximately
70 percent of
bankruptcy filers use Chapter 7, which has no provision for debt repayment even if the
filer can repay. Only 30 percent use Chapter 13, which sets up repayment plans.
At present, individuals with significant income and the ability to repay some
of their debts can obtain the same full discharge of debts as individuals with
little or no income and assets.
Our legislation addresses this problem by requiring that a debtor demonstrate
that he or she actually needs
bankruptcy relief and, if so, provides only the amount of relief that is needed. This
needs- based system would create a simple formula, based on a debtor's income
and obligations, to determine exactly how much relief the debtor needs.
Individuals with no means to repay their debts could file for
bankruptcy under Chapter 7, thereby obtaining complete debt relief and a fresh start.
Individuals who can repay a portion of their debts would file under Chapter 13
and begin a repayment plan based on what they can afford.
With this change in the
Bankruptcy Code, the
bankruptcy system would protect consumers in financial difficulty without unfairly
imposing inappropriate additional costs and burdens on consumers who continue
to pay their debts.
All consumers should benefit from this legislation -- every consumer pays
higher prices for goods and services and higher interest rates as a result of
bankruptcy losses. Enactment of the
"Bankruptcy Reform Act of 1999" will reduce the level of those
bankruptcy losses, thereby reducing the cost of credit and goods and services for all
consumers. I am pleased to be a sponsor of this legislation and look forward
to working with
each of you to ensure its passage.
END
LOAD-DATE: March 14, 1999
