LEXIS-NEXIS® Congressional Universe-Document

LEXIS-NEXIS® Congressional

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