Washington — Sen. Chuck Grassley today won Senate passage of landmark legislation to overhaul the nation's bankruptcy code.

The Iowa senator said his plan is aimed at reducing the number of bankruptcies filed each year by fixing weaknesses in the code and designing a more balanced, fair approach for debtors and creditors. The number of bankruptcies have soared during the last decade despite a historically strong economy.

In addition, Grassley said the package includes permanent status and an expansion of Chapter 12, which is tailored to help farmers reorganize debt and stay in the business of farming.

The overall bill earned strong bipartisan support with senators voting 83 to 14 for the bill. It is the most comprehensive reform of bankruptcy law since 1978, and the first legislative item to pass in the new millennium.

"It was time for Congress to close the loopholes that let big spenders walk away from debts and update the code to achieve a healthier balance between consumers and creditors," Grassley said. "The bill passed today reflects nearly three year's work to address the problems caused by irresponsible consumerism, an aggressive credit industry, lax bankruptcy laws and lawyer-run bankruptcy mills."

Consumer bankruptcies have escalated more than 80 percent since 1990. In 1999, nearly 1.4 million bankruptcies were filed. The overwhelming majority of debtors file under Chapter 7, which effectively wipes away their debts, whereas only about one-third of debtors opt to file under Chapter 13, which requires some repayment plan to reimburse creditors.

The bill that Grassley co-authored with Sen. Robert Torricelli sets up a flexible formula for bankruptcy court judges to channel those with repayment capacity to Chapter 13.

The measure also seeks to improve the bankruptcy system for consumers by promoting credit counseling services and educational courses for debtors prior to filing a bankruptcy petition. The plan strengthens enforcement and penalties against coercive tactics by creditors. It penalizes creditors who seek a double-payment and establishes tough penalties for creditors who use threats to coerce debtors into voluntarily agreeing to pay a debt which could be wiped away in bankruptcy.

The Grassley/Torricelli legislation also seeks to minimize court dockets and keep costs down. It promotes the alternative dispute resolution process by saying that if someone in financial trouble tries in good faith to work out a reasonable repayment plan, but a creditor rejects this, then the ability of the creditor to collect in bankruptcy will be limited.

Today's bill is also a major victory for Grassley's effort to make Chapter 12 for farmers a permanent part of the bankruptcy code. The package strengthens this tool for farmers by making an increased number of farmers eligible for Chapter 12 protections and making the federal government last on the list of creditors when a farmer sells farm assets during reorganization. Changing the treatment of capital gains taxes under Chapter 12 would give farmers greater flexibility.

In addition, a number of amendments were added to the reform proposal during Senate consideration, including Grassley's amendment to protect quality of care for patients — especially nursing home residents — when a health care provider is in bankruptcy. Current law does not guarantee the well-being of patients in a bankruptcy case. Two years ago, residents of a California nursing home were literally evicted onto the street by a bankruptcy trustee.

Torricelli and Grassley's amendment to set new requirements for credit card companies and protect consumers. Grassley said these provisions reflect some of the most significant pro-consumer legislation considered by the Senate in a decade.

Under the measure, creditors are required to display prominently a minimum payment warning on every credit card statement. This feature would include a toll-free number for credit card holders to learn how many months it would take to repay a certain balance with minimum monthly payments. It also requires credit card solicitations to disclose when a low introductory rate ends and what the subsequent rate will be. And, it requires credit card solicitations via the Internet to comply with the Truth in Lending Act.

The House of Representatives passed its own consumer bankruptcy reform last summer, during the first session of the 106th Congress. The bill sponsored by Reps. George Gekas of Pennsylvania and Rick Boucher of Virginia passed by 313 to 108. The Senate and House proposals now must be reconciled by a conference committee.

Grassley advanced this comprehensive proposal from his position as chairman of the Judiciary Subcommittee on Administrative Oversight and the Courts. He held his first hearing on consumer bankruptcies in April 1997. This followed a congressionally-mandated report of the National Bankruptcy Review Commission, which was created by legislation Grassley co-authored in 1994.