James Sensenbrenner, March 20, 2003

How many of you have seen those late night TV commercials showing attorneys who recommend that people should get out of debt by filing for bankruptcy? I certainly have. And although I have seen them numerous times, they never fail to irk me.

America’s bankruptcy system was established to help provide a fresh start for individuals who are truly in tough financial straits. People who were down on their luck were offered a second chance. But, when people who have the ability to pay their bills don’t do so, all Americans suffer.

Recently, the Spiegel Group, an entity that owns the famous Spiegel Catalog and the Eddie Bauer stores, filed for bankruptcy. Why? This company, founded in 1871, began offering credit to its customers under the slogan, ‘We Trust the People.’ According to one news report however, the company ‘trusted too many people, and some did not pay their credit card bills.’ Analysts estimate that the default rate with respect to Spiegel’s credit card receivables ranged from 17 to 20 percent. When businesses hurt, their employees and investors hurt, and our economy suffers.

This is why I introduced H.R. 975, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2003 this year. This legislation, which passed the House on March 19 by a vote of 315 to 113, provides relief to those who truly require financial protection as a result of unexpected medical bills, unemployment, and other legitimate needs. The bill includes special protections for individuals with spousal or child support claims, and requires deadbeat parents to pay their debts -- even after filing for bankruptcy relief. H.R. 975 also requires debtors to receive credit counseling before they can be eligible for bankruptcy relief, so that they will make an informed choice about bankruptcy, its alternatives, and consequences.

In several significant respects, H.R. 975 will help our nation’s family farmers in financial distress. The bill makes Chapter 12 -- a specialized form of bankruptcy relief -- a permanent component of the Bankruptcy Code, and ensures that more family farmers will be eligible for this type of bankruptcy relief.

H.R. 975 blocks crooked corporate executives from defrauding shareholders and employees by preventing them from using bankruptcy as a mechanism to shield their mansions and penthouses from the claims of creditors. You may recall that about a year ago, it was widely reported that many former Enron and WorldCom executives were planning to protect their assets by taking advantage of this homestead provision in bankruptcy law. My legislation places reasonable monetary limitations on homestead exemptions so as to prevent future abuses by debtors who unfairly evade their financial obligations.

H.R. 975 does not change the law for people who are down and out and genuinely cannot repay their bills. Where there is a change, is for the people who have the potential to pay some of their debt during the five years after their declaration of bankruptcy. It is not fair to pass their burden on to those taxpayers who pay 100% of their debt.

The time for this legislation is long overdue. With House passage of the bill, perhaps this seventh attempt will prove to be a charm, and finally lead to enactment of these critically important reforms.

James Sensenbrenner, Jr., is a Republican Member of Congress representing the Fifth Congressional District of Wisconsin. He chairs the House Judiciary Committee.