James Sensenbrenner, January 29, 2004

Bankruptcy is a problem that impacts us all, particularly when people file for fraudulent reasons.

When people file abusive or fraudulent bankruptcy cases, oftentimes because they overextend themselves and rack up bills that they have no hope of paying off, hard working tax-paying citizens who pay their bills on time end up having these additional costs dumped on them. The results of these abusive bankruptcies are evident in many ways, examples of which include paying higher interest rates and higher prices for goods and services.

These numbers add up. For instance, it has been estimated that in 1997 alone, more than $40 billion of debt was discharged as a result of bankruptcy cases. These losses, according to one estimate, translate into a $400 annual "tax" on every household in our nation in the form of higher prices and higher interest rates.

In Wisconsin, bankruptcy filings have gradually increased over the last three years. According to press reports earlier this month, 2003 was the third consecutive year in which a record number of Wisconsinites filed for bankruptcy protection. Wisconsin saw 28,225 petitions filed in 2003, approximately 12% more than the 25,248 filed in 2002.

It would be both bad ethics and bad economics to continue to force responsible consumers to pay the bills of the irresponsible. As Chairman of the House Judiciary Committee, I have repeatedly pushed forth legislation to address this problem. Last year, for the seventh time, the House of Representatives passed HR 975, the Bankruptcy Abuse Prevention and Consumer Protection Act. As in previous times, the bill died in the Senate, a body that is often described as the "saucer in which the coffee cools." HR 975 has now become nearly frozen in that proverbial senatorial saucer.

On January 28, in yet another effort to make this bill law, the House passed bankruptcy reform legislation for the eighth time, by an overwhelming vote of 265 to 99.

The House-passed bill provides relief to those who truly require financial protection for legitimate needs that include unexpected medical bills or unemployment. 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. The bill requires credit counseling for debtors before they can be eligible for bankruptcy relief, so that they will make an informed choice about bankruptcy, its alternatives, and consequences. This legislation also helps family farmers who may be in financial distress. It 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.

These are but a few of the provisions of my bankruptcy reform bill. This is a comprehensive bill that was crafted with the input of my colleagues, both Republican and Democrat, who recognize that the bankruptcy system in the US is broken, and continues to get worse each day the Senate fails to act on it.

This can, and needs to stop! The proliferation of bankruptcy filings is one additional stress on our economy that can be easily relieved. With the House’s passage of this bill -- again -- I hope the Senate will finally wake up and smell the coffee.

Congressman James Sensenbrenner, a Republican, represents the Fifth Congressional District of Wisconsin. He chairs of the House Judiciary Committee.