U.S. SENATOR PATRICK LEAHY

I am pleased that the Committee is holding this hearing on bankruptcy reform – the first in four years. 

Our nation wears a different face today than it did that last time we held a hearing on bankruptcy reform four years ago.  We endured the terrorist attacks of September 11, 2001, which only deepened the financial woes of an already struggling economy. 

We have been witness to a parade of financial misdeeds by major U.S. corporations. The names Enron, WorldCom, among others, have left a bitter taste in the mouths of average Americans, damaging investor confidence and shaking our capital markets.  Financially troubled companies have shortchanged their pension promises by nearly $100 billion, putting workers, responsible companies and taxpayers at risk.

Since we last held a hearing on bankruptcy reform, 782,000 private-sector jobs have been lost.  Unfortunately, far too many Americans who are working are barely making ends meet – even when holding down two or three different jobs at the same time.

And we are immersed in wars in Afghanistan and Iraq, with no exit in sight. 

We must discuss bankruptcy reform in the context of these real-life developments since 2001.  In order for bankruptcy reform legislation to be appropriate and fair, its key provisions must be carefully examined and updated where necessary.

This week Majority Leader Frist said the following about bankruptcy reform legislation: “It has been several Congresses since people have really looked at the bill very carefully. So we felt it was important to have hearings as well as to have the opportunity to mark it up, modernize it, before taking it to the floor."

I agree with Majority Leader Frist. We should modernize this legislation to take into account the changes that have occurred in our economy since 2001.

For example, we should strengthen the financial safety nets for middle class American families confronting illness or injury.  Medical problems contribute to about half of all bankruptcies, even though most of those who file had health insurance when they first became sick.  Many lose their jobs – and their insurance – because their conditions worsen, while others face thousands of dollars in co-payments and deductibles and for services not covered by their insurance.

Today we will hear from Professor Elizabeth Warren of Harvard Law School on this matter.  I am pleased that Professor Warren could join us to discuss her recent research and analysis of illness and injury as they contribute to bankruptcy.

We should also provide for more disclosure of information so that consumers may better manage their debts and avoid bankruptcy altogether.  U.S. consumer debt has reached staggering levels after more than doubling over the past 10 years.  According to the most recent figures from the Federal Reserve Board, consumer debt hit $1.98 trillion in October 2003, up from $1.5 trillion three years ago.  The total credit card debt alone stands at $735 billion, with the household card debt of those who carry balances estimated to average $12,000.

I know that Senator Grassley, Senator Durbin, Senator Schumer and others share a commitment to include credit industry reforms in a fair and balanced bankruptcy bill.  The millions of credit card solicitations made to American consumers over the past years have contributed to the rise in consumer debt and bankruptcies.  It is relatively easy to obtain credit, but not nearly enough is done to ensure that credit is properly managed.  Additional disclosure is needed to ensure that consumers completely understand the implications of their credit card use.

We must also be careful that our efforts to ensure accountability in the bankruptcy process do not inadvertently create problems for privacy and security.  We are in an age where personal information can be easily digitized and shared, and when it falls into the wrong hands, easily abused.  Identity theft is one danger, as is tracking and harassing a battered spouse.  We should consider ways to minimize these possibilities while we seek accountability.  

The economic hardships faced by service members’ families are other developing matters that warrant our attention.  Calls to serve their country in Iraq, Afghanistan or elsewhere can cause loss of family income, the closing of a family business or additional expenses.  Unfortunately, it is not uncommon for service members and their families to be forced into filing for bankruptcy relief.  Senators Durbin, Graham and others have taken an interest in this issue, and I look forward to working with them on how we can remedy the situation faced by the brave men and women who serve our nation and their families.

While many things have changed since our last bankruptcy hearing four years ago, there remains one thing that has not changed: The campaign of violence, vandalism and intimidation continues to curtail the availability of family services and endanger providers and patients, and the perpetrators of such violence continue to escape judgment through bankruptcy abuse.

Since the last time this Committee closely examined bankruptcy reform legislation, there have been reported a total 1,245 acts or threats of violence against clinics, providers and patients, including one bombing, eight arson cases, 26 death threats, 577 anthrax threats, 10 assault and batteries, 17 burglaries and 26 stalking cases.

For example, in 2002 six defendants in the “Nuremberg Files” web site case have filed for bankruptcy.  Five filed for bankruptcy in the days or even hours immediately before scheduled depositions in which they would have had to reveal information regarding their assets.  The other defendant filed just before garnishment could be executed. 

Senators Schumer and Hatch worked diligently during the 107^th Congress to include carefully crafted bipartisan language in the bankruptcy legislation to ensure that perpetrators of clinic violence can not declare bankruptcy in order to avoid paying fines and debts associated with their illegal acts.  We then reached a compromise with Congressman Henry Hyde and House Judiciary Chairman James Sensenbrenner, and we included the provision in the final conference report. 

The 501-page bankruptcy reform bill introduced a few days ago has been stripped of the consensus clinic violence language and fails to address the discharge of penalties for violence against family planning clinics.  As a result, perpetrators of clinic violence can continue to seek shelter in the nation=s bankruptcy courts.  That is simply wrong.

Today, Maria Vullo, a top-rate attorney, will testify about the need to amend the Bankruptcy Code to stop wasteful litigation and end abusive bankruptcy filings used to avoid the legal consequences of violence, vandalism and harassment to deny access to legal health services.  Ms. Vullo, welcome.

As we move forward with reforms that are appropriate to eliminate abuses in the system, we need to remember the people who use the system, both the debtor and the creditor.  We need to balance the interests of creditors with those of middle class Americans who need the opportunity to resolve overwhelming financial burdens.  As recent Congresses proved, there are many competing interests in the bankruptcy reform debate that make it difficult to enact a balanced and bipartisan bill into law.

I look forward to working with Chairman Specter on a schedule that would allow our Committee likewise to do its work and serve the Senate by fully and fairly considering legislation on bankruptcy-related issues.  These are important subjects that can have a real impact on the lives of many people who have already suffered from illnesses or divorce or job loss.  We ought to utilize the expertise of the Members of our Committee to ensure that what we report to the Senate is fair and balanced and that it will not exact an unintended toll on our neighbors.

We need to work in a bipartisan fashion from the beginning to the end of the legislative process to enact reforms that ensure our bankruptcy laws better serve their intended goals.