Grassley Bill Seeks to Decrease Growing Number of Consumer Bankruptcies


Jill Kozeny

202/224-1308


Responding to projections that personal bankruptcy filings will reach an all time high in 1997 despite a strong national economy and low unemployment rates, Sen. Chuck Grassley of Iowa today introduced a bi-partisan bill aimed at decreasing the number of bankruptcies filed by American consumers.

Grassley planned to discuss the reform bill he developed with Sen. Richard Durbin of Illinois -- the Consumer Bankruptcy Reform Act of 1997 -- during an afternoon hearing of the Judiciary subcommittee with jurisdiction over bankruptcy policy. Grassley serves as chairman and Durbin serves as ranking member of the Subcommittee on Administrative Oversight and the Courts.

"Those who don't want to take personal responsibility for their debts need to get the message: the free ride is over. The Grassley/Durbin bill would discourage casual bankruptcies by sending a clear signal that a person can't file for bankruptcy and walk away from debts if he or she has the ability to re-pay some portion of those debts. It's a simple and straightforward idea whose time has come," Grassley said.

Grassley also said the proposal he introduced today recognizes that some creditors have employed abusive tactics to collect debts from individuals who have declared bankruptcy and that debtors sometimes face circumstances which do not fit into a rigid formula. "I want to promote reform of the consumer bankruptcy laws that is fair and balanced. Our bill gives creditors the ability to present evidence when debtors can repay their debts and it gives debtors the ability to stand up to groundless court filings which have been used to harass and intimidate debtors," Grassley said.

Grassley also emphasized that his approach would encourage creditors and debtors to solve their differences outside of the costly litigation process with alternative dispute resolution. "In today's society, the first reaction of parties in a dispute is too often to take it to court. Instead, we need to urge sensible, economical and speedy resolution to problems," Grassley said.

Specifically, the Grassley/Durbin bill would:

  • Allow creditors to bring motions to transfer debtors who can pay their debts from Chapter 7 to Chapter 13.
  • Provide for penalties when creditors try to move debtors to Chapter 13 without having reasonable grounds to believe the debtors can repay their debts.
  • Provide incentives for creditors and debtors to use alternative dispute resolution instead of bankruptcy.
  • Establish mandatory civil penalties for creditors who abusively use the bankruptcy code to harass debtors.

In April, Grassley conducted a subcommittee hearing to examine skyrocketing consumer debt and its relationship to the explosive growth in consumer bankruptcies. During that discussion, the Iowa senator reviewed the cultural shifts that have led to increased consumer debt and the role the massive number of credit card solicitations may have in the increase in consumer debt and personal bankruptcies.