"When a business goes belly-up, the bankruptcy process exists to protect the interests of creditors and to help debtors reorganize," said Grassley. "However, the current system fails to catch some who are uniquely vulnerable during bankruptcy proceedings, including patients and workers."
To help ensure patient care isn't compromised, the Business Bankruptcy Reform Act of 1998allows a bankruptcy judge to appoint a patient ombudsman to look out for the patient's interests. In addition, the bankruptcy trustee is required to make sure patients are transferred to another facility when a health care provider is closed down.
Grassley's bill also adds an important new protection for employee health care and pension plans. If a company declares bankruptcy before a worker's withheld wages are transferred into employee benefit programs, current law effectively freezes this money and prevents it from being transferred. Grassley's legislation would protect each worker's earned benefits and ensure that any withheld funds go towards health insurance and pensions.
According to Grassley, low home mortgage interest rates potentially are at risk because of a quirk in the bankruptcy code. Noting that a strong secondary security market helps mortgage lenders to make loans at lower rates, he said current law doesn't specify that securities purchasers would continue to receive payment if the mortgage lender declares bankruptcy. Grassley's bill would make changes to provide financial certainty to securities purchasers. "Keeping home mortgage rates affordable will help more people realize the American Dream," said Grassley. "My bill would help sustain today's record-low mortgage rates."
Grassley said bankruptcy disputes don't stop at the border. The Business Bankruptcy ReformAct of 1998 would enact the model law of international bankruptcies to facilitate standard procedures for bilateral bankruptcy cases. "American creditors deserve a fair shake when foreign companies declare bankruptcy," said Grassley. "Oftentimes, they run up against a brick wall because foreign countries won't cooperate with U.S. bankruptcy courts."
As Chairman of the Finance Subcommittee on International Trade, Grassley works to keep strong commercial ties between the U.S. and its trading partners. "The global marketplace needs a uniform bankruptcy process in place to secure a smooth expansion into the 21st century. The financial crisis in Asia underscores the dangers of a weak system. That's why I plan to push for meaningful reforms in an amendment to the International Monetary Fund (IMF) when it comes up in the Senate."
To reduce the clog of bankruptcies that may languish for years in court, Grassley's bill also contains provisions to enact special fast-track procedures for businesses declaring less than $5 million in debt. "With no real hope for reorganizing, some cases should turn sooner to Chapter 7 instead of using Chapter 11 to stall the process," said Grassley.
As Chairman of the Judiciary Subcommittee on Administrative Oversight and the Courts, Grassley has convened six bankruptcy hearings so far in the 105th Congress. At a seventh hearing next Wednesday, March 11, Grassley will examine legislative proposals designed to address the record number of consumer bankruptcy filings. Last year, Grassley and Sen. Richard Durbin of Illinois introduced the bipartisan Consumer Bankruptcy Reform Act of 1997.