Opening Statement of Sen. Chuck Grassley at the Bankruptcy Reform Hearing

Senate Committee on the Judiciary

Mr. Chairman, I'm pleased the bankruptcy bill is on the Judiciary Committee agenda and that we are scheduled to mark up this bill next week. The bipartisan legislation I just introduced as S. 256 is nearly identical to the 107th Congress H.R. 333 Conference Report signed by Senator Leahy, but voted down in the other body. The only difference is that I've removed the poison pill abortion amendment. All of the other compromises made at the request of our Democratic colleagues have been preserved intact in this bill.

As many of you know, we've been working on the issue of bankruptcy reform for a number of years now-since the mid 1990's. When I started working on this issue, it was considered a scandal that bankruptcies might reach 1.4 million. Guess what? In 2004, there were 1.6 million. Congress has wasted time and we still have a bankruptcy crisis on our hands.

By way of background, both Houses demonstrated overwhelming margins in favor of this bipartisan bill in 2000, but President Clinton pocket-vetoed the legislation and we simply ran out of time in the session to override the veto. In the 107th Congress, I re-introduced the bankruptcy bill and it passed the Senate overwhelmingly, with numerous changes to satisfy Democrats. We then went to conference with the House, and further concessions were made. The conference committee report language was the result of a long process of bipartisan negotiations that culminated in agreement on over four hundred pages of legislative text. Ultimately, we had a signed conference report supported by our Ranking Member.

Given that the language we are considering is the same as the 107th Congress conference report signed off on by our Democratic friends - minus the poison pill - I'm hopeful that we can all stand by the compromises we reached in good faith. We all cooperated and compromised on this legislation. It provides new consumer protections, helps children in need of child support, and makes other necessary reforms to a system that is open to abuse. There is no need to re-open this bill.

As we hear from witnesses today, I recall the broad public support for reforming our bankruptcy system. The vast majority of people believe that individuals who file for bankruptcy should be required to pay back some of their debts if they have the means to do so.

This is precisely what the bankruptcy reform legislation does.

Most people think it should be more difficult for people to file for bankruptcy. Americans have had enough; they are tired of paying for high rollers who game the current system and its loopholes to get out of paying their fair share.

This legislation eliminates some of the opportunities for abuse that exist under the current system. Our current system allows wealthy people to continue to abuse the system at the expense of everyone else. People with good incomes can run up massive debts and then use bankruptcy to get out of honoring them.

All of us end up paying for the unscrupulous who abuse the system. In fact, it has been estimated that every American family pays as much as $550 a year in a hidden tax as a result of the actions from these abuses. My bankruptcy reform legislation will help eliminate this hidden tax by implementing a means test to make wealthy people who can repay their debts actually honor them. I suppose we can call this a tax cut for the responsible people in America.

Bankruptcy abuse hurts our nation's small businesses. We will hear today about how small businesses have been hurt by losses due to bankruptcy. When businesses absorb these losses, they have to make up for the loss somehow through higher prices, or by laying off employees or going out of business.

The bankruptcy crisis is a jobs crisis. Making American's businesses stronger helps all of us - especially those in need of a job.

Make no mistake, misrepresentations about this legislation have been running rampant by those who oppose any meaningful bankruptcy reform. I've been in politics a long time, and I know that political criticism is never inhibited by ignorance. For instance, the statistical analysis in the U.S. Trustee's office examined over 5000 bankruptcy cases and found that under one-half listed medical debts of any sort. And those filers who did list medical debts, on average, listed under $5000 in medical debts.

So much for the myth that most bankruptcies are driven medical costs. The fact is there are abusers out there. The fact is S. 256 doesn't harm bankrupts with large medical debts.

Let's stop the abuse. Let's return to common sense. Let's enact bankruptcy reform now, before the abuse gets worse.

The reality is that the bankruptcy reform bill does not deny anyone access to bankruptcy relief; it just requires those who have the means to repay debts based on their income to do so. It's that simple. I look forward to quick Committee action and quick floor action on this bill.