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Bankruptcy Reform And How It Affects Chapter 13 Bankruptcy Lawyers

Mr. President, I am compelled to respond to some of the outlandish allegations that have been made against the bipartisan bankruptcy bill that passed this Senate twice with over 90 votes, I believe, both times. It is a bill that has been under discussion for well over two years. I personally negotiated not long ago with the White House and Senator Reid the last problem we had with the bill. We worked that out to the satisfaction of those who were negotiating it. I thought we were well on the way to finally passing this bill.

What we have in this body is a group of senators who vote for it but, when the chips are down, don't help us get it up for the final vote.

The suggestion that there has been no opportunity for debate is certainly wrong. We debated it in committee, extensively in the Judiciary Committee, where I am a member. We debated it on the floor two separate years and earlier this year in great detail. We received a whole host of amendments, and we debated those amendments in detail. We voted on those amendments. It has gone to conference. Now we have a bill on the floor, and senators are complaining that they can't now offer more amendments. You don't amend a conference report after it has been to conference. That is true of every bill that ever goes through this body.

It is shocking to me to hear some of the things that have been said about this bill. What this legislation does is say we have to do something about this incredible increase in the filing of bankruptcies in America. Over a million—it has doubled in 10 or 12 years—is the number of people who have been filing bankruptcy. Why is that so? Because you can go to your bankruptcy lawyer and if you owe $30,000 and you make $30,000 a year, you can file bankruptcy, not pay your debts, not pay one dime that you owe—not a dime—and walk away scot-free by filing under chapter 7. That is happening every day in this country, and it is an absolute abuse. It is wrong.

The family that does its best every day to pay its debts and tries to do right, are they chumps? Are they dumb because they don't run up a bunch of debts and not pay their debts and then go down to the bankruptcy lawyer and just file bankruptcy, even though they could have paid those debts if they tried to do so?

This bill addresses at its fundamental core the bankruptcy machine that is out there being driven by advertising you see on your TVs virtually every night all over America until 11 or 12 o'clock. There are these ads: Got debt problems? Call old Joe, the bankruptcy lawyer. He will take care of you.

Do you know what they tell them when they get there? They say: First of all, Mr. Client, you need to pay me $1,000, $2,000.

I really don't have that, Mr. Lawyer.

Don't pay any more debts. Get all your paychecks. Collect all your paychecks. Bring the money to me. Keep paying on your credit card. Run up your debt, and then we will file bankruptcy for you, and we will wipe out all the debts; you won't have to pay them.

The lawyer gets his money. There are lawyers of whom I am aware personally who get paid $1,000 or more and have done 1,000 or more in one year. That is $1 million a year, just routine, running this money through the system, basically ripping off people who need to be paid.

Make no mistake about it, when an individual does not pay what he owes and what he could pay, we all pay. Who pays? The one who is honest and pays his debts. He ultimately gets stuck with higher interest rates. The businesses lose money and can't afford to operate. That is what is happening.

They say: Well, it is health care. If you have severe medical problems and you are not able to pay your debts, you ought not to have to pay your debts.

But why should you be able to not pay the hospital, if you can? That is the question. If you can pay the bill, shouldn't you pay it? That is the question.

The fundamental part of this bill is, if you are making above median income in America, that is adjusted by how many children you have. If you have more children, your income level goes up for median income—the factors included in that. So if you can't pay your debt, you get to wipe out all your debts just like today under chapter 7. If your income is $100,000 a year and you owe $50,000 and you can easily pay at least some of that $50,000, under this law—and you make above median income—you can ask the creditors whom who you are not paying to ask the judge to put you into chapter 13.

The judge may say: Mr. Debtor, you owe $50,000. We don't believe you can pay all the debt. You need to pay $10,000 of that back, and you will pay it so much a month over three years in chapter 13. Chapter 13 is not a disaster. It is not a horrible thing. As a matter of fact, in my state, chapter 13 is exceedingly popular. I believe more than half of the bankruptcy filings in Alabama are filed under chapter 13 instead of chapter 7, which just wipes out your debt. With chapter 13, you go to the judge and say: I have more debts than I can pay. The creditors are calling me, and I can't pay all of them at once. The judge says: OK, stop. Pay all of your money to the court, and we will pay it out to each one of these creditors so much a month. You get to have so much to live on for you and your family.

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