As we all know, there exists in our nation a tragic irony: As our nation prospers, as economic growth has soared to new heights unseen by past generations, the United States House of Representatives has just passed revised bankruptcy legislation that would turn America's back on our least fortunate citizens. We are here today to urge the Senate, in its rush to adjournment, to act to reverse this detrimental course of action.
This legislation preys on the most vulnerable of our society, when uncontrollable circumstances-- layoffs, divorce, and medical crisis-- plunge them into financial crisis. Rather than enabling poor Americans to reconstruct their lives, this newly introduced bankruptcy bill (H.R. 2415) would force the nation's most vulnerable, our low-income citizens, into payment plans that are beyond their ability to complete. Over the past fifteen years, two-thirds of those who undertake such plans have failed to complete them.
In biblical times, this debt-relief was structured into the Sabbatical, or seventh year, remission of debt. It is specifically referred to as "God's remission of debt." A fair and equitable bankruptcy system plays the same role in our society. This bill mars the values of fairness and equity.
It says in Deuteronomy, "If there is among you anyone in need, a member of your community in any of your towns within the land that the Lord your God is giving you, do not be hard-hearted or tight-fisted toward your needy neighbor. You should rather open your hand, willingly lending enough to meet the need, whatever it may be." (Deut. 15:7-9)
There are several crucial flaws in the legislation as it is currently framed:
- It rejects important provisions aimed at preventing people from falling into bankruptcy, such as requiring vital consumer information on credit card billing;
- It will allow wealthy debtors to protect assets by investing them in housing prior to bankruptcy while rentals paid by middle and lower income citizens would not enjoy similar protections;
- These provisions will particularly hurt divorced families living in poverty, thus deepening child poverty. Amendments were rejected that would have insured that parents and children owed support would prevail over the sophisticated collection departments of creditors;
- Most importantly, by subjecting bankruptcy cases to a complex and arbitrary means test, which assumes that all individuals face the same housing, food, and transportation costs, H.R. 2415 would deny many applicants access to Chapter 7 bankruptcy, which excuses most debts. Instead, the legislation would divert these individuals into a Chapter 13 payment plan. Many families would find themselves bereft of bankruptcy assistance altogether when expenses absorb household income, making a Chapter 13 payment plan an impossibility. This would increase the likelihood that they would lose their homes to foreclosure and cars to repossession in Chapter 13.
Crushing the poorest Americans beneath unrealistic payment plans would force them to make impossible choices-- between repaying credit card debt and feeding their families, between repaying a loan and meeting child support. African-American and Hispanic families, both over-represented in bankruptcy, would suffer disproportionately if this legislation were to become law. Older tenants, who fall behind in their rent due to overwhelming medical costs, would have bankruptcy take from them the ability to catch up on back-rent.
This wayward, misguided piece of legislation is based on misperception and falsehood. Contrary to the claims of the bill's proponents, the American bankruptcy system is NOT fraught with fraud and abuse warranting these reforms. The latest research reveals that only 4-10 percent of personal bankruptcy cases are filed in bad faith.
And the number of personal bankruptcies is NOT on the rise, necessitating legislation. According to data supplied by the Administrative Office of U.S. Courts, personal bankruptcies dropped by more than 100,000 in 1999 compared to 1998. They have continued to decline for all three quarters of this year.
Caring for the poor is more than an American value. For many people of faith, helping the poor is a sacred responsibility. And the more closely we look at this legislation, the more clearly we see that it would contradict the mandates of our common moral heritage and would gravely damage the well-being of so many who are struggling to survive financial reversals.
We call on the Senate to join us. Join us in championing the poor and the needy. Join us in assisting low-income Americans to repair their lives after financial disaster. Join us in doing everything in our power to stop the passage of this legislation.