CUT THE `BANKRUPTCY TAX' & PROTECT APARTMENT OWNERS' PROPERTY RIGHTS.

On Wednesday, February 24, I introduced the Bankruptcy Reform Act of 1999. This legislation is virtually identical to the Bankruptcy Reform conference report that passed the House with more than 300 votes in the 105th Congress. It is the result of a detailed inquiry by a national review commission on bankruptcy, along with more than 18 months of hearings, mark-ups, debates, and compromise. It is time--past time--to enact real reform in our bankruptcy system. This is a fair, bipartisan bill, and I expect it will receive the same overwhelming support that it received in the House during the last Congress.

The Bankruptcy Reform Act of 1999 is pro-housing provider, pro-consumer, and pro-personal responsibility. It will prohibit troublesome resident abuses of the Code's automatic stay provision and make the rights of women and children a much greater priority in the bankruptcy system.

A record 1.4 million personal bankruptcies were filed last year, equaling one out of every 75 households. The debts that remained unpaid as a result of those bankruptcies cost each American family that did pay their bills on time an estimated $550 a year in the form of higher costs for credit, goods, and services. That is enough to buy two months worth of groceries or pay at least three months of utility bills for a typical family. We can--and should--cut the "bankruptcy tax" on American families by passing real Bankruptcy Code reform.

Unfortunately, much of the debt that was eventually passed on to consumers last year was debt that bankruptcy filers could afford to pay. That is why it is so urgent that we pass real bankruptcy reform. By holding accountable those who can afford to pay, we can restore as much as $5 billion a year to the pockets of American families--a very significant number.

The major features of this bipartisan legislation include:

Automatic-stay provision. Responsible apartment residents and apartment property owners/managers nationwide benefit from this legislation to reform the Bankruptcy Code. The bill would close a loophole that hurts apartment-property owners and drives up the cost of rent for responsible residents. Currently, a loophole in the Bankruptcy Code's automatic stay provision forbids any action by an apartment unit's rightful owner to evict an abusive resident. Thus, attorneys and non-attorneys encourage apartment residents to file for bankruptcy and stop paying the rent they owe. Hundreds of apartment owners, mostly small businesses, wrote to the National Bankruptcy Review Commission to report horror stories of residents who filed bankruptcy, stopped paying rent, went on to damage their unit, and, in some cases, threaten other residents. As is found in this bill, real reform of the automatic stay provision is needed to preserve the property rights of apartment owners and protect the safety of other residents.

Needs-based bankruptcy. The vast majority of bankruptcy filers choose Chapter 7 of the Bankruptcy Code, which erases virtually all debts. While many families may face job loss, divorce, or medical bills, and therefore legitimately need the protection provided by the bankruptcy code, research has shown that some Chapter 7 filers actually have the capacity to repay some of what they owe. Instead, however, they choose to walk away from their debts anyway. The Bankruptcy Reform Act of 1999 will ensure that high-income filers who could repay some of what they owe are required to do so. It accomplishes this goal through a needs-based system that takes debtors' income, expenses, obligations, and any special circumstances into account when determining whether they have the capacity to repay a portion of their debts. It is important to note that the bill does preserve the right of any filer earning less than the median national income (currently about $51,000 for a family of four) to automatically choose either Chapter 7 or Chapter 13, thereby preserving, protecting, and enhancing the ability to obtain a legitimate "fresh start" in bankruptcy.

Puts women and children first. The legislation closes loopholes which allow some debtors to use the current bankruptcy system to delay or evade child support and alimony payments. These child support changes have been called "a veritable `wish list' of provisions which substantially enhances our efforts to enforce support obligations during ... bankruptcy" by Jonathan Burris, president of the California Family Support Council.

Bold new protections for consumers. The bill includes education provisions that will ensure that debtors are made aware of their options before they file for bankruptcy, including alternatives to bankruptcy such as credit counseling. It also sets up a pilot program of financial management training for debtors in the bankruptcy system, to help educate filers so they can avoid repeating their mistakes. Also, the bill cracks down on "bankruptcy mills," law firms and other entities that push debtors into bankruptcy without fully explaining the

consequences.

New creditor responsibilities. The legislation also imposes new restrictions and responsibilities upon creditors. For example, the bill requires creditors to disclose more about the effect of paying only the minimum payment, limits the ability of a creditor to terminate an account just because a consumer pays his or her bills in full each month, and establishes new creditor penalties designed to encourage good-faith pre-bankruptcy settlements with debtors.

Cosponsors of this bill include Rick Boucher (D-VA), Bill McCollum (R-FL), James Moran (D-VA), Richard Armey (R-TX), Martin Frost (D-TX), Robert Menendez (D-NJ), Deborah Pryce (R-OH), Tillie Fowler (R-FL), Tom Davis (R-VA), Patrick Kennedy (D-RI), David Dreier (R-CA), Charles Canady (R-FL), Bob Goodlatte (R-VA), Steve Chabot (R-OH), Ed Bryant (R-TN), Steve Rothman (D-NJ), Mary Bono (R-CA), Robert Andrews (D-NJ), Richard Baker (R-LA), Doug Bereuter (R-NE), Duke Cunningham (R-CA), Jim Davis (D-FL), Cal Dooley (D-CA), Jennifer Dunn (R-WA), Ralph Hail (D-TX), Darlene Hooley (D-OR), Sue Kelly (R-NY),Steve Largent (R-OK), James Maloney (D-CT), Bob Riley (R-AL), Tim Roemer (D-IN), Pete Sessions (R-TX), Adam Smith (D-WA), Ellen Tauscher (D-CA), Nydia Velazquez (D-NY), and Albert Wynn (D-MD).

This is fair, bipartisan legislation that recognizes the property rights of small business apartment owners and does something to remove abusive residents. As well, the bill improves the law's treatment of those who need it the most: women, children, and consumers. I am pleased to be among those championing the measure and look forward to its enactment.

Congressman Gekas was first elected to the U.S. House of Representatives in 1982. He was elected to an eighth term in 1996. He is a member of the House Committee on the Judiciary and serves as chairman of its Subcommittee on Commercial and Administrative Law, which has jurisdiction over bankruptcy law, regulatory rearm, and the Administrative Procedure Act.