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Letter to Congressional Leaders on Bankruptcy Reform Legislation

June 29, 2000

Dear Mr. Speaker: (Dear Mr. Leader:)

I write again because I am deeply concerned about recent developments concerning bankruptcy reform legislation pending before Congress. I understand the House and Senate Republican Leadership has reached a conclusion on a package they will soon move through the Congress. We have not seen the final language, but, if the reported description is accurate, I will veto the bill.

OMB Director Lew sent a letter to the informal conferees, on May 12, 2000, that laid out the principles against which I will judge any final bankruptcy bill that comes to my desk. I would like to sign a balanced consumer bankruptcy bill that would encourage responsibility and reduce abuses of the bankruptcy system on the part of debtors and creditors alike. The majority of debtors turn to the bankruptcy system, not to escape bills they can afford to repay, but because they face real hardship—uninsured medical expenses, unemployment, or divorce. We can target the abuses without placing unnecessary barriers before those in need of a fresh start who turn to bankruptcy as a last resort. I remain concerned about the balance in the bill that the informal conferees have produced.

In addition, in my letter of June 9, 2000, I highlighted five issues that could help to determine whether the final bill meets my standards of balance and fairness. On three of these issues, the Republican resolution is seriously flawed.

First, I cannot support a bankruptcy bill that fails to require accountability and responsibility from those who use violence, vandalism, intimidation, and harassment to deny others access to legal health services. Some have strategically abused the bankruptcy system to avoid the penalties that Congress and the States have imposed for such illegal acts. The language that I understand the Republicans will include on this subject is inadequate. It would require a finding that there was a "willful and malicious threat of serious bodily injury" before certain debts would be made nondischargeable. Often, no such finding is made when holding parties liable for their actions in denying others access to legal health services under Federal or State law. The final legislation must include an effective approach to this problem, such as the one contained in the amendment by Senator Schumer, which passed the Senate by a vote of 80-17.

I am also concerned that the changes proposed to the Fair Debt Collection Practices Act would deny an effective remedy to victims of abusive check collection practices. We have yet to hear a compelling rationale for why check collectors should not be subject to the same requirements as those who collect other debts. Moreover, no committee in either body of Congress has considered this issue, raised for the first time in Conference. At a minimum, the proposal should be subject to full Congressional consideration, so that public scrutiny can be applied to the implications of the proposed changes.

The proposed limitation on State homestead exemptions will address, for the first time, those who move their residence shortly before bankruptcy to take advantage of large State exemptions to shield assets from their creditors. But the proposal does not address a more fundamental concern: unlimited homestead exemptions that allow wealthy debtors in some States to continue to live in lavish homes. In light of how other provisions designed to stem abuse will affect moderate-income debtors, it is unfair to leave this loophole for the wealthy in place.

I remain concerned that the negotiations have produced a bill that has lost some of the balance that the Senate bill had tried to achieve, albeit imperfectly from my perspective. As a result of all these concerns, I will veto the bill that we understand the Republicans plan to forward to my desk. But I continue to urge Congress to reconsider and send me a fair bill that meets the test of balance.



NOTE: Letters were sent to J. Dennis Hastert, Speaker of the House of Representatives; Richard A. Gephardt, House minority leader; Trent Lott, Senate majority leader; and Thomas A. Daschle, Senate minority leader. An original was not available for verification of the content of this letter.

William J. Clinton, Letter to Congressional Leaders on Bankruptcy Reform Legislation Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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