Floor Statement of Senator Barack Obama on
S.256, the Bankruptcy Abuse and Prevention Act of 2005
I have come to the floor today to address this pending legislation.
This issue should
force us to face a fundamental question about who we are as a country,
how we progress as a society, and where our values lie as a people:
How do we treat
our fellow Americans who have fallen on hard times, and what is
our responsibility to cushion those falls when they occur?
this bill is designed to curb the worst abuses of our bankruptcy
system. That's a worthy goal, and we can all agree that bankruptcy
was never meant to serve as a Get Out of Jail Free Card, for use
when you've foolishly gambled away all your savings and don't feel
like taking responsibility for your actions. Business owners and
creditors deserve the money they're owed, and anyone who tries to
scam the system just because they can should be stopped and forced
to pay their debt.
But to accomplish
that, this bill would take us from a system where judges weed out
the abusers from the honest to a system where all the honest are
presumed to be abusers. Where declaring Chapter 7 bankruptcy is
made prohibitively expensive for people who already have suffered
financial devastation. With this bill, it doesn't matter if you
ran up your debt on a trip to Vegas or a trip to the Emergency Room,
you're still treated the same under the law and you still face the
possibility that you'll never get the chance to start over.
Now, it would
be one thing if most people were abusing the system and falling
into bankruptcy because they were irresponsible with their finances.
But we know that's not the case. We know that most people fall into
bankruptcy as a result of bad luck. And we know that a recent Harvard
study showed that nearly half of all bankruptcies occur because
of an illness that ends up sticking families with medical bills
they just can't keep up with.
Take the case
of Suzanne Gibbons. A few years back, Suzanne had a good job as
a nurse and a home on Chicago's Northwest Side. Then she suffered
a stroke that left her hospitalized for five-days. And even though
she had health insurance through her job, it only covered $4,000
of her $53,000 hospital bill.
Because of her
illness, she was soon forced to leave her full-time nursing job
and take a temp job that paid less and didn't offer health insurance.
Then the collection agencies started coming after her for hospital
bills that she just couldn't keep up with. She lost her retirement
savings, she lost her house, and eventually, she was forced to declare
If this bill passes
as written, Suzanne would be treated by the law the same as any
scam artist who cheats the system. The decision about whether or
not she can file for Chapter 7 bankruptcy would never take into
account the fact that she fell into financial despair because of
her illness. With all that debt, she would have had to hire a lawyer
and pay hundreds of dollars more in increased paperwork. And after
all that, she still may have been told that she was ineligible for
Chapter 7 bankruptcy.
And so, as much
as we'd like to believe that the face of this bankruptcy crisis
is credit card addicts who spend their way into debt, the truth
is that it's the face of people like Suzanne Gibbons. It's the face
of middle-class America. Over the last thirty years bankruptcies
have gone up 400% -- and we've had more than 2,100 in Illinois just
last year. We also know what else has gone up: the cost of child
care and the cost of college, the cost home ownership and the cost
of health care - which is now at a record high. People are working
harder and longer for less, and they're falling further and further
And we're not
talking about the poor or even just the working poor here. As bankruptcy
professor Elizabeth Warren has noted, these are middle-class families
with two parents who both work at good-paying jobs that put a roof
over their heads. They're saving every extra penny they have so
that their children can someday do better than they did. But with
just one illness, emergency, or divorce, those dreams can be wiped
out. This bill does a great job helping the credit card industry
recover the profits they're losing, but what are we doing to help
middle-class families recover the dreams they're losing?
This bill does
a great job protecting credit card companies from the few bad apples
who try to escape their debt, but what does it do to protect the
American public from the credit card companies who try to take advantage
the bankruptcy crisis this bill should address is not just the one
facing credit card companies who are enjoying record profits. We
should be addressing middle-class families who are dealing with
As Senator Dodd,
Senator Feinstein, and others have pointed out, this bill also fails
to deal with the aggressive marketing practices and hidden fees
credit card companies have used to raise their profits and our debt.
Charging a penalty to consumers who make a late payment on a completely
unrelated credit card is just one example of these tactics. We need
to end these practices so that we're making life easier not just
for the credit card companies, but for honest, hardworking middle-class
And if we're going
to crack down on bankruptcy abuse, we should make it clear that
we intend to hold the wealthy and the powerful accountable too.
As it is now, this bill makes it easier for a company like Enron
who just bilked their employees out of their life savings to declare
bankruptcy than for the employees themselves. In my own state, we
even had a mining company by the name of Horizon declare bankruptcy
and then refuse to pay its employees the health benefits it owed
The Mine Workers
involved had provided a total of 100,000 years of service and dedication
and sacrifice to this company. They spent their lives working hard.
They did their part. But Horizon didn't do its part, and it was
allowed to hide behind bankruptcy laws to leave these workers without
the care they had earned.
This is wrong.
It's wrong that this bill would make it harder for these unemployed
workers to declare bankruptcy, while doing nothing to prevent the
bankrupt company that put them there from shirking its responsibility
What kind of a
message does it send when we tell hardworking, middle-class Americans,
"You have to be more responsible with your finances, but the
corporations you work for can be as irresponsible as they want with
We must reform
our bankruptcy code so that corporations keep their promises and
meet their obligations to their workers. And while I remain hopeful
that our companies want to do the right thing for their workers,
doing so should not be a choice - it should be a mandate.
has two amendments to do this that I have co-sponsored and urge
my colleagues to support. One would increase the required payments
of wages and employee benefit plans to $15,000 per individual from
the current level of $4,925. And it would also require companies
that emerge from bankruptcy to immediately pay each retiree who
lost health benefits an amount of cash equal to what a retiree would
be expected to have to pay for COBRA coverage for 18 months. The
second amendment would prevent bankruptcy courts from dismissing
companies' coal act obligations to pay their workers the benefits
they promised them. These companies made a deal to their mine workers,
and they should be forced to honor that deal.
this bill gives us a rare chance to ask ourselves who we're here
to protect - who we're here to stand up and speak out for. We should
curb bankruptcy abuse and to demand a measure of personal responsibility
from people. We all want that.
But there are
also millions of middle-class families out there who are struggling
to get by. They work hard, they love their children, and they're
willing to do anything to give them the best possible shot in life.
And in the ten minutes since I've been talking, about thirty of
them have filed for bankruptcy.
We live in a rapidly
changing world with an economy that's moving just as fast. We can't
always control this and we can't promise that the changes will always
leave everyone better off.
But we can do
better than one bankruptcy every nineteen seconds. We can do better
than forcing people to choose between the cost of health care and
the cost of college. We can do better than big corporations using
bankruptcy laws to deny health care and benefits to their employees.
And we can give people the basic tools and protections they need
to believe that in America, your circumstance is no limit to the
success you may achieve and the dreams you may fulfill.
And so, while
I cannot support this bill the way it is written, I do look forward
to working with my colleagues in amending this bill so that we can
still keep that promise alive. Thank you.