Statement of John Conyers, Jr.

Hearing on H.R. 764 (Bankruptcy Amendments of 1997) and

H.R. 120 (Bankruptcy Law Technical Corrections Act of 1997)

House Judiciary Subcommittee on Commercial and Administrative Law

April 30, 1997

I want to begin by thanking you, Chairman Gekas and Ranking Member Nadler, for inviting me to testify today. I think it is truly within the bipartisan "spirit of Hershey" to begin this process by permitting both myself and Chairman Hyde to testify on our respective bills.

There are few matters which are more complex, or more important to this country, than the bankruptcy laws. However, in recent years, the bankruptcy laws have become so complex that when we make significant substantive changes -- as we did in 1978, 1984 and 1994 -- we often make inadvertent errors which require periodic fixing through technical corrections bills.

This is why I introduced a technical corrections bill on the very first day of the Congress. My bill was based on proposals made last Congress by numerous parties interested in the bankruptcy process as well as the well respected National Bankruptcy Conference. A similar bill was unanimously adopted by the Senate last year (S. 1559), but we ran out of time to deal with it in the rush of business at the end of the Congress.

Both my bill and Chairman Hyde's bill are by and large limited to technical and non-controversial changes. For the most part, the bills are very similar and I am hopeful that we will be able to resolve the differences before moving to any markup.

While both bills are technical, I would also note that if enacted into law, they will provide genuinely needed clarity to the Bankruptcy Code, helping both debtors and creditors alike. For example, by clarifying the operation of the manner in which the preference provisions of the Code apply to non-insider creditors (overruling DePrizio) we will be able to offer much needed certainty to commercial lenders and encourage the continued flow of credit to businesses.

And by clarifying that non-monetary equipment lease obligations need not be cured (in response to the Claremont Acquisition case), the legislation would eliminate a potential cloud over thousands of equipment leasing transactions.

Also, by clarifying that "production payments" are not subject to bankruptcy, we will be helping many persons in the oil and gas business who rely on these sales to operate their business.

I am also attaching hereto a comprehensive summary of my bill, and ask that it be made part of the record as well.

Since I have introduced H.R. 120 an additional technical correction has come to my attention. Section 305 of the 1994 Reform Act overruled Rake v. Wade⁽¹⁾ to make it clear that the Bankruptcy Code did not require debtors to pay interest on their arrearages in order to cure their mortgages. It is my understanding that some lenders have nonetheless sought to require that debtors pay special high penalty rates in order to cure their mortgage, which was certainly not intended. I hope we can end this practice through a further technical amendment to the Code.⁽²⁾

Also, I would note that the Judicial Conference has requested 18 additional bankruptcy judgeships. These are needed to deal with the tremendous increase in bankruptcy filings we are experiencing (up 27% nationally to over 1.1 million filings, and up 26% in Michigan). I would suggest that Chairman Gekas and Ranking Member Nadler considering combining the final technical corrections bill that emerges from the Subcommittee with the new judgeship bill. This will eliminate the need to obtain two unanimous consent requests in the Senate on these two measures.

Finally, I would remind you that the In Forma Pauperis pilot program Congress created several years ago⁽³⁾ is scheduled to expire on September 30, 1997. This very limited program has operated extremely well in practice at very minimal cost. The issue of In Forma Pauperis -- allowing for a waiver of bankruptcy filings fees by indigent individual debtors -- is being considered by the Bankruptcy Commission and a report on the issue is due from the Federal Judicial Center next spring. However, it would be extremely disruptive to the few districts where the pilot program now operates if it was prematurely terminated. I would therefore strongly urge that the Members recommend that the Appropriations Committee continue to allow appropriations for this salutary program.

Thank you once again for allowing me to testify.

Judiciary Homepage

1. 113 S.Ct. 2187 (1993).

2. I would suggest adding the clause "except the satisfaction of any penalty rate" at the end of sections 1123(d), 1222(d) and 1322(e).

3. Sec. 111(d)(3) of the FY '94 Commerce, Justice, State Appropriations Bill (Pub. L. 103-121).