Memorandum of Disapproval on the "Bankruptcy Reform Act of 2000"

Memorandum of Disapproval on the ``Bankruptcy Reform Act of 2000''

December 19, 2000

I have withheld my approval of H.R. 2415, the Bankruptcy Reform Act
of 2000. I firmly believe that Americans would benefit from bankruptcy
reform legislation that would stem abuse of the bankruptcy system by,
and encourage responsibility of, debtors and creditors alike.
Unfortunately, this bill is not balanced reform and it omits critical
language to require accountability and responsibility from those who
unlawfully bar access to legal health services. I hope the next Congress
can work in a bipartisan spirit to enact balanced legislation.
Over the past several months, my Administration has engaged in a
good faith effort to reach agreement with the bill's proponents on a
number of outstanding issues. With this goal in mind, we have pursued
negotiations notwithstanding my deep concern that the bill failed to
address some creditor abuses and also unnecessarily disadvantaged all
debtors to stem abuses by a few.
An agreement was reached in those negotiations on an essential
issue--limiting homestead exemptions--with compromises made on both
sides. Unfortunately, H.R. 2415 fails to incorporate that agreement,
instead reverting to a provision that my Administration has repeatedly
said was fundamentally flawed and contrary to the central premise of
this legislation: that debtors who truly have the capacity to repay a
portion of their debts do so. The agreement would have benefited not
only those debtors' creditors but also all other debtors through lower
credit costs. In contrast, the current bill's unlimited homestead
exemptions allow debtors who own lavish homes to shield their mansions
from their creditors, while moderate-income debtors, especially those
who rent, must live frugally under rigid repayment plans for 5 to 7
years. This loophole for the wealthy is fundamentally unfair and must be
closed. And the inclusion of a provision that limits--to some degree--a
wealthy debtor's capacity to move assets before bankruptcy into a home
in a State with an unlimited homestead exemption does not ameliorate the
glaring omission of a real homestead cap.
Moreover, I have made clear that bankruptcy legislation must require
accountability and responsibility from those who unlawfully bar access
to legal health services. Far too often, we have seen doctors, health
professionals, and their patients victimized by those who espouse and
practice violence at health care clinics. The Congress and the States
have established remedies for those who suffer as a result of these
tactics. However, we are increasingly seeing the use of the bankruptcy
system as a strategic tool by those who

seek to promote clinic violence while shielding themselves from personal
liability and responsibility. It is critical that we shut down this
abusive use of our bankruptcy system and prevent endless litigation that
threatens the court-ordered remedies owed to victims of clinic violence.
The Senate was right in its bipartisan vote of 80-17 to adopt an
amendment that would effectively close down any potential for this abuse
of the Bankruptcy Code. Nonetheless, this critical provision was dropped
from the final bill without public debate, and I fail to understand why
the bill's proponents refuse to include this consensus provision to shut
down the use of bankruptcy to avoid responsibility for clinic violence.
On the positive side, the bill would improve credit card
disclosures--although more can and should be done--and impose
limitations on misleading creditor practices that encourage debtors to
reaffirm dischargeable debts on potentially unfavorable terms. However,
these beneficial provisions are outweighed by the bill's flaws and
omissions.
I would have signed a balanced bankruptcy reform bill that addressed
known abuses, without tilting the playing field against those debtors
who genuinely turn to bankruptcy for a fresh start. I have withheld my
approval of H.R. 2415 because it does not strike the right balance.
William J. Clinton
The White House,
December 19, 2000.