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30

ROLL CALL NO. 9—CONTINUED

  Ayes Nays Present

Mr. Keller

  X  

Mr. Issa

  X  

Mr. Flake

     

Mr. Pence

     

Mr. Forbes

  X  

Mr. King

  X  

Mr. Feeney

  X  

Mr. Franks

  X  

Mr. Gohmert

  X  

Mr. Conyers

X    

Mr. Berman

X    

Mr. Boucher

  X  

Mr. Nadler

X    

Mr. Scott

X    

Mr. Watt

X    

Ms. Lofgren

     

Ms. Jackson Lee

X    

Ms. Waters

X    

Mr. Meehan

X    

Mr. Delahunt

     

Mr. Wexler

     

Mr. Weiner

X    

Mr. Schiff

X    

Ms. Sanchez

X    

Mr. Smith (Washington)

     

Mr. Van Hollen

X    

Mr. Sensenbrenner, Chairman

  X  

Total

12 19  

 

 

 

 

 

 

10. An amendment by Ms. Jackson Lee amending section 102 of the bill to increase the amount of actual expenses a chapter 7 debtor may claim under the provision's needs-based test for certain educational costs for a debtor's dependent child from $1,500 to $3,000. Defeated 12 to 21.

ROLL CALL NO. 10

  Ayes Nays Present

Mr. Hyde

     

Mr. Coble

  X  

Mr. Smith (Texas)

  X  

Mr. Gallegly

  X  

Mr. Goodlatte

  X  

Mr. Chabot

  X  

Mr. Lungren

  X  

Mr. Jenkins

  X  

Mr. Cannon

  X  

Mr. Bachus

  X  

Mr. Inglis

  X  

Mr. Hostettler

     

Mr. Green

  X  

Mr. Keller

  X  

Mr. Issa

  X  

Mr. Flake

     

Mr. Pence

  X  

Mr. Forbes

  X  

Mr. King

  X  

Mr. Feeney

  X  

Mr. Franks

  X  

Mr. Gohmert

  X  

Mr. Conyers

X    

 

 

 

 

 

 

 


31

ROLL CALL NO. 10—CONTINUED

  Ayes Nays Present

Mr. Berman

X    

Mr. Boucher

  X  

Mr. Nadler

X    

Mr. Scott

X    

Mr. Watt

X    

Ms. Lofgren

     

Ms. Jackson Lee

X    

Ms. Waters

X    

Mr. Meehan

     

Mr. Delahunt

     

Mr. Wexler

     

Mr. Weiner

X    

Mr. Schiff

X    

Ms. Sanchez

X    

Mr. Smith (Washington)

X    

Mr. Van Hollen

X    

Mr. Sensenbrenner, Chairman

  X  

Total

12 21  

 

 

 

 

11. Three en bloc amendments by Ms. Jackson Lee as follows: (a) amending Bankruptcy Code section 523(a) to provide that a debt arising from certain sex offenses in which the victim was an individual who had not attained the age of 17 years is nondischargeable; (b) amending Bankruptcy Code section 523(a) to provide that a debt arising from a judicial, administrative, or other action related to the consumption or consumer purchase of a tobacco product that is based in whole or in part on false pretenses, a false representation, or actual fraud is nondischargeable; and (c) amending section 708 of the bill to provide that the confirmation of a chapter 11 plan under Bankruptcy Code section 1141 does not discharge a debtor that is corporation from a debt specified in Bankruptcy Code section 523(a)(9). Defeated 9 to 20. 

ROLL CALL NO. 11

  Ayes Nays Present

Mr. Hyde

     

Mr. Coble

  X  

Mr. Smith (Texas)

  X  

Mr. Gallegly

  X  

Mr. Goodlatte

  X  

Mr. Chabot

  X  

Mr. Lungren

  X  

Mr. Jenkins

  X  

Mr. Cannon

  X  

Mr. Bachus

  X  

Mr. Inglis

  X  

Mr. Hostettler

     

Mr. Green

     

Mr. Keller

  X  

Mr. Issa

  X  

Mr. Flake

     

Mr. Pence

  X  

Mr. Forbes

  X  

Mr. King

  X  

Mr. Feeney

  X  

Mr. Franks

  X  

Mr. Gohmert

  X  

Mr. Conyers

X    

 

 

 

 

 

 

 


32

ROLL CALL NO. 11—CONTINUED

  Ayes Nays Present

Mr. Berman

X    

Mr. Boucher

  X  

Mr. Nadler

     

Mr. Scott

X    

Mr. Watt

X    

Ms. Lofgren

     

Ms. Jackson Lee

X    

Ms. Waters

X    

Mr. Meehan

X    

Mr. Delahunt

     

Mr. Wexler

     

Mr. Weiner

X    

Mr. Schiff

     

Ms. Sanchez

     

Mr. Smith (Washington)

     

Mr. Van Hollen

X    

Mr. Sensenbrenner, Chairman

  X  

Total

9 20  

 

 

12. Motion to report S. 256 favorably. Passed 22 to 13.

ROLL CALL NO. 12

  Ayes Nays Present

Mr. Hyde

     

Mr. Coble

X    

Mr. Smith (Texas)

X    

Mr. Gallegly

X    

Mr. Goodlatte

X    

Mr. Chabot

X    

Mr. Lungren

X    

Mr. Jenkins

X    

Mr. Cannon

X    

Mr. Bachus

X    

Mr. Inglis

X    

Mr. Hostettler

     

Mr. Green

X    

Mr. Keller

X    

Mr. Issa

X    

Mr. Flake

X    

Mr. Pence

X    

Mr. Forbes

X    

Mr. King

X    

Mr. Feeney

X    

Mr. Franks

X    

Mr. Gohmert

X    

Mr. Conyers

  X  

Mr. Berman

  X  

Mr. Boucher

X    

Mr. Nadler

  X  

Mr. Scott

  X  

Mr. Watt

  X  

Ms. Lofgren

     

Ms. Jackson Lee

  X  

Ms. Waters

  X  

Mr. Meehan

  X  

Mr. Delahunt

  X  

Mr. Wexler

     

Mr. Weiner

  X  

Mr. Schiff

  X  

Ms. Sanchez

  X  

Mr. Smith (Washington)

     

 

 

 

 

 

 

 


33

ROLL CALL NO. —CONTINUED

  Ayes Nays Present

Mr. Van Hollen

  X  

Mr. Sensenbrenner, Chairman

X    

Total

22 13  

 

 

 

COMMITTEE OVERSIGHT FINDINGS

In compliance with clause 3(c)(1) of Rule XIII of the Rules of the House of Representatives, the Committee reports that the findings and recommendations of the Committee, based on oversight activities under clause 2(b)(1) of Rule X of the Rules of the House of Representatives, are incorporated in the descriptive portions of this report. 

NEW BUDGET AUTHORITY AND TAX EXPENDITURES

In compliance with clause 3(c)(2) of Rule XIII of the Rules of the House of Representatives, the Committee adopts as its own the estimate of budget authority, or tax expenditures or revenues contained in the cost estimate prepared by the Director of the Congressional Budget Office pursuant to section 402 of the Congressional Budget Act of 1974.

CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

In compliance with clause 3(c)(3) of Rule XIII of the Rules of the House of Representatives, the Committee sets forth, with respect to the bill, S. 256, the following estimate and comparison prepared by the Director of the Congressional Budget Office under section 402 of the Congressional Budget Act of 1974:


U.S. Congress,            

Congressional Budget Office,

Washington, DC, April 4, 2005.

Hon. F. James Sensenbrenner, Jr., Chairman,

Committee on the Judiciary,

House of Representatives, Washington, DC.

Dear Mr. Chairman: The Congressional Budget Office has prepared the enclosed cost estimate for S. 256, the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005," as reported by the House Committee on the Judiciary. This version of S. 256 is identical to the legislation as passed by the Senate on March 10, 2005.

If you wish further details on this estimate, we will be pleased to provide them. The CBO staff contacts are Gregory Waring (for Federal spending), who can be reached at 226-2860, Annabelle Bartsch (for Federal revenues), who can be reached at 226-2720, Melissa Merrell (for the State and local impact), who can be reached at 225-3220, and Paige Piper/Bach (for the private-sector impact), who can be reached at 226-2940.

Sincerely,                                         

Douglas Holtz-Eakin.                      

Enclosure

 

 

 

 


34

cc:  Honorable John Conyers, Jr.

       Ranking Member

S. 256—Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. 


SUMMARY

CBO estimates that implementing S. 256 would result in gross discretionary costs of $392 million over the 2006-2010 period, primarily to pay for increased responsibilities of the United States Trustees (U.S. Trustees), assuming appropriation of the necessary amounts. At the same time, the act would increase the fees charged for filing certain bankruptcy cases and would change how some of these fees are currently recorded in the budget during the first 5 years after enactment. We estimate that implementing the act would increase the amount of bankruptcy fees that are treated as an offset to appropriations by $75 million over the 5-year period, resulting in an estimated net increase in discretionary spending of approximately $318 million over this period.

In addition, CBO estimates that enacting S. 256 would increase revenues by about $60 million over the 2006-2010 period and by about $140 million over the 2006-2015 period primarily because of provisions that temporarily amend the Treasury's allocation of filing fees. Finally, enactment of S. 256 would authorize additional judgeships, and we estimate that the mandatory pay and benefits for those positions would cost $26 million over the next 5 years and $45 million over the 2006-2015 period.

On balance and assuming appropriation of the necessary amounts to implement the act, CBO estimates that its enactment would increase budget deficits by about $280 million over the 2006-2010 period.

S. 256 contains two intergovernmental mandates as defined in the Unfunded Mandates Reform Act (UMRA), but CBO estimates that the costs would be insignificant and would not exceed the threshold established in UMRA ($62 million in 2005, adjusted annually for inflation). Overall, CBO expects that enacting this bill would benefit State and local governments by enhancing their ability to collect outstanding obligations in bankruptcy cases.

S. 256 would impose private-sector mandates, as defined in UMRA, on bankruptcy attorneys, creditors, bankruptcy petition preparers, debt-relief agencies, consumer reporting agencies, and credit and charge-card companies. CBO estimates that the direct costs of those mandates would exceed the annual threshold established by UMRA ($123 million in 2005, adjusted annually for inflation).

 

 

 

 

MAJOR PROVISIONS

In addition to establishing means-testing for determining eligibility for chapter 7 bankruptcy relief, S. 256 would:

• Require the Executive Office for the U.S. Trustees to establish a test program to educate debtors on financial management;

• Authorize 28 new temporary judgeships and extend four existing judgeships;

• Permit courts to waive chapter 7 filing fees and other fees for debtors who could not pay such fees in installments;

 

 


35

• Require that at least one of every 250 bankruptcy cases under chapter 13 or chapter 7 be audited by an independent certified public accountant;

• Require the Administrative Office of the United States Courts (AOUSC) to receive and maintain tax returns for certain chapter 7 and chapter 13 debtors;

• Require the AOUSC and the U.S. Trustees to collect and publish certain statistics on bankruptcy cases; and

• Increase chapter 7 and chapter 11 bankruptcy filing fees, decrease chapter 13 filing fees, and change the budgetary treatment of such fees over a specified period of time.

Other provisions would make various changes affecting the bankruptcy provisions for municipalities and the treatment of tax liabilities in bankruptcy cases.

 

 

ESTIMATED COST TO THE FEDERAL GOVERNMENT

As shown in Table 1, CBO estimates that implementing S. 256 would result in a net increase in discretionary spending of about $318 million over the 2006-2010 period, subject to future appropriation actions. In addition, we estimate that mandatory spending for the salaries and benefits of bankruptcy judges would increase by less than $100,000 in 2005 and by $26 million over the 2006-2010 period. Enacting the legislation's provisions for adjusting filing fees would increase revenues by about $60 million over the next 5 years. The costs of this legislation fall within budget function 750 (administration of justice).


36

TABLE 1. ESTIMATED BUDGETARY EFFECTS OF S. 256

By Fiscal Year, in Millions of Dollars

CHANGES IN SPENDING SUBJECT TO APPROPRIATION

 

2005

2006

2007

2008

2009

2010

Means-Testing (Section 102)    •   

Estimated Authorization Level

0

16

24

39

39

36

Estimated Outlays

0

14

23

39

39

36

Studies by U.S. Trustees, GAO, and SBA (Sections 103, 230, and 443)

Estimated Authorization Level

0

1

*

0

0

0

Estimated Outlays

0

1

*

0

0

0

Debtor Financial Management Training (Section 105)    •   

Estimated Authorization Level

0

3

1

0

0

0

Estimated Outlays

0

2

1

*

0

0

Credit Counseling Certification (Section 106)

Estimated Authorization Level

0

4

7

8

8

7

Estimated Outlays

0

4

7

8

8

7

Maintenance of Tax Returns (Section 315)    •   

Estimated Authorization Level

0

2

2

2

2

2

Estimated Outlays

0

2

2

2

2

2

Changes in Bankruptcy Filing Fees (Sections 325 and 418)

Estimated Authorization Level

0

-46

-49

6

7

7

Estimated Outlays

0

-46

-49

6

7

7

U.S. Trustee Site Visits (Section 439)    •   

Estimated Authorization Level

0

3

 

3

3

3

Estimated Outlays

0

3

3

3

3

3

Compiling and Publishing Data (Sections 601-602)

Estimated Authorization Level

0

1

7

8

8

8

Estimated Outlays

0

1

7

8

8

8

Audit Procedures (Section 603    •   

Estimated Authorization Level

0

0

16

17

17

16

Estimated Outlays

0

0

16

17

17

16

Additional Judgeships—Support Costs (Section 1223)

Estimated Authorization Level

*

8

17

17

18

18

Estimated Outlays

*

7

16

17

18

18

FTC Toll-Free Hotline (Section 1301)    •   

Estimated Authorization Level

0

2

1

1

1

1

Estimated Outlays

0

2

1

1

1

1

Total Discretionary Changes

Estimated Authorization Level

*

-6

29

101

103

98

Estimated Outlays

*

-10

26

101

103

98

CHANGES IN DIRECT SPENDING

Additional Judgeships (Section 1223)    •   

Estimated Budget Authority

*

3

6

6

6

6

Estimated Outlays

*

3

5

6

6

6

CHANGES IN REVENUES

Changes in Revenue from Filing Fees

Estimated Revenues

0

-6

-12

30

24

24

 

 

 

 

 

 

 

 

 

 

BASIS OF ESTIMATE

For this estimate, CBO assumes that S. 256 will be enacted by July 2005 and that the amounts necessary to implement the act will be appropriated for each fiscal year. Many of the act's new provisions would be effective 180 days after enactment. However, a


37

few provisions would be effective 18 months after enactment. CBO assumes those provisions would take effect in fiscal year 2007.

 

Spending Subject to Appropriation

Most of the estimated increases in discretionary spending under S. 256 would be required to fund the additional workload that would be imposed on the U.S. Trustees. Those increases would be partially offset for fiscal years 2006 and 2007 by changes in bankruptcy filing fees that would be recorded as offsetting collections under the act. CBO estimates that implementing S. 256 would result in a net increase in discretionary costs of about $318 million over the 2006-2010 period, with most of the increase falling after 2007.

Means-Testing (Section 102). This section would establish a system of means-testing for determining a debtor's eligibility for relief under chapter 7. Under the proposed means test, if the amount of debtor income remaining after certain expenses and other specified amounts are deducted from the debtor's current monthly income exceeds the threshold specified in section 102, then the debtor would be presumed ineligible for chapter 7 relief. A debtor who could not demonstrate "special circumstances," which would cause the expected disposable income to fall below the threshold, could file under other chapters of the bankruptcy code. 

Although the private trustees would be responsible for conducting the initial review of a debtor's income and expenses and filing the majority of motions for dismissal or conversion, CBO expects that the workload of the U.S. Trustees would increase under the means-testing provision. The U. S. Trustees would provide increased oversight of the work performed by the private trustees, file additional motions for dismissal or conversion, and take part in additional litigation that is expected to occur as the courts and debtors debate allowable expenses and other related issues. Although CBO cannot predict the amount of such litigation, we expect that, during the first few years following enactment of the act, the amount of litigation could be significant as parties test the new law's standards. In subsequent years, litigation could begin to subside as precedents are established. Based on information from the U.S. Trustees, CBO estimates that the U.S. Trustees would require 200 additional attorneys, paralegals, and analysts to address the increased workload. As a result, CBO estimates that implementing this provision would cost about $150 million over the 2006-2010 period, assuming appropriation of the necessary funds. 

 

 

 

 

Studies by the U.S. Trustees, Government Accountability Office (GAO), and Small Business Administration (SBA) (Sections 103, 205, 230, and 443). Section 103 would require the U.S. Trustees to conduct a study regarding the use of Internal Revenue Service expense standards for determining a debtor's current monthly expenses and the impact of those standards on debtors and bankruptcy courts. Section 230 would require GAO to conduct a study regarding the feasibility of requiring trustees to provide the Office of Child Support Enforcement information about outstanding child support obligations of debtors. Section 205 would require GAO to conduct a study on the treatment of consumers by creditors with respect to reaffirmation agreements. Section 443 would require the Administrator of SBA, in consultation with the Attorney


38

General, the U.S. Trustees, and the AOUSC, to conduct a study on small business bankruptcy issues. Based on information from the U.S. Trustees, GAO, and SBA, CBO estimates that completing the necessary studies would cost about $1 million in 2006 and less than $500,000 in 2007, subject to the availability of appropriated funds. 

Debtor Financial Management Test Training Program (Section 105). This section would require the U.S. Trustees to establish a test training program to educate debtors on financial management. The test training program would be authorized for six judicial districts over an 18-month period. Based on information from the U.S. Trustees, CBO estimates that about 90,000 debtors would participate if such a program were administered by the U.S. Trustees in fiscal years 2006 and 2007. At a projected cost of about $40 per debtor, CBO estimates that implementing this provision would cost nearly $4 million over the 2006-2007 period.

Credit Counseling Certification (Section 106). This section would require the U.S. Trustees to certify, on an annual basis, that certain credit counseling services could provide adequate services to potential debtors. Based on information from the U.S. Trustees, CBO estimates that the U.S. Trustees would require additional attorneys and analysts to handle the greater workload associated with certification. CBO estimates that implementing this provision would cost $33 million over the 2006-2010 period.

Maintenance of Tax Returns (Section 315). This section would authorize the AOUSC to receive and retain debtors' tax returns for the year prior to the commencement of the bankruptcy for chapter 7 and chapter 13 filings. Such collection and storage of tax returns would commence only at the request of a creditor. Based on information from the AOUSC, CBO expects that creditors will request tax information in about 25 percent of such cases. CBO estimates that implementing section 315 would cost $10 million over the 2006-2010 period to store and provide access to about two million tax returns.

Changes in Bankruptcy Filing Fees (Sections 325 and 418). Section 325 would increase chapter 7 and chapter 11 bankruptcy filing fees, decrease the chapter 13 filing fee, and change the distribution of such fees during the first 5 years after enactment. Considering the expected reduction in the use of chapter 7 because of means-testing and a provision in section 418 that would allow fee waivers, CBO estimates that implementing the new fee structure and changes in fee classifications would result in a net increase in offsetting collections totaling $75 million over the 2006-2010 period.

Current Law Filing Fees. Under current law, the filing fee for chapter 7 and chapter 13 is $155 and is divided between the U.S. Trustee System Fund (recorded as an offsetting collection), the AOUSC (recorded as an offsetting receipt), the private trustee assigned to the case, and the remainder is recorded as a governmental receipt (i.e., revenue). The filing fee for chapter 11 relief is currently set at $800 and is divided between the U.S. Trustee System Fund and the AOUSC, and the remainder is also recorded as a governmental receipt. Section 325 would change the filing fees for chapters 7, 13, and 11 to $200, $1,000, and $150, respectively.


39

Distribution of Filing Fees. During the first 2 years after enactment, the S. 256 would allow the U.S. Trustee System Fund to retain (as an offset to appropriations) a larger portion of the current-law chapter 7, 13, and 11 filing fees. At the same time, the act would temporarily reduce for 2 years the percentage of current-law filing fees allocated to the AOUSC, and, because current law sets the private trustee's portion of the filing fee at a flat amount ($45), no portion of the current-law filing fees would be recorded as governmental receipts during fiscal years 2006 and 2007. After 2 years, the distribution of the filing fees under S. 256 would revert to the distribution formula in current law.

Under S. 256, the general fund of the Treasury would receive any increase in bankruptcy filing fees due to enactment of the legislation over the 2006-2010 period. Beginning in 2011, the full amount of the proposed fees would be allocated according to the formula specified in current law. Of the $200 fee for chapter 7 filers, about $55 would be recorded as an offsetting collection to the appropriation for the U.S. Trustees System Fund, and almost $68 would be recorded as an offsetting receipt and spent without further appropriation by the AOUSC. The private trustee assigned to the case would receive $45 and the remainder of the fee would be recorded as a governmental receipt. Of the $150 fee for a chapter 13 case, the U.S. Trustee System Fund would receive about $41, and the AOUSC would receive almost $51 per case to spend without further appropriation. Finally, of the $1,000 fee per chapter11 case, the U.S. Trustee System Fund would receive $500, the AOUSC would receive $250, and the remainder of the fee would be recorded as a governmental receipt.

 

 

 

 

Fee Waivers. Section 418 would permit a bankruptcy court or district court to waive the chapter 7 filing fee and other fees for a debtor who is unable to pay such fees in installments. Based on information from the AOUSC, CBO expects that, in fiscal year 2006, chapter 7 filing fees would be waived for about 3.5 percent of all chapter 7 filers and that the percentage waived would gradually increase to about 10 percent by fiscal year 2009.

U.S. Trustee Site Visits in Chapter 11 Cases (Section 439). This section would expand the responsibilities of the U.S. Trustees in small business bankruptcy cases to include site visits to inspect the debtor's premises, review records, and verify that the debtor has filed tax returns. Based on information from the U.S. Trustees, CBO estimates that implementing section 439 would require about 20 additional analysts to conduct over 2,300 site visits each year. CBO estimates that implementing this provision would cost about $15 million over the 2006-2010 period for the salaries, benefits, and travel expenses associated with those additional personnel.

Compilation and Publication of Bankruptcy Data and Statistics (Sections 601-602). Beginning 18 months after enactment, the act would require the AOUSC to collect data on chapter 7, chapter 11, and chapter 13 cases and the U.S. Trustees to make such information available to the public. CBO estimates that it would cost about $32 million over the 2006-2010 period to meet these requirements. Of the total estimated cost, about $25 million would be required for additional legal clerks, analysts, and data base support. The remainder would be incurred by the U.S. Trust- 


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