Memorandum of Disapproval for Bankruptcy Reform Legislation

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.