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[House Report 106-45]
[From the U.S. Government Publishing Office]

106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                     106-45
_______________________________________________________________________

 
                   FAMILY FARMER BANKRUPTCY EXTENSION

_______________________________________________________________________

 March 9, 1999.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Gekas, from the Committee on the Judiciary, submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 808]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 808) to extend for 3 additional months the period 
for which chapter 12 of title 11 of the United States Code is 
reenacted, having considered the same, reports favorably 
thereon with amendments and recommends that the bill as amended 
do pass.

                           TABLE OF CONTENTS

                                                                  

                                                                 Page
The Amendment..............................................           2
Purpose and Summary........................................           2
Background and Need for Legislation........................           2
Hearings...................................................           3
Committee Consideration....................................           3
Vote of the Committee......................................           3
Committee Oversight Findings...............................           4
Committee on Government Reform Findings....................           4
New Budget Authority and Tax Expenditures..................           4
Congressional Budget Office Cost Estimate..................           4
Constitutional Authority Statement.........................           6
Section-by-Section Analysis................................           6
Changes in Existing Law Made by the Bill, as Reported......           6
Additional Views...........................................           7

    The amendments are as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:
    Section 149 of title I of division C of Public Law 105-277 is 
amended--
            (1) by striking ``April 1, 1999'' each place it appears and 
        inserting ``October 1, 1999'',
            (2) in subsection (a)--
                    (A) by striking ``September 30, 1998'' and 
                inserting ``March 31, 1999'', and
                    (B) by striking ``October 1, 1998'' and inserting 
                ``April 1, 1999'', and
            (3) by striking subsection (c).

SEC. 2. EFFECTIVE DATE.

    The amendments made by section 1 shall take effect on April 1, 
1999.
    Amend the title so as to read:

      A bill to extend for 6 additional months the period for 
which chapter 12 of title 11 of the United States Code is 
reenacted.

                             The Amendment

    Inasmuch as H.R. 808 was ordered reported with a single 
amendment in the nature of a substitute, the contents of this 
report constitute an explanation of the bill as so amended.

                          Purpose and Summary

    H.R. 808 extends the reenactment of chapter 12, a 
specialized form of bankruptcy relief for family farmers, for a 
six-month period ending on October 1, 1999.

                Background and Need for the Legislation

    On February 23, 1999, Representative Nick Smith (R-Mich.) 
(for himself and Representatives George Gekas (R-Pa.), David 
Minge (D-Minn.), Ronnie Shows (D-Miss.), Bill Barrett (R-Neb.), 
James Leach (R-Iowa), J.C. Watts, Jr. (R-Okla.), Sherwood 
Boehlert (R-NY), and John McHugh (R-NY)) introduced H.R. 808 to 
extend chapter 12 of title 11 of the United States Code.
    Chapter 12 is a specialized form of bankruptcy relief 
available only to a ``family farmer with regular annual 
income,'' \1\ a defined term.\2\ It permits eligible family 
farmers, under the supervision of a bankruptcy trustee,\3\ to 
reorganize their debts pursuant to a repayment plan.\4\ The 
special attributes of chapter 12 make it better suited to meet 
the particularized needs of family farmers in financial 
distress than other forms of bankruptcy relief, such as chapter 
11 \5\ and chapter 13.\6\
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    \1\ 11 U.S.C. Sec. 109(f).
    \2\ 11 U.S.C. Sec. 101(19).
    \3\ 11 U.S.C. Sec. 1202.
    \4\ 11 U.S.C. Sec. 1222.
    \5\ For example, chapter 12 is typically less complex and expensive 
than chapter 11, a form of bankruptcy relief generally utilized to 
effectuate large corporate reorganizations.
    \6\ Chapter 13, a form of bankruptcy relief for individuals seeking 
to reorganize their debts, limits its eligibility to debtors with debts 
in lower amounts than permitted for eligibility purposes under chapter 
12. Cf. 11 U.S.C. Sec. Sec. 109(e), 101(18).
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    Chapter 12 was enacted on a temporary seven-year basis as 
part of the Bankruptcy Judges, United States Trustees, and 
Family Farmer Bankruptcy Act of 1986 \7\ in response to the 
farm financial crisis of the early- to mid-1980's.\8\ It was 
subsequently extended on August 6, 1993 to September 30, 
1998.\9\ Last year, chapter 12 was further extended until April 
1, 1999 as part of the Omnibus Consolidated and Emergency 
Supplemental Appropriations Act, 1999.\10\
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    \7\ Pub. L. No. 99-554, Sec. 255, 100 Stat. 3088, 3105 (1986).
    \8\ See U.S. Dept. of Agriculture, Info. Bull. No. 724-09, Issues 
in Agricultural and Rural Finance: Do Farmers Need a Separate Chapter 
in the Bankruptcy Code? (Oct. 1997). As one of the principal proponents 
of this legislation explained:

      I doubt there will be anything that we do that will have 
      such an immediate impact in the grassroots of our country 
      with respect to the situation that exists in most of the 
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      heartland, and that is in the agricultural sector. . . .

      You know, William Jennings Bryan in his famous speech, the 
      Cross of Gold, almost 60 years ago [sic], stated these 
      words: ``Destroy our cities and they will spring up again 
      as if by magic; but destroy our farms, and the grass will 
      grow in every city in our country.''
      This legislation will hopefully stem the tide that we have 
      seen so recently in the massive bankruptcies in the family 
      farm area.

    132 Cong. Rec. 28,147 (1986) (statement of Rep. Mike Synar (D-
Okla.)).

    \9\ Pub. L. No. 103-65, 107 Stat. 311 (1993).
    \10\ Pub. L. No. 105-277, Sec. 149 (1998).
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                                Hearings

    No hearings were held on H.R. 808.

                        Committee Consideration

    In light of the imminent April 1, 1999 sunset date for 
chapter 12, the bill was held at the full Committee on the 
Judiciary for markup. On March 2, 1999, the Committee met in 
open session and ordered favorably reported the bill H.R. 808 
with amendment by a voice vote, a quorum being present.

                         Vote of the Committee

    1. A substitute offered by Mr. Gekas to extend chapter 12 
to October 1, 1999 to the amendment offered by Ms. Baldwin to 
H.R. 808 to extend chapter 12 to July 1, 2001. Adopted 14 to 8.
        AYES                          NAYS
Mr. Hyde                            Mr. Conyers
Mr. Gekas                           Mr. Nadler
Mr. Coble                           Mr. Scott
Mr. Gallegly                        Mr. Watt
Mr. Canady                          Ms. Jackson Lee
Mr. Goodlatte                       Ms. Waters
Mr. Chabot                          Mr. Delahunt
Mr. Barr                            Ms. Baldwin
Mr. Hutchinson
Mr. Pease
Mr. Rogan
Mr. Graham
Ms. Bono
Mr. Rothman

    2. An amendment, as amended by Mr. Gekas' substitute, 
offered by Ms. Baldwin to H.R. 808 to extend chapter 12 until 
October 1, 1999. Adopted 22 to 0.
        AYES                          NAYS
Mr. Hyde
Mr. Gekas
Mr. Coble
Mr. Gallegly
Mr. Canady
Mr. Goodlatte
Mr. Chabot
Mr. Barr
Mr. Hutchinson
Mr. Pease
Mr. Rogan
Mr. Graham
Ms. Bono
Mr. Conyers
Mr. Nadler
Mr. Scott
Mr. Watt
Ms. Jackson Lee
Ms. Waters
Mr. Delahunt
Mr. Rothman
Ms. Baldwin

                      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.

                Committee on Government Reform Findings

    No findings or recommendations of the Committee on 
Government Reform and Oversight were received as referred to in 
clause 3(c)(4) of Rule XIII of the Rules of the House of 
Representatives.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of House Rule XIII is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               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, H.R. 808, 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, March 4, 1999.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 808, a bill to 
extend for 6 additional months the period for which chapter 12 
of title 11 of the United States Code is reenacted.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susanne S. 
Mehlman, who can be reached at 226-2860.
            Sincerely,
                                                     Dan L. Crippen
    Enclosure
    cc: Hon. John Conyers, Jr.,
         Ranking Minority Member.
H.R. 808--A bill to extend for 6 additional months the period for which 
        chapter 12 of title 11 of the United States Code is reenacted
    CBO estimates that enacting H.R. 808 would result in no 
significant impact on the federal budget. Because this bill 
would affect both direct spending and receipts, pay-as-you-go 
procedures would apply, but CBO estimates that such effects 
would not be significant. H.R. 808 contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act and would impose no costs on 
state, local, or tribal governments.
    H.R. 808 would extend for six additional months chapter 12 
of Title 11 of the U.S. Code, which was created by the 
Bankruptcy Judges, United States Trustees, and Family Farmer 
Bankruptcy Act of 1986 (Public Law 99-554). Chapter 12, which 
is due to expire on April 1, 1999, specifies bankruptcy 
procedures available only to family farmers with regular annual 
income and is intended to facilitate an efficient and 
expeditious bankruptcy process.
    Based on information from the Executive Office of the 
United States Trustees (U.S. Trustees), CBO expects that 
without the temporary extension of chapter 12, family farmers 
filing for bankruptcy would split their filings about evenly 
between chapter 11 and chapter 13. Chapter 12 has a $200 filing 
fee and does not require the bankrupt party to pay quarterly 
fees to the government. Chapter 11, in contrast, requires an 
$800 filing fee as well as quarterly filing fees. (On average, 
$1,000 is collected per case.) Chapter 13 requires only a $130 
filing fee. Bankruptcy fees appear in two different places in 
the budget. Some of the fees are recorded as governmental 
receipts (revenues); others are recorded as offsetting 
collections to the U.S. Trustee System Fund and the 
Administrative Office of the United States Courts (AOUSC). The 
percentage of the fees allocated between these two accounts 
varies by chapter.
    Assuming that half the annual caseload--about 500 cases--
would be affected by this bill, its enactment would result in a 
negligible loss in revenues and a loss in offsetting 
collections of less than $500,000 in 1999. The loss of 
offsetting collections would reduce the amount available for 
spending by the U.S. Trustees and the AOUSC; however, CBO 
estimates that no additional appropriations would be required 
to replace this projected loss of fees because it would be 
matched by a reduction in workload associated with chapter 11 
and chapter 13 cases, resulting in no net budgetary effect.
    The CBO staff contact for this estimate is Susanne S. 
Mehlman, who can be reached at 226-2860. This estimate was 
approved by Robert A. Sunshine, Deputy Assistant Director for 
Budget Analysis.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of Rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in Article I, Section 8, Clause 4 of the 
United States Constitution.

                      Section-By-Section Analysis

    Section 1. Amendments. This provision amends section 149 of 
title I of division C of the Omnibus Consolidated and Emergency 
Supplemental Appropriations Act, 1999 \11\ to provide that 
chapter 12 of title 11 of the United States Code, as in effect 
on March 31, 1999, is reenacted for the period beginning on 
April 1, 1999 and ending on October 1, 1999. It also specifies 
that all cases commenced or pending under chapter 12 shall be 
conducted and determined under such chapter as if such chapter 
were continued in effect after October 1, 1999.
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    \11\ Id.
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    Section 2. Effective Date. The amendments made by H.R. 808 
take effect on April 1, 1999.

H.L.C.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

 SECTION 149 OF TITLE I OF DIVISION C OF THE OMNIBUS CONSOLIDATED AND 
EMERGENCY SUPPLEMENTAL APPROPRIATIONS ACT, 1999

           *       *       *       *       *       *       *

      Sec. 149. (a) Chapter 12 of title 11 of the United States 
Code, as in effect on [September 30, 1998] March 31, 1999, is 
hereby reenacted for the period beginning on [October 1, 1998] 
April 1, 1999, and ending on [April] October 1, 1999.
      (b) All cases commenced or pending under chapter 12 of 
title 11, United States Code, as reenacted under subsection 
(a), and all matters and proceedings in or relating to such 
cases, shall be conducted and determined under such chapter as 
if such chapter were continued in effect after [April] October 
1, 1999. The substantive rights of parties in connection with 
such cases, matters, and proceedings shall continue to be 
governed under the laws applicable to such cases, matters, and 
proceedings as if such chapter were continued in effect after 
[April] October 1, 1999.
      [(c) This section shall take effect on October 1, 1998.]

                      Additional Views on H.R. 808

    While we are gratified that chapter 12 of the Bankruptcy 
Code will be extended for an additional six months under this 
legislation as reported, we are disappointed that family 
farmers will continue to face uncertainty about the future of 
their legal protections under the Bankruptcy Code during this 
serious farm crisis.
    An amendment, offered by Ms. Baldwin, that would have 
extended chapter 12 permanently was ruled out-of-order on a 
procedural technicality. A subsequent amendment, offered by Ms. 
Baldwin, that would have extended chapter 12 for two years was 
amended down to six months on a largely party-line vote.
    The opposition to extending chapter 12 beyond six months is 
particularly inexplicable considering that chapter 12's 
permanent extension has strong bi-partisan support in both 
chambers. Our family farmers deserve to know that if they need 
to reorganize their debts in order to save their farm, chapter 
12 will be there. With only a six-month extension, family 
farmers may begin to make premature decisions regarding farm 
bankruptcy in order to assure that the protections now in the 
law are available to them. There is no substantive reason to 
hold family farmers hostage while Congress deliberates larger 
bankruptcy reform.
    We support this extension of chapter 12, but we are 
disappointed that the Majority has proved unwilling to grant to 
family farmers the permanent protection they need and deserve.

                                   John Conyers, Jr.
                                   Jerrold Nadler.
                                   Zoe Lofgren.
                                   Sheila Jackson Lee.
                                   Maxine Waters.
                                   William D. Delahunt.
                                   Tammy Baldwin.
                                   Anthony D. Weiner.

                                
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