The Bankruptcy Reform Act of 2001 Hearing Committee
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S. HRG. 107–195 THE BANKRUPTCY REFORM ACT OF 2001 HEARING BEFORE THE COMMITTEE ON THE JUDICIARY UNITED STATES SENATE ONE HUNDRED SEVENTH CONGRESS FIRST SESSION FEBRUARY 8, 2001 Serial No. J–107–2 Printed for the use of the Committee on the Judiciary ( U.S. GOVERNMENT PRINTING OFFICE 76–343 DTP WASHINGTON : 2002 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001 COMMITTEE ON THE JUDICIARY ORRIN G. HATCH, Utah, Chairman STROM THURMOND, South Carolina PATRICK J. LEAHY, Vermont CHARLES E. GRASSLEY, Iowa EDWARD M. KENNEDY, Massachusetts ARLEN SPECTER, Pennsylvania JOSEPH R. BIDEN, JR., Delaware JON KYL, Arizona HERBERT KOHL, Wisconsin MIKE DEWINE, Ohio DIANNE FEINSTEIN, California JEFF SESSIONS, Alabama RUSSELL D. FEINGOLD, Wisconsin SAM BROWNBACK, Kansas CHARLES E. SCHUMER, New York MITCH MCCONNELL, Kentucky RICHARD J. DURBIN, Illinois MARIA CANTWELL, Washington SHARON PROST, Chief Counsel MAKAN DELRAHIM, Staff Director BRUCE COHEN, Minority Chief Counsel and Staff Director (II) C O N T E N T S STATEMENTS OF COMMITTEE MEMBERS Page Durbin, Hon. Richard J., a U.S. Senator from the State of Illinois .................... 123 Grassley, Hon. Charles E., a U.S. Senator from the State of Iowa ..................... 120 Hatch, Hon. Orrin, a U.S. Senator from the State of Utah ................................. 2 Kennedy, Hon. Edward M., a U.S. Senator from the State of Massachusetts ... 121 Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont .................... 4 Schumer, Hon. Charles E., a U.S. Senator from the State of New York ............ 109 Specter, Hon. Arlen, a U.S. Senator from the State of Pennsylvania ................. 1 Thurmond, Hon. Strom, a U.S. Senator from the State of South Carolina ........ 129 WITNESSES Becker, Hon. Edward R., Chief Judge, United States Court of Appeals for the Third Circuit, Philadelphia, PA ................................................................... 9 Beine, Kenneth H., President, Shoreline Credit Union, Two Rivers, WI ........... 49 Manning, Robert D., Senior Research Fellow, Institute for Higher Education, Law, and Governance, University of Houston Law Center, Houston, TX ....... 57 Newsome, Hon. Randall J., Judge, United States Bankruptcy Court, Northern District of California, Oakland, CA .................................................................... 19 Sheaffer, Dean, Vice President, Director of Credit, Boscov’s Department Stores, Inc., Laureldale, PA ................................................................................ 76 Strauss, Philip L., Principal Attorney, San Francisco Department of Child Support Services, San Francisco, CA ................................................................. 37 Vullo, Maria T., Partner, Paul, Weiss, Rifkind, Wharton and Garrison, New York, NY ............................................................................................................... 81 Williamson, Brady C., Attorney, LaFollett, Godfry and Kahn, and former Chair, National Bankruptcy Review Commission, Madison, WI ..................... 43 Zywicki, Todd J., Assistant Professor of Law, George Mason University School of Law, Arlington, VA .......................................................................................... 87 QUESTIONS AND ANSWERS Responses of Philip L. Strauss to Questions from Senator Biden ....................... 130 Responses of K.H. Beine to Questions submitted by Senator Feingold .............. 132 Responses of Randall J. Newsome to Questions submitted by Senator Fein- gold ........................................................................................................................ 134 Responses of Philip L. Strauss to Questions submitted by Senator Feingold .... 135 Responses of Todd I. Zywicki to Questions submitted by Senator Feingold ....... 137 Responses of Dean Sheaffer to Questions submitted by Senator Feingold ......... 138 Responses of Brady C. Williamson to Written Questions .................................... 139 Responses of the Administrative Office of the Courts to Questions submitted by Senator Leahy ................................................................................................. 140 Responses of Robert D. Manning to Questions submitted by Senator Leahy .... 142 Responses of Todd Zywicki to Questions submitted by Senator Leahy .............. 147 SUBMISSIONS FOR THE RECORD American Bar Association, Governmental Affairs Office, Washington, DC, statement .............................................................................................................. 150 Arnold, Hon. Richard S., U.S. Circuit Judge for the Eighth Circuit, statement 152 Association of Financial Guaranty Insurors, statement ....................................... 153 Block-Lieb, Susan, Professor of Law, Fordham University, New York, NY, statement .............................................................................................................. 155 Bond Market Association, Washington, DC, statement ....................................... 157 (III) IV Page Commercial Law League of America, Chicago, IL, statement and attachment . 163 Consumer Mortgage Coalition, statement ............................................................. 166 International Council of Shopping Centers, Alexandria, VA, statement ............ 169 Jones, Hon. Edith H., United States Court of Appeals, Fifth Circuit, Houston, TX, statement ....................................................................................................... 173 United States Department of Justice, Office of Legislative Affairs, Jon P. Jennings, Acting Assistant Attorney General, statement ................................ 175 Wallace, George J., Eckert Seamans Cherlin & Mellott LLC, Washington, DC, statement ...................................................................................................... 176 THE BANKRUPTCY REFORM ACT OF 2001 THURSDAY, FEBRUARY 8, 2001 U.S. SENATE, COMMITTEE ON THE JUDICIARY, Washington, DC. The committee met, pursuant to notice, at 10:10 a.m., in room SD–226, Dirksen Senate Office Building, Hon. Orrin G. Hatch, Chairman of the Committee, presiding. Present: Senators Hatch, Grassley, Specter, Kyl, Sessions, Leahy, Kennedy, Biden, Feinstein, Feingold, and Schumer. Chairman HATCH. We are happy to welcome you all out to the committee this morning. I will give my remarks immediately after Senator Specter, who wants to introduce Judge Becker from the Third Circuit Court of Appeals, and then we will move on from there with the Ranking Member and then to Judge Becker. STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM THE STATE OF PENNSYLVANIA Senator SPECTER. Thank you very much, Mr. Chairman, for your courtesy in permitting me to start. I have another commitment which I have to attend to. It is a great pleasure for me to present Chief Judge Edward Roy Becker from the Court of Appeals for the Third Circuit to this com- mittee. I haven’t known Judge Becker very long, only 51 years. We rode the elevated train from northeast Philadelphia to the Univer- sity of Pennsylvania. I am substantially older than Judge Becker. He was a freshman when I was a senior. He started at the University of Pennsylvania in the fall of 1950, and I had the opportunity to coach the Univer- sity of Pennsylvania debating team when Judge Becker was a sen- ior. We went to Boston to debate the Norfolk State prisoners, Senator Kennedy, and the subject was resolved that the communist party should be outlawed. The five chief editors from the newspapers— Irwin Cannon was one of the judges of that debate, and I am not pleased to tell you that Judge Becker and I lost to the Norfolk State prisoners. We had a very large audience, about 1,000 in- mates. Senator KENNEDY. Which side were you on, Senator? [Laughter.] Senator SPECTER. They had to take the side of law and order to urge outlawing the communist party. We had 1,000 people. That is what you call a real captive audience, the quintessential. (1) 2 Judge Becker graduated Phi Beta Kappa from the University of Pennsylvania and the Yale Law School, where again we were to- gether in the law school. He graduated in the class of 1957 and he had a very unusual career as an active lawyer, a business lawyer, a trial lawyer, and a Republican committeeman. I would say that Judge Becker is one of the few, if not the only Federal judges to have earned his judgeship both ways, by merit and by politics. It was a confluence of factors. He was on the United States District Court for the Eastern District of Pennsyl- vania at the age of 37, and he was elevated to the Third Circuit in 1970 and he is now the Chief Judge, bringing an enormous num- ber of innovative ideas, one of the real leaders of the American bar and the American judiciary. If there should ever be another va- cancy on the Supreme Court of the United States, we could start the confirmation hearing this morning. As you can tell, Mr. Chairman, it is a long, very intimate friend- ship with Chief Judge Becker, and I know that he has some words of wisdom for the committee. Thank you very much, Senator Hatch, for permitting me to go out of order. Chairman HATCH. Thank you for your kind introduction, Senator Specter. That is high praise Judge Becker, and, of course, I am very fa- miliar and aware of you, as well, and have equally high esteem for you. OPENING STATEMENT OF HON. ORRIN G.