S9/' t'^^ ' ^ EXTENSION OF FAMILY FARMER BANKRUPTCY PROVISIONS HEARI! NG „ BEFORE THE ' ,—^^^ ; SUBCOMMITTEE ON - 1 ECONOMIC AND COMMERICAL LAW y^^ , OPTHE ^ COMMITTEE ON THE JUDICIARY HOUSE OP REPRESENTATIVES ONE HUNDRED THIRD CONGRESS FIRST SESSION ON H.R. 416 TO EXTEND THE PERIOD DURING WHICH CHAPTER 12 OF TITLE 11 OF THE UNITED STATES CODE REMAINS IN EFFECT; AND FOR OTHER PURPOSES MARCH 10, 1993 Serial N9. 3 t^i\ n \ 2333 BOSTON PUBLIC LIBRARY GOVERNMENT DOCUMENTS DEPARTMENT Printed for the use of the Committee on the Judiciary U.S. GOVERNMENT PRINTING OFFICE 67-706 CC WASHINGTON : 1993 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-041097-5 y M.:r «Y/ « I w>^ EXTENSION OF FAMILY FARMER BANKRUPTCY PROVISIONS^nT75r HEARING! aug'iTi^I BEFORE THE ' ^ '^^^ J J; SUBCOMMITTEE ON " ECONOMIC AND COMMERICAL LAW ijQ^^s, OF THE COMMITTEE ON THE JUDICIARY HOUSE OP REPRESENTATIVES ONE HUNDRED THIRD CONGRESS FIRST SESSION ON H.R. 416 TO EXTEND THE PERIOD DUREMG WHICH CHAPTER 12 OF TITIJ^: 11 OF THE UNITED STATES CODE REMAINS IN EFFECT; AND FOR OTHER PURPOSES MARCH 10, 1993 Serial N9, 3 1 APk n ^ 2333 BOSTON PUBLIC LIBRARY GOVERNMENTDOCUMENTS DEPARTMENT Printed for the use of the Committee on the Judiciary U.S. GOVERNMENT PRINTING OFFICE 67-706 CC WASHINGTON : 1993 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-041097-5 COMMITTEE ON THE JUDICIARY JACK BROOKS, Texas, Chairman DON EDWARDS. California HAMILTON FISH, JK.. New York JOHN CONYERS. JR.. Michigan CARLOS J. MOORHEAD. California ROMANO L. MAZZOLl. Kentucky HENRY J. HYDE, Illinois WILLIAM J. HUGHES, New Jereey F. JAMES SENSENBRENNER, JH.. MIKE SYNAR. Oklahoma Wisconsin PATRICIA SCHROEDER. Colorado BILL McCOLLUM. Florida DAN GLICKMAN, Kansas GEORGE W. GEKAS, Pennsylvania BARNEY FRANK, MaBsachusctts HOWARD COBLE, North Carolina CHARLES E. SCHUMER, New York LAMAR S. SMITH, Texas HOWARD L. BERMAN, California STEVEN SCHIFF. New Mexico RICK BOUCHER, Virginia JIM RAMSTAD, Minnesota JOHN BRYANT, Texas ELTON GALLEGLY, California GEORGE E. SANGMEISTER, Illinois CHARLES T. CANADY, Honda CRAIG A. WASHINGTON, Texas BOB INGLIS, South Carolina JACK REED, Rhode Island BOB GOODLATTE, Vin^nia JERROLD NADLER, New York ROBERT C. SCOTT, Virginia DAVID MANN, Ohio MELVIN L. WATT, North Carolina XAVIER BECERRA, California Jonathan R. Yahowsky. (ifneral Counsel i Robert H. Brink. Deputy (ieneral Counael Alan F. COFKKY. Jr., Minority ChiefCounsel SUBCOMMITTKK ON ECONOMU^ AND CoMMKKCIAL IwW JACK BROOKS, Texas. Chairman JOHN CONYERS, Jr., Michigan HAMILTON FISH, Jr., New York MIKE SYNAR. Oklahoma ELTON GALLE(;LY, California PATRICIA SCHROEDER, Colorado CHARLES T. CANADY, Florida DAN GLICKMAN, Kansas BOB INGLIS, vSouth Canilina HOWARD L. BERMAN, California BOB GOOI)1j\TTE, Virwnia RICK BOUCHER. Virginia CARLOS J. M(X)RHEAI), Cahfornia ROBERT C. SCOTT. Virginia DAVID MANN, Ohio MELVIN L. WATT, North Carolina Cynthia W. Mkaix)w, Counsel GhX>RCK p. SI,()VK:r, Assistant Counsel PKRRY AI'KIJJAUM, Assistant Counsel CaRRIK Bk;1)W>;LI,, Assistant Counsel PktvM J. Lkvinson, Minority Counsel (II) CONTENTS HKARING DATK March 10. 1993 ""[ TKXT OF HILI, H.R. 416 2 OPKNINC STATKMKNT Brooks, Hon. Jack, a Representative in Congress frnm the State of Texas, and chairman, Subcommittee on Kconomic and (Commercial l>aw 1 WITNKSSKS Plagge, JefT, executive vice president. First State Bank of Webster City, LA, on behalfofthe American Bankers Association G Underwood, Charles, attorney, Oklahoma City, OK 6 LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARINC Plagge, Jeff, executive vice president. First State Bank of Webster City, lA, on behalfofthe American Bankers Association: Prepared statement 9 Synar, Hon. Mike, a Representative in Congress from the State ofOklahoma: Statement 5 APPENDIX Matkkiai, Suhmittki) kok tmk Hkakinc Rk(X)ki) Plaggc, Jeff, executive vice president, First State Bank. Webster City. lA: Study entitled, "Bankruptcy Costs Under Chapter 12" R<)bt>rt N. Collender, Agriculture and Rural Economy Division, Economic Research Service, U.S. Department ofAgriculture, StaffReport No. ACES 9210 2f> (III) EXTENSION OF FAMILY FARMER BANKRUPTCY PROVISIONS WEDNESDAY, MARCH 10, 1993 HOUSK OK Rki'rkskntativks, SUUCOMMIITKK ON E(X)N()MI(' AND COMMKIU^IAI, LaW, COMMIITKK ON THK JUDK^IAItY, Washington, DC. The subcommittee met, pursuant to notice, at 11:11 a.m., in room 2141, Ravburn House Office Building, Hon. Jack Brooks (chairman ofthe subcommittee) presiding. Present: Representatives Jack Brooks, Mike Synar, Robert C. Scott, Melvin L. Watt, Hamilton Fish, Jr., Elton Gallogly, Charles T. Canady, and Bob Goodlatte. Subcommittee staff present: Perry Apclbaum, assistant counsel; Carrie Bedwell, assistant counsel; Catherine S. Cash, research as sistant; and Deloris L. Cole, ofTice manager; full committee staff present: Jonathan R. Yarowsky, general counsel; and Peter J. Levinson, minority counsel. OPENING STATEMENT OF CHAIRMAN IIROOKS Mr. Brooks. The subcommittee will come to order. The committee's other item of interest this morning is H.R. 416, to extend chapter 12 of title 11 of the United States Code for an additional 5 years. Chapter 12, scheduled to sunset October 1 of this year, allows farmers to reduce the amount of their secured debt to the credit value ofthe collateral while continuing in control of their farms. In exchange, the farmers are reouired to commit all of their disposable income to repaying their creaitors during a debt adjustment period. I commend the gentleman from Oklahoma, Mr. Synar, who has been the driving force to make sure that this important chapter of the bankruptcy laws continues to function efTicicntly and fairly. IThebill, H.R. 416, followsil (1) 103d congress H.R.416 1st Session Toextend the period duringwhich chapter 12 oftitle 11 ofthe United States Code remains in effect; and forother purposes. IN THE HOUSE OF REPRESENTATIVES January 5, 1993 Mr. S'i'NAR (for himselfand Mr. GraKDY) introduced the followingbill; which was referred to the Committee onthe Judiciary A BILL To extend the period during which chapter 12 of title 11 of the United States Code remains in effect; and for other purposes. 1 Be it enacted by the Senate and House ofRepresenta- 2 tives ofthe United States ofAmerica in Congress assembled, 3 SECTION 1. EXTENSION OFTIME PERIOD. 4 The first sentence of section 302(f) of the Bank- 5 ruptcy Judges, United States Trustees, and Family Farm- 6 er Bankruptcy Act of 1986 (Public Law 99-554; 100 7 Stat. 3124) is amended by striking "1993" and inserting 8 "1998". 2 1 SEC. 2. FILINGOF PLAN. 2 Section 1221 of title 11, United States Code, is 3 amended by striking "an extension is sul)stantially justi- 4 fied" and inserting "the need for an extension is attrib- 5 utable to circumstances for which the debtor should not 6 justly be held accountable". o •HR 416 IH Mr. Brooks. We look forward to hearing testimony from two dis- tinguished witnesses regarding the operation of chapter 12. We do have both witnesses here, Mr. Plagger Mr. Pi>ACOK. Yes. Mr. Brooks. This morning, we will ask the witnesses to appear jointly. I do not have an opening statement except for that that I have made. Mr. Fish, do you have an opening statement? Mr. Fish. Just very brief, Mr. Chairman. I also am pleased to welcome our witnesses to this hearing on legislation to extend the sunset on chapter 12 of the Bankruptcy Code. Today we will be receiving testimony from an attorney expe- rienced in family farmer cases and a banker knowledgeable about agricultural lending practices. In the 99th Congress, I had the opportunity to participate ac- tively in the congressional effort to enact Bankruptcy Code relief for family farmers facing fmancial distress. The new chapter 12 was designed to provide a flexible mechanism for family farmers to keep their farms and contribute a portion of future income to the payment of obligations. By making bankruptcy law more respon- sive to the plight of family farmers, we hoped to help farm commu- nities around the country. Our hearing today, together with the record of a similar hearing last year, gives the subcommittee an opportunity to assess how the family farmer bankruptcy chapter is working. In that connection, I ask the witnesses to ^we us their suggestions for possible amend- ments to chapter 12, including comments on H.R. 416's proposed change in Bankruptcy Code section 1221. This will assist us great- ly- Thank you, Mr. Chairman. Mr. Brooks. Thank you very much. Mr. Scott, any questions, any comments at this point, opening statements? This morning, I am asking the witnesses to appear jointly. To save time I would ask both ofyou to limit your statement to 5 min- utes. When you have completed your statements, the committee will address questions to both of you. Prepared statements will be made a part ofthe record, the complete statement. Our first witness is Charles Underwood, an attorney from Okla- homa City, OK. Mr. Undkrwooi). am Charles Underwood, Your Honor. I Mr. Brooks. Sit down and relax, you don't have to be sworn. We have absolute faith in you. Mr. ScoiT. Mr. Chairman, did Representative Synar have an op- portunity to speak? Mr. Brooks. He did, but he did not exercise that. Mr. Synar's statement follows:! I