January 21, 2000

On Nov. 10, 1999, the Senate voted to override a 160-year-old Texas tradition: the right to keep one’s family home when facing bankruptcy.

The U.S. Constitution gives the federal government the power to establish bankruptcy laws. For more than 130 years, Washington has properly allowed states to determine how much personal and residential property should be exempt when assets are used to pay debts. Before Texas became a state, our constitution allowed farmers and homeowners to keep their homestead even during times of crop loss or financial hardship. The Supreme Court upheld the rights of states to do just this in 1902.

It is a terrible mistake for the federal government to consider reversing these precedents by seeking to substitute its will for the Texas Constitution and the laws of 10 other states.

The Senate bill does more than trample states’ rights. It is bad news for our farmers and senior citizens as well. By 2020, 54 million Americans will be over age 65. Because 81 percent of seniors own their homes, they are most at risk when creditors seize homes to pay debts.

The Senate action that I fought to defeat would let homeowners keep only $100,000 in home equity during a bankruptcy, but the median resale value of an existing home in Texas is $125,200. The average senior citizen in our state—especially those facing high medical costs—would be hurt if this legislation becomes law.

In addition, property values across the nation vary widely. The median resale price of a home in California is $215,000. In Nebraska, it’s $70,200. Clearly, the states should set their own levels of bankruptcy exemptions, not adopt a one-size-fits-all mandate from Washington. This is an area in which states’ rights should prevail.

I also oppose this legislation because it puts Texas farm families at risk. The federal government just spent nearly $9 billion to aid farmers hurt by low commodity prices and bad weather. In an ironic twist, should small family farmers in Texas have to declare bankruptcy under the law now being debated, they might have to give up their home or the farm.

Those seeking to overturn 132 years’ worth of states’ rights on this issue cite abuses by a very small number of wealthy people. But the office that oversees all bankruptcy cases stated that it "...did not find a single debtor who came close to the popular stereotype of homestead abuse...this is a relatively rare phenomenon."

We should pursue those who abuse the system—not everyone else. Good safeguards are to be enacted. For example, the bankruptcy bill now being debated requires that debtors must live in a state for at least two years before their houses can be exempt from bankruptcy proceedings. Not many people plan their bankruptcies 24 months in advance. And judges now have enough power to ferret out and punish would-be cheaters.

Banks and other lenders are sophisticated. They know better than to use a house as collateral in states that exempt homes from bankruptcy proceedings. Further, the law already has adequate laws to protect these lenders.

This matter that should be decided by Texans, not the federal government. I feel strongly about this because of the homestead exemption’s place in the Texas Constitution.