By U.S. Rep. Asa Hutchinson (Ark., 3rd District)

As our nation witnesses an epidemic of personal bankruptcy filings, I think it is clear that we need to reform our bankruptcy system.

Last year marked a record number of filings with nearly a million and a half – up 500 percent from 1980. The National Association of Federal Credit Unions estimates that if this trend continues, there will be 2.3 million filings by the year 2003.

Having lost its social stigma, bankruptcy "convenience" filings have become a tool to avoid financial obligations rather than a measure of last resort. A 1997 study revealed that one-in-four filed for complete debt relief despite the fact they still had the financial means to repay parts of their debt.

When individuals file for bankruptcy, they pass on their debt to other hard-working Americans through hundreds of dollars of hidden taxes. By some estimates, it takes 33 responsible consumers to pay for just one bankruptcy of convenience. The rise in hidden costs to the average household is estimated to be more than $550 per year.

That’s why I am supporting the Bankruptcy Reform Act of 1999 (H.R. 833). This legislation, which we will mark up this week in the Judiciary Committee, promises to restore personal responsibility by closing the loopholes which allow individuals who can afford to pay their debts to nonetheless pass on that debt to others.

H.R. 833 establishes a "means testing" requirement to ensure that a filer actually needs bankruptcy relief and, if so, provides only the amount needed. The system relies on a formula that includes a debtor’s income and obligations to determine exactly how much relief is needed. Those who can afford to repay portions of their debt would work out a repayment plan, under a Chapter 13 filing. The plan would be based on their ability to pay.

Although some individuals file for bankruptcy in order to skirt their obligations, there are many people who stumble into bankruptcy despite hard work and the best of intentions. We’ve all known a good person who has faced hard times. H.R. 833 provides relief for these individuals and offers a fresh start. They would file under Chapter 7 in order to obtain relief from much of their debt.

Debtors should not shoulder all the blame for the bankruptcy predicament we are currently facing. Banks and creditors who abuse the system should also be held accountable. Last year I supported legislation that passed the House and Senate and imposed new requirements on credit card issuers, including a mandate that credit card companies provide consumers with information about the time it will take to pay off their debts.

As your representative in Congress, I welcome your views and comments. Feel free to contact me during my frequent trips home to the 3rd District. Or you can reach me in Washington, D.C., at (202) 225-4301. My Washington office is 1535 Longworth House Office Building, Washington, D.C., 20515. My email address is Asa.Hutchinson@mail.house.gov.

Also, feel free to weigh in with your thoughts on this subject at my Electronic Town Hall Discussion Board, the only one of its kind in Congress.