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July 5, 2000, Wednesday, FINAL EDITION

SECTION: EDITORIAL PAGE, Pg. 2B

LENGTH: 620 words

HEADLINE: CREDIT INDUSTRY TRYING TO BUY BANKRUPTCY 'REFORM'

BYLINE: JEFFREY FREEDMAN -

BODY:

Bankruptcies are on the decline. Last year, filings were down 8.5 percent from 1998. They continued to fall in the first quarter of 2000. Why, then, is Congress pushing bankruptcy "reform" legislation?

Money, and plenty of it. The credit industry has spent more than $ 70 million on political contributions and lobbying efforts to get a bankruptcy reform bill enacted. It's working. Congress is considering legislation that will allow credit lenders to squeeze even more money out of those who have little left to give.

Under the proposed changes, only certain approved debtors may file Chapter 7, where most unsecured debt is forgiven. The rest will be forced into Chapter 13, where the filer pays a portion of the debt through a repayment plan, which is often unrealistic and unaffordable.

Who will be allowed to file Chapter 7? If the bill passes, a rigid means test will determine if a debtor qualifies. Under its budgeting rules, if a family of five has a surplus of $ 50 to $ 100 per month, they will not be allowed to file Chapter 7. Some debtors may not qualify for any type of bankruptcy.

Under the proposed law, much credit card debt will not be forgiven in bankruptcy. If a family receives medical treatment 90 days before filing, no matter how poor the family is, those medical bills will not be forgiven. Furthermore, credit card debts will compete with child-support and alimony obligations.

The proposed law will require people to pay for credit counseling before filing bankruptcy, often resulting in backlog, garnishments, repossessions or foreclosure. New auto loan provisions will cause some people to lose vehicles needed to get to work.

Some of this might make sense if the present system were truly being abused. But in most cases, it is not. As an attorney who has practiced consumer bankruptcy law in Western New York for over 20 years, I have seen firsthand what leads people to the doors of Bankruptcy Court and how they feel about it when they get there.

Few bankruptcy filers are the uncaring "deadbeats" they are often portrayed to be. Sixty percent of filers have had a job interruption of some kind. Twenty percent are divorced, twice the rate for the general population. Only 29 percent of women receive all court-ordered support due them, so it is no surprise that filings by women now comprise 55 percent of all personal bankruptcies. Twenty percent of filers have medical problems. Many other filers are "house poor" -- trying at all costs to hold on to a home they cannot afford.

Meanwhile, credit card debt and other unsecured loans exceed $ 610 billion. Credit lenders keep on lending, with little regard for the consumer's ability to repay. In fact, credit solicitations appear to be targeted at those who can least afford it. Lenders know that it will take 34 years to pay off a $ 2,500 credit card debt at 18 percent interest if the debtor only makes the minimum payments required.

But lenders have nothing to worry about. The proposed legislation will go easy on them, failing to hold them accountable for their irresponsible marketing and lending practices.

Passage of the bankruptcy reform bill will prove once again that money can indeed buy happiness -- provided the buyer has millions to spend on special-interest legislation. JEFFREY FREEDMAN is a senior partner with Jeffrey Freedman Attorneys at Law.

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GRAPHIC: JEFFREY FREEDMAN

LOAD-DATE: July 7, 2000