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November 18, 1999, Thursday, 0 South Pinellas Edition

SECTION: NATIONAL; Pg. 3A

LENGTH: 618 words

HEADLINE: Long-term care measure attached to bankruptcy bill

BYLINE: VANITA GOWDA

DATELINE: WASHINGTON

BODY:
The Senate on Wednesday agreed to allow bankruptcy filers to claim long-term care costs as necessary expenses when calculating their monthly bills.

"Necessary expenses" receive priority over creditor payments when deciding what a debtor will pay monthly. Under current law, bankruptcy courts decide case by case whether a debtor's long-term care expenses receive priority. The measure, written by Sen. Russell Feingold, D-Wis., was attached to a bill that would overhaul the nation's bankruptcy rules for the first time in 20 years. Among other things, the bill would override Florida's homeowner exemption, which has made the state a haven for bankruptcies.

The Senate is expected to pass the full legislation by the end of the week.

Although the House passed a similar bill in May, it is highly unlikely the bill will become law this year. With Congress expected to adjourn after completing work on the budget, House and Senate negotiators most probably will not have time to write a final version of the legislation.

The purpose of the legislation is to press more debtors to file for bankruptcy under Chapter 13, which requires some repayment of debt. It would curb the number of filings under Chapter 7, which cancels debts after assets have been liquidated.

Last year, more than 78,000 Floridians filed for protection under consumer bankruptcy laws and 1,900 businesses filed for bankruptcy. Florida ranks 22nd in the nation for the number of bankruptcy filings.

The Feingold amendment would apply to the long-term care costs of any member of the debtor's household, or any member of the immediate family, such as parents, grandparents or siblings.

Opponents of the amendment argued that it goes too far and that the current approach prevents fraud.

The House version of the bankruptcy bill does not allow long-term care costs to be counted as necessary expenses.

For Floridians, the most controversial provision of the Senate bill would let debtors shield no more than $ 100,000 in home equity from creditors. Sen. Bob Graham, D-Fla., was a vocal opponent of the amendment, adopted last week, overriding a Florida state law that allows bankruptcy filers to exempt the full value of their homes when figuring their total assets.

Currently, states decide how much home equity can be sheltered from creditors. Florida and four other states, including Texas, allow the debtors to shield the entire value of their homes.

Supporters of the provision say it would stop debtors from defrauding creditors by buying lavish homes in Florida and Texas before declaring bankruptcy. But opponents argued that the provision would infringe on states' rights.

Graham and Sen. Kay Bailey Hutchison, R-Texas, failed to pass an amendment that would allow states to opt out of the $ 100,000 cap. The House bill would cap the home equity exemption at $ 250,000 but allow states to go higher.

Supporters of the overhaul bankruptcy reform bill say that even though it appears that it will not become law this year, the approval of both chambers bodes well for its passage next year.

The Clinton administration opposed the House version of the bill and has expressed strong reservations about the Senate version, in part because of an unrelated amendment passed last week that would raise the minimum wage, currently $ 5.15 an hour, by $ 1 over three years. The administration had wanted to phase it in over two years.

Samuel Gerdano, executive director of the American Bankruptcy Institute, said the bill's most important effect would be to alter the attitude toward debtors. It would be a "change in philosophy," he said, "from a law that is more forgiving to debtors to one that is not."

LOAD-DATE: November 18, 1999