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March 4, 2000, Saturday, Final Edition

SECTION: OP-ED; Pg. A15; FREE FOR ALL

LENGTH: 420 words

HEADLINE: Winners in Bankruptcy

BODY:

Opponents of our bankruptcy reform bill lay the blame for the dramatic increase in bankruptcy filings on creditors who "entice"--as your Feb. 18 editorial put it--people into debt. While a high debt burden is certainly a major cause of bankruptcies, people are not "enticed" to spend money; they spend money on things that they want.

But as your paper accurately states, "the number of people filing for bankruptcy has soared from 330,000 in 1980 to 1.4 million in 1999." In the strongest economy in a generation, one in every 100 families declares bankruptcy. We believe that it is far too easy for high-income debtors to declare bankruptcy and walk away from their debts, even though they have the ability to pay a substantial portion of those debts.

Filing for bankruptcy should be considered a last resort. But according to a study by Prof. Michelle White of the University of Michigan, with just a little planning, the benefits of filling for bankruptcy--wiping out unsecured debt, "cramming down" the value of a new car loan and shielding assets--exceed the costs of doing so, particularly for high-income households.

The House bill we have sponsored is an appropriate response to the abuses now occurring. Our legislation would impose a "means test" for the use of Chapter 7 and its liquidation provisions. If a person can pay a significant portion of his debts, and if the person earns more than the median income--just under $ 56,000 for a family of four--the person can still get bankruptcy protection but would be required to use a Chapter 13 debt-repayment plan. Conversely, every low-income individual and family (those under the median figure) would automatically be given a fresh start.

The high number of bankruptcy filings makes it more difficult for individuals and families of low and modest income to obtain credit, as banks and other lenders pull back on risky loans. The estimated losses associated with bankruptcy filings cost the average American family more than $ 400 a year in higher costs, rates and fees.

The proponents of bankruptcy reform, which passed by an overwhelming veto proof majority of 313 to 108 in the House and 83 to 14 in the Senate, are not proposing to close the door to bankruptcy protection to anyone. We simply want to return personal responsibility to a system that has gone haywire.

--George W. Gekas,

Rick Boucher

and Adam Smith

Reps. Gekas (R-Pa.), Boucher (D-Va.) and Smith (D-Wash.) are cosponsors of the House Bankruptcy Reform Act.

LOAD-DATE: March 04, 2000