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May 25, 1999, Tuesday, Final Edition

SECTION: OP-ED; Pg. A14; LETTERS TO THE EDITOR

LENGTH: 425 words

HEADLINE: High-Income Debtors

BODY:

In the article "Bankruptcy Bill Goes to House Floor" [Financial, May 5], reporter Kathleen Day referred to the much-debated study funded by the American Bankruptcy Institute. Unfortunately, she neglected to mention that the credit industry is not alone in disputing the study's conclusions. In fact, many academics as well as the General Accounting Office have challenged the quantitative implications of the study. The probable degree of the impact of the means-testing provision of H.R. 833 is still being debated; however, there is a general consensus among most in the field that the study substantially underestimated its impact. While the GAO has not taken an official position on this issue, it has expressed a view that the study "double counted" transportation expenses, thus underestimating the impact of the provision. At the same time, the authors of the study themselves have twice reestimated the percentage of Chapter 7 debtors affected by the means-testing provision since the original publication of the study.

The revised estimate now stands at somewhere around 7 percent ($ 10 billion in repayments), much higher than the 3 percent ($ 4.7 billion in repayments) reported in the article. In terms of number of filings, this difference of four percentage points is equivalent to an additional 200,000 would-be Chapter 7 debtors who will be required to file Chapter 13 over the next five years.

I testified on behalf of the National Association of Federal Credit Unions to the House Judiciary subcommittee in March that approximately 10 percent of all debtors would be able to repay $ 14 billion, a figure arrived at independently by Ernest & Young as well. Thus, using the American Bankruptcy Institute study in the article woefully understates both the amount of potential repayments and the number of filers who would be shifted into Chapter 13.

Credit unions are nonprofit financial cooperatives, many of whose members are hard-working people of modest means. Therefore, much of the financial benefit of the debt repayment by debtors affected by the means testing will be directly shared by all their members. Credit unions strongly support H.R. 833 and the means-testing provision it contains. We believe the legislation will benefit tens of millions of American consumers, including credit union members, by reducing the number of Chapter 7 filings by high-income debtors with ample means to repay their debts.

LISA H. RYU

Staff Economist

National Association of

Federal Credit Unions

Arlington

LOAD-DATE: May 25, 1999