The bill's "needs-based" approach will help distinguish between debtors who have virtually no assets or earning power and debtors with the ability to repay all or a portion of their obligations. "As a result, consumers will be protected from bearing the costs of those debtors who abuse the system," said Robert R. Davis, ACB's director of government relations.

"Community banks have a long history of working with borrowers who find themselves in dire financial straits," said Davis. "This legislation reinforces the ability of lenders and borrowers to work cooperatively in resolving financial difficulties before bankruptcy protection is sought, as well as during the bankruptcy process."

The legislation will also hold down the cost of home mortgage loans by once-and-for-all prohibiting federal district courts from reducing the value of secured mortgage loans in bankruptcy proceedings. The U.S. Supreme Court outlawed "cramdowns" in 1993, but the practice persists.

Finally, the legislation would clamp down on the abusive practice of repeat bankruptcy filings that make it more difficult and time consuming for lenders to collect from debtors who can afford to repay.