CREDITORS OBJECT TO OVERHAUL.

Byline: Marcy Gordon Associated Press 

Before a government panel has even issued its recommendations for reshaping bankruptcy laws, credit card companies, bankers and retailers are complaining the proposals would give an unfair advantage to debtors.

A federal judge on the sharply divided panel blasted the proposals Thursday, calling some of them ``an open invitation to abuse'' by consumers who owe money.

``The general tendency of these proposals is to encourage the filing of bankruptcy petitions,'' Edith Hollan Jones, a U.S. Court of Appeals judge in Houston, said in a telephone interview.

Jones recently filed a lengthy dissent to the draft report of the National Bankruptcy Review Commission, and three other panel members supported her views on personal bankruptcy. That meant the recommendations, which are to be submitted Monday to Congress and the White House, were endorsed by a slim 5-4 majority.

The three other dissenters were John A. Gose, Jeffery J. Hartley and James I. Shepard, all attorneys.

The number of Americans filing personal bankruptcies last year surged past 1 million for the first time, intensifying criticism that too many people take court protection from creditors too lightly. Experts are puzzled about why this has occurred during a strong economy.

The commission's majority recommendations include increasing home and personal property exemptions for calculating what a debtor owes, and forgiving all credit card debt incurred 31 days or less prior to filing for bankruptcy.

Jones said the latter proposal would encourage consumers to ``go on a shopping spree 31 days before bankruptcy.''

Credit card companies, bankers and retailers are unhappy with the proposals, which were previewed recently on the Internet and reported on in The Wall Street Journal on Thursday.

They would ``perpetuate existing flaws in the (bankruptcy laws) and will make bankruptcy an even more attractive option than it is today,'' said David Sandor, a spokesman for Visa USA Inc.