PROPOSAL SEEKS CHANGE IN LAW TO MAKE REPAYMENT ATTRACTIVE.
With consumer bankruptcies soaring, federal law should be changed to channel more filers into debt-repayment programs, according to a draft proposal from a government advisory board.
The proposal, prepared by an arm of the National Bankruptcy Review Commission, is just beginning to circulate among bankruptcy specialists. However, experts predict it will add to an already lively debate about restructuring the U.S. Bankruptcy Code.
Creditors have been pushing to narrow the path to bankruptcy protection, arguing that overly lenient laws have contributed to the record 1.1 million personal bankruptcy filings in fiscal 1996. Advocates for debtors say lenders' own practices have ballooned the number of Americans in fiscal distress.
A commission aide stressed that the draft had not been adopted and was intended only to start public discussion as the panel marches toward an Oct. 20 deadline for recommending bankruptcy law changes to Congress.
Currently, debtors seeking bankruptcy protection can choose between two broad options.
Under Chapter 7, debtor's assets - except their house and car, among other things - are quickly liquidated. In return, the debtor's obligations are wiped out. Chapter 13 requires a structured debt-repayment plan over three to five years but allows a debtor to keep more assets.
The draft proposes incentives to make Chapter 13 more attractive to bankruptcy filers, including steps to clear a debtor's credit record more quickly than the 10 years allowed under current law.
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|Title Annotation:||Review; BUSINESS|
|Publication:||Daily News (Los Angeles, CA)|
|Date:||Mar 13, 1997|
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