BANKERS SAY: MAKE DEBTORS PAY MORE

July 2, 2004

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The American Bankers Association believes that about 10 percent of the 1.6 million Americans who filed for personal bankruptcy last year could and should have repaid their debts without bankruptcy. The banking industry supports H.R. 975, a bill approved by the U.S. House of Representatives that would make it harder to wipe out debts through bankruptcy. The legislation would steer many people away from chapter 7 bankruptcies, allowing them only to file chapter 13 cases. “The system is broken,” association spokesman Catherine Pulley said. “It needs to be fixed.”

The bill probably would stop many people who legitimately need to file for bankruptcy from doing so, countered Deborah Thorne, a professor at Ohio University who manages the Consumer Bankruptcy Project, a national group that studies personal bankruptcy and is critical of the legislation. “Yep, I could reduce the number of chapter 7 bankruptcies. All I have to do is deny people access to them,” Thorne said. Neutral observers predict the bill is going nowhere this year.