Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, April 23, 1994                   TAG: 9404250139
SECTION: BUSINESS                    PAGE: A-4   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

SENATE BILL EASES BANKRUPTCY

The bill, adopted 94-0 late Thursday night, also would give overworked bankruptcy judges new administrative tools to speed the disposition of cases.

In one of the most significant changes, the bill raises the debt limit on individual bankruptcy filings under Chapter 13 of the bankruptcy law from $350,000 to $1 million.

Chapter 13 allows debtors, with court approval, to take as long as five years to pay off their debts, as opposed to Chapter 7, which requires debtors' property to be sold and the proceeds distributed to creditors.

Creditors often prefer Chapter 13 because they ultimately receive more of the money due them; debtors also like it because they can avoid a traumatic liquidation of most of what they own.

``This code should reinforce the balance between the interests of the creditor and the debtor while ensuring strong commercial markets for both the consumers and businesses of America,'' said Sen. Howell Heflin, D-Ala., chairman of the Senate Judiciary subcommittee on courts and administrative practice.

Last year, 918,734 bankruptcies were filed in federal courts, nearly three times the number filed just eight years earlier.

In a change much sought by lenders, the legislation would prevent ``cramdowns,'' which allow bankrupt homeowners to reduce their mortgage payments when the market value of their home has fallen below the loan amount. It would sharply limit, but not entirely eliminate, cramdowns for home equity loans and second mortgages.

However, it also would pre-empt state laws to ensure debtors the opportunity to retain their homes, up to the point of a sheriff's sale, by paying foreclosure debts and resuming mortgage payments.

Bankrupt debtors also could not default on their taxes by using a credit card to pay them. And safeguards preventing debtors from avoiding alimony, child support and government fines would be enhanced.

The Senate and House passed similar bankruptcy legislation in 1992, but no action was taken to meld the two versions.

Several bankruptcy reform proposals have been introduced in the House since then, but Rep. Jack Brooks, D-Texas, chairman of the House Judiciary Committee, hasn't indicated whether he intends to have his panel act on any