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WASHINGTON-Personal bankruptcy filings continued to burst through previous calendar year records in 2003. Credit unions and others are hoping they can successfully shuffle the Bankruptcy Abuse Prevention and Consumer Protection Act of 2003 (H.R. 975) through the legislative process to help curb abuse of the system while maintaining protections for those truly in need. Year-end numbers provided by the Administrative Office of the U.S. Courts showed bankruptcy filings in 2003 at 1,660,245, a 5.2% increase over the 12-month period ending Dec. 31, 2002. However, the year-end 2003 numbers did not reach the historic high for a 12-month period for fiscal year 2003, ending Sept. 30, 2003, in which 1,661,996 people filed for bankruptcy protection. Personal bankruptcy filings continued to dominate bankruptcies, climbing from over 1.5 million in 2002 to more than 1.6 million at year-end 2003. On the positive side, business filings declined for the second year in a row from 38,540 to 35,037. Bankruptcy filings in the last quarter of 2003 fell 0.5% to 393,348 from the same period in 2002. Lawmakers, credit unions and other lenders are continuing their drive to get H.R. 975, which they have been working on for eight years now, to the president’s desk this year. The bill would establish a means test for more accurately placing debtors in the appropriate chapters, mandate financial education prior to filing for bankruptcy protection, and permit credit union members to voluntarily reaffirm their debts to their credit unions. Thirty-one Republican senators recently signed on to a letter supporting the swift passage of the bill, which has been held up in the Senate by Senator Charles Schumer’s (D-N.Y.) interjection of the abortion issue into the bill. He has repeatedly introduced an amendment to prohibit those who are convicted of violence against an abortion clinic from filing for bankruptcy to avoid fines stemming from their illegal activities. The leadership’s concern is if they allow Schumer to introduce his amendment this session, others will want theirs given consideration as well, NAFCU Director of Legislative and Political Affairs Brad Thaler said. “The leadership is still trying to find ways to work through the issue and move the bankruptcy reform bill forward in the Senate,” he explained. The Republican senators’ letter, addressed to Senate Majority Leader Bill Frist (R-Tenn.), expressed the senators’ “desire for the expedited consideration of H.R. 975.” Both Frist and Senate Minority Leader Tom Daschle (D-S.D.) have previously expressed support for bankruptcy reform. “This long overdue and much needed legislation has passed the House and Senate repeatedly, with large bipartisan majorities,” the senators’ letter read. “Accordingly, the opposition to the bill by a small minority of Senators should not prevent the Senate from moving forward.” It explained that studies have shown that billions are lost every year due to abuse of the bankruptcy system. “Surveys from the last election revealed that voters of all parties, and from all segments of society, overwhelmingly support bankruptcy reform,” the letter continued. “The responsible majority of voters want bankruptcy available to those who need it. However, they also believe that those who can afford to repay a meaningful amount of debt should be required to do so. We must pass this modest reform that moves the system closer to what most voters expect.” The signatories to the letter, whom CUNA worked to obtain, included Senate Banking and Judiciary Committee members Wayne Allard (Colo.); Bob Bennett (Utah); Jim Bunning (Ky.); Mike Crapo (Idaho); Elizabeth Dole (N.C.); Mike Enzi (Wyo.); Chuck Grassley (Iowa); Orrin Hatch (Utah); Lindsey Graham (S.C.); Jon Kyl (Ariz.); Mike DeWine (Ohio); John Cornyn (Texas); Rick Santorum (Pa.); Jeff Sessions (Ala.); John Sununu (N.H.); and several others. “I don’t anticipate a similar letter from the Democrats,” CUNA Vice President of Legislative Affairs and Senior Legislative Counsel Gary Kohn said. “They’ve done that in the past, but I can tell you that there has been movement on the Democratic side based on a lot of the meetings we’ve had behind the scenes as well.” The bankruptcy legislation is aimed at forcing more people who are able to pay back part of their debts to do so by filing for Chapter 13 protection, where debts are partially or fully repaid in installments, rather than Chapter 7, where exempt property is kept but other items are sold off to repay creditors. Other than Chapter 11 filings, for business reorganization, other categories of bankruptcies increased. Chapter 7 filings rose 6% to 1.18 million at year-end 2003, up from 1.11 million at year-end 2002. Chapter 13 filings increased 3.8% to 473,137 in calendar year 2003. Chapter 12 (family farm) bankruptcy filings jumped a whopping 46.8% from 485 to 712 as of Dec. 30, 2003, while Chapter 11s fell by nearly 2,000 to 9,404. What Bankruptcy Judges are Doing The number of filings per judgeship has grown with the number of bankruptcy filings. Ten years ago, each judge handled 2,685 a year. In 2003, that number jumped 90.8% to 5,124. But, no new bankruptcy judges have been added since 1992. H.R. 1428, which would add 36 new judges, is pending in the House. The Senate already passed its version (S. 878) during the first session of the 108th Congress. Bankruptcy judges themselves are working to reduce their caseload as well by going out and warning young consumers of the problem of taking on too much debt. “Many of the debtors who come into bankruptcy court admit that if someone had warned them about the pitfalls, they would not be in that predicament,” Chief Judge John Ninfo of the U.S. Bankruptcy Court for the Western District of New York said. Bankruptcy Judge Thomas Stinnett, who chairs the Public Education Committee of the National Conference of Bankruptcy Judges, noted that while credit card companies solicit college students at registration, ultimately people are responsible for their own actions. NCBJ is sponsoring an outreach program to educate high school and college students of the consequences of excessive debt. In school courses on handling credit responsibly are included in the curriculum. [email protected]

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