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The bankruptcy bill passed last week by the U.S. Senate is not only a bad deal for consumers and their attorneys, but it also adds to the burden of bankruptcy judges. Heavily backed by the credit card industry, S. 256 purports to take aim at bankruptcy abuses by imposing a strict “means test” for the discharge of debt. Yet judges already have the ability to deny a debtor the discharge of debt under Chapter 7, and they do so when substantial assets are available to pay creditors. The means test, based on income and expense standards designed by the Internal Revenue Service, will increase the number and complexity of hearings and make the process more difficult, time-consuming and costly for debtors, many of whom are elderly and driven to bankruptcy by medical bills. The bill does authorize 28 new bankruptcy judges, though nearly twice that number was requested by the Judicial Conference of the United States. It’s true that bankruptcies have soared to nearly 1.6 million last year, and some high-income debtors can wipe away their debts by filing for bankruptcy, as the bill’s sponsors argue. But the bill does not close existing loopholes that can shelter valuable assets such as expensive homes and cash in “asset-protection trusts.” Debtors’ attorneys complain that provisions in the bill will open them up to sanctions over factual inaccuracies in bankruptcy petitions, and that they will have to certify the debtor’s ability to make repayments if debtors must maintain liability for some debts. This may make it harder for low-income debtors to find attorneys, since these cases may not generate enough in fees to warrant the risk. In a letter last month to senators Patrick Leahy, D-Vt., and Arlen Specter, R-Pa., 92 bankruptcy and commercial law professors argued that the rise in bankruptcies is in part the result of credit card companies becoming much more aggressive in marketing their cards to riskier borrowers-at great profit. The credit card industry should not be rewarded for this with increased leverage over consumers.

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