Debt law overhaul near

WASHINGTON — People will soon find it harder to dissolve medical bills and credit card debt in bankruptcy under a bill clearing its last major Senate hurdle Tuesday after negotiations with the House.

Senate passage later this week and anticipated action by the House next month would deliver to President Bush the second of his pro-business legislative priorities after Republicans increased their majorities on both sides of the Capitol in November.

Last month Congress sent Bush a law making it harder for injured plaintiffs to join each other and win multimillion-dollar class-action judgments against corporations.

Banks, credit card issuers and retailers have pushed for eight years for an overhaul of bankruptcy laws to force more people to repay at least part of the debt they owe. It nearly passed Congress in 2002, but it failed over a Democratic measure approved by the Senate and rejected by House Republicans to prohibit protesters from using bankruptcy to avoid paying court fines for blocking abortion clinics.

This year, with the Republicans' ranks in the Senate swelled by four members after last fall's elections, the abortion plank was rejected on a 53-46 vote. Later the Senate voted 69-31 to limit further amendments and close the debate and hold a final vote this week.

The bill sets up a new test to measure people's income and assets against the median income in their state.

Those with insufficient assets or income could still file a Chapter 7 bankruptcy, which erases debts entirely after certain assets are forfeited. Those with income 25 percent above the state's median income would be forced into Chapter 13, where a judge would then order a repayment plan.

According to current law, a bankruptcy judge determines under which chapter of the bankruptcy code a person falls.

Feeling a long-elusive victory to be close, Republican backers exulted and urged colleagues to move speedily through the remaining Senate deliberations.

"The sooner we finish work in the Senate and get the bill to the House, the sooner our bankruptcy system will be focused as it should be on helping those with real need, and less vulnerable to abuse by consumers who have the ability to repay their debts," said Sen. Charles Grassley, R-Iowa, the bill's primary author.