WASHINGTON -- Bankers seeking reforms in the bankruptcy code were heartened this week by the introduction of a legislative package by Rep. Mike Synar, D-Okla., a senior member of the House Judiciary Committee.

Rep. Synar's bill is the first tangible sign that the House could take up bankruptcy legislation, following the earlier clearance of a bill by the Senate Judiciary Committee for consideration by the full Senate.

"It is a critical event that we needed to have happen," said Philip Corwin, director of operations and retail banking for the ABA. Given the House and Senate actions, "there is a meaningful chance of getting bankruptcy reform passed later this year."

One provision in the Synar bill actively supported by bankers would encourage the use of Chapter 13 proceedings, in which debts are restructured. Lenders have been concerned about increased use of Chapter 7 filings, in which debts are discharged.

The Synar bill would prohibit bankruptcy judges from reducing the principal amount of first mortgages and would limit their ability to reduce second mortgages.

Courts would be permitted to deny bankruptcy protection for anyone found to have committed credit card fraud. The bill would also increase the amount of time lenders have to recover a motor vehicle after a filing to 20 days, from 10 under present law.

A spokesman for Sen. Howell Heflin, D-Ala., a sponsor of the Senate bankruptcy package, called the Synar bill a "a step in the right direction that needs to be taken if bankruptcy reform is going to take place."

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