Reforming bankruptcy laws to crack down on borrowers could result in an average of 12% of filers repaying 74% of their debts, according to an Ernst & Young study released Tuesday.

By applying a needs-based formula to bankruptcy petitions in four major cities, Ernst & Young concluded that from 8% to 14% of Chapter 7 filers in the years 1991 to 1993 would have had to make repayments under Chapter 13- and could have repaid at least two-thirds of their "unsecured, nonpriority" debt over five years.

"A significant number of Chapter 7 bankruptcy filers are not entering into debt-repayment plans even when they could repay at least some of what they owe," said Tom Neubig, lead author of the study, which was funded by Visa U.S.A. and MasterCard International.

Creditors have been pushing Congress to require high-income borrowers to repay some of their debts. This so-called needs-based bankruptcy legislation is being championed by Rep. George W. Gekas, R-Pa., chairman of the House Judiciary subcommittee overseeing bankruptcy reform.

The Ernst & Young report is another in a series of studies, polls, and other Visa-funded volleys aimed at showing that borrowers should be held more responsible for their debts. Personal bankruptcies reached a record high of 1.3 million in 1997.

Consumer groups underplayed the findings.

"If they're talking about 8% to 14% of Chapter 7 filers being forced into repayment plans, it seems to me that the legislative tool should be a scalpel and not the hammer which H.R. 3150 represents," said Gary Klein, staff attorney at the National Consumer Law Center. Mr. Klein called the study's underlying data outdated and the percentage of filers required to repay "very small."

A nearly identical methodology was used in a study conducted last year by Georgetown University's Credit Research Center, which reached similar conclusions. But that study was criticized by the U.S. General Accounting Office for failing to take into account nondischargeable debts such as car loans and student loans.

Visa spokesman Mike McGarry sounded a pro-consumer theme in his remarks.

"The study underscores the importance of having a needs-based bankruptcy bill," Mr. McGarry said. "Responsible, bill-paying consumers are being hurt by those who can repay a portion of their debts but don't have to under the current system."

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