The House was expected late Wednesday to adopt a compromise consumer bankruptcy bill, and the Senate could act as early as today.
The compromise bill would combine the Senate and House approaches to needs-based bankruptcy, which means consumers who can afford to do so must repay at least some unsecured credit.
Court-appointed trustees would review each bankruptcy petition and decide within 10 days based on the consumer's income and living expenses whether the debtor should be required to repay some unsecured credit in Chapter 13 or eliminate it in Chapter 7. A consumer could challenge the trustee's decision before a federal bankruptcy judge.
Creditors also could ask a judge to force a consumer into Chapter 13 provided the debtor earns more than the median income. The judge is directed to grant the creditor's request if the debtor could afford over five years to repay either 25% of unsecured debt or $5,000. The only exception would be if consumers could prove that special circumstances would prevent them from having enough money to pay those debts.
"This report reflects a solid compromise that will work to reduce abuses of the consumer bankruptcy code while maintaining a strong safety net for Americans who legitimately need a fresh start," said Sen. Chuck Grassley, R-Iowa.
Sen. Grassley and Rep. George W. Gekas, R-Pa., said they expect the compromise to appease the Clinton administration, which has been threatening to veto the bill. The deal unveiled Wednesday also would:
Bar consumers from eliminating credit card debt used to buy luxury goods within 90 days of filing bankruptcy unless the consumer could show he did not intend to defraud the creditor.
Prevent consumers from using state homestead exemptions to keep debtors from seizing their homes unless they lived in the state for at least two years.
Give consumers who reaffirm debts the right to a hearing before a judge.
Block consumers from cramming down loans that are less than five years old. For loans of more than five years, consumer could treat this difference as an unsecured debt.
Permit credit card companies to drop consumers who do not use their cards for three straight months but prevent them from canceling cards solely because a consumer pays his full balance.