The Senate's overwhelming approval last week of consumer bankruptcy reform prompted only muted celebration because Capitol Hill operatives know the real hurdle to enactment remains ahead.

Though House and Senate bills share the same principle that consumers should have to repay part of their debts in bankruptcy if they can afford to do so, their philosophies of determining who should pay differ greatly.

Negotiators must resolve that fundamental disagreement and decide which, if any, of several pro-consumer additions to the Senate bill will be dumped to keep the support of banks and credit card issuers. Time is short, with only two weeks left before Congress is set to adjourn.

The industry favors the House's use of a formula based on income and living expenses to decide whether consumers must repay some unsecured debts in Chapter 13 rather than discharging them in Chapter 7. Under this system, debtors who can afford to cover their living expenses and repay all secured debt and at least 20% of unsecured debt over five years would be automatically barred from Chapter 7.

The Senate approach would require creditors to prove to a judge that the debtor could repay at least 30% of unsecured debt within five years. Unlike the House's approach, the decision requires a court hearing and ultimately relies on judicial discretion.

William P. Binzel, vice president of government relations for MasterCard International, predicted, based on conversations with key lawmakers, that the House approach would be selected because it would be simpler and less expensive to implement.

But the Senate side says it will not surrender quietly. After pledging in a news conference after the vote to work diligently for a compromise, Sen. Charles E. Grassley, R-Iowa, emphasized that the 97-to-1 victory margin in the Senate was more convincing than the 306-to-118 vote by the House in June and that the Clinton administration favors the Senate bill.

A Senate Judiciary Committee staff member suggested in an interview that the House would have to move in the Senate's direction to gain the President's signature. That could be done by preserving judicial review, as in the Senate bill, but requiring the judge to force debtors out of Chapter 7 if they can repay some debts. Debtors would be given some flexibility to convince the judge otherwise, however.

"That is the one the White House has indicated it would support," he said.

The committee staff member also predicted that the two sides would meet halfway on their repayment test by setting the threshold at 25% of unsecured debt.

Industry sources said they expected to knock out several amendments that would impose new burdens on creditors.

The Senate bill requires that credit card issuers disclose in each statement how long it would take to pay down the entire credit card loan when paying only the monthly minimum balance. Another would bar credit card issuers from canceling cards of customers who pay monthly bills in full or imposing annual fees on those customers.

However, the Judiciary staff member said Sen. Richard J. Durbin, D-Ill., who has been named a negotiator, would fight hard to keep in the credit card disclosure requirement and probably would prevail.

Still unclear is how the House and Senate might compromise on other pivotal issues, such as limits on reaffirmation agreements. Debtors use reaffirmation to remove a loan from bankruptcy by agreeing to repay it. The House bill would not change current law, which lets the parties record these voluntary agreements with the court. The Senate version would require court approval to prevent abuses of consumers.

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