WASHINGTON - New legislation that would affect how billions of dollars of debt claims are settled was on the brink of passage Thursday night as the Senate readied for a final vote.

The number of bankruptcy filings fell 5% last year to 1.2 million, but many experts and lobbyists on both sides of the debate have predicted that the slumping economy could send the number back up later this year. Credit extended, including unused credit lines and debt incurred to consumers, rose to nearly $3 trillion through Sept. 30 of last year.

"We need reform," said Clyde White, chairman and chief executive officer of Ouachita Independent Bank in Monroe, La. "I've seen it firsthand - people who have taken shelter in the bankruptcy code who didn't really deserve it."

The Senate bill that would make it harder for people to erase their debts in bankruptcy court must be melded with the House version - which passed March 1 - before arriving on President Bush's welcoming desk.

"It will be a victory after a long, hard battle," Edward L. Yingling, chief lobbyist for the American Bankers Association, said in anticipation of swift enactment.

Congress approved similar legislation last year but it was vetoed by then-President Clinton for being too harsh on working families.

The financial services industry has been pushing for changes to the bankruptcy code for four years, using its influence, manpower, and money liberally.

According to the Center for Responsive Politics, a watchdog group, the banking and retail credit industries contributed $9.2 million to federal candidates and political parties during 2000 election cycle. MBNA America, the largest credit card issuer, was the single biggest contributor to President Bush's campaign, having donated $237,675.

"I'm not surprised that President Bush can't wait to sign this bill - this is his crowd," Sen. Paul Wellstone, D-Minn., the bill's biggest critic, said during debate Wednesday.

There is at least one provision the President reportedly does not like, however. Secretary of State Colin Powell was quoted as saying Wednesday that the administration opposes the portion of the bill that would protect Lloyd's of London's American investors from having to pay their debts to the insurance company.

Sen. Russell D. Feingold, D-Wis., intended to offer an amendment before debate ends that would strike that provision.

Though the industry is pleased with the overall bill, financial services lobbyists said they will be taking a closer look at some approved, pro-consumer amendments.

These include a provision by Sen. Charles E. Schumer, D-N.Y., that would transfer liability for fair-lending law violations to companies that purchase loans from bankrupt high-cost lenders will be scrutinized as well.

The industry is also on alert for amendments that could hold up a House-Senate compromise.

Thursday the Senate agreed to an amendment from Sen. Herb Kohl, D-Wis., that would impose a $125,000 federal cap on homestead exemptions - an attempt to prevent wealthy debtors from shielding assets by pouring it into their houses.

Mr. Yingling said the ABA likes the provision but acknowledged it could be a deal-breaker. Last year, it was dropped from the final bill, he said.

Senate Banking Committee Chairman Phil Gramm, R-Texas, said Wednesday that he would not support a bill with Sen. Schumer's anti-predatory-lending amendment intact but said he was confident that it, and other problematic amendments, would be dropped during negotiations between House and Senate leaders.

Consumer groups and opponents have argued "reform" has come at too high a price for low- and moderate-income people and at no cost to lenders.

"Credit card issuers are brazenly lobbying for new bankruptcy restrictions at the same time their aggressive marketing and lending practices are pushing many families closer to the financial brink," said Travis Plunkett, legislative director for the Consumer Federation of America.

But bankers said abuses have to be curbed.

"Everyone feels there should be exemptions for their constituency; we just want it to be fair," Mr. White said. We loan money; we want to get it back. If we don't, there should be a good reason for it."

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