Bankrupt debtors should be required to prove in court that they are unable to pay any of their obligations before judges erase their bills, industry representatives argued Tuesday.

"The consumer bankruptcy system this year will provide billions of dollars of relief to debtors without ever asking whether those debtors need that relief," said Michael F. McEneney, an attorney representing the National Consumer Bankruptcy Coalition, an industry group.

Mr. McEneney, testifying before the National Bankruptcy Review Commission, said Congress should amend the Bankruptcy Code to require debtors to prove that they cannot pay even a part of their bills before filing Chapter 7, which generally eliminates all their debts. Debtors should be forced to file under Chapter 13 instead, which requires some repayment.

According to an industry-sponsored survey, the average Chapter 7 filer could repay 33% of his or her nonhousing debt over 36 months. Stretching payments over 60 months would allow repayment of 55% of the outstanding debt.

Rising bankruptcies are becoming an enormous headache for the industry. Filings surged 26% in the 12 months ended Sept. 30, hitting an all-time high of 1.1 million, according to federal figures.

Consumer bankruptcy filings have more than tripled since 1980 and will cost lenders roughly $30 billion in 1996, according to industry estimates.

The National Bankruptcy Review Commission, chaired by Wisconsin attorney Brady C. Williamson, was established by Congress in 1994. The group is expected to vote in the spring on recommended changes to the Bankruptcy Code and issue a report on Oct. 20.

"Lenders want new legal tools to address these problems and they want them as quickly as possible," said banking lobbyist Philip S. Corwin.

He asked the commission to push for several changes in bankruptcy law:

*Expedite appeals to stem litigation.

*Define provisions, such as the proper length and minimum amount of a Chapter 13 repayment plan.

*Allow random audits of bankruptcy filers to prevent assets and income from being understated.

*Require debtors to undergo budgeting and financial management counseling before their debts are erased.

*Limit debtors' ability to shelter expensive homes and luxury assets from bankruptcy proceedings.

*Prohibit debtors from staving off creditors with repeated bankruptcy filings.

Consumer groups, which blame the recent rise in bankruptcies on aggressive credit card issuers, have opposed efforts to limit Chapter 7 filings or weaken debtor protections.

Charles Albright, chief credit officer at Household International, denied that lenders are to blame for the increase in bankruptcies.

"We do not indiscriminately offer credit to any consumer without regard to their ability to pay," he said. "We engage in an exhaustive process to make sure that we offer credit to those that can repay."

Lawrence Chimerine, a consultant for MasterCard International, said the increase in bankruptcies is a long-term trend of the past 15 years. "The impression that everybody is overspending is just not accurate."

He blamed corporate downsizing, health insurance cutbacks, and irresponsible borrowing for the rising credit problems. He also charged aggressive marketing by bankruptcy lawyers has removed the stigma from damaged credit records.

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