Congress passed a new bankruptcy law which is proving to be a real lifesaver for people who are overwhelmed by debt.

The law gives bankruptcy courts much more power to help debtors pay off their depts without being harassed by creditors. Using the courts' Chapter 13 Wage Earners' Program, a debtor can stretch out payments to creditors over a three-year period without any interest or late-payment charges.

More important, no creditor can reposses a debtor's car, foreclose on a home or garnish wages. As a matter of fact, no creditor can even call the debtor if the debtor so wishes it. Some have piled up debts that couldn't possibly be paid off over three years -- even five years.

In this case, it's necessary to declare bankruptcy and wipe the slate clean so you can have a fresh start. The new law allows a debtor to have more personal property exempt from creditors' claims than was allowed under the old law. Unless state law prohibits it or offers better protection, you can now retain up to $7,500 equity in your home and up to $3,000 worth of other items "car, furniture, work tools and the like).

If your house has to be sold to pay off debts, then you could retain up to $7,500 from the sale to help you get stated with a rented home.

In the case of homes, some states such as California allow bigger exemptions than the one provided under the federal law. If your home is jointly owned -- husband and wife -- it may be difficult or even impossible for creditors to force a sale.

Under the new law, small family businesses are included and get more protection than they used to get under the old law. Co-signers on loans are also protected for the first time against harassment by creditors.

People who sent money in to mail-order houses or put money down as a deposit on a lay-away plan get new protection under the law. If the seller goes bankrupt, these consumer creditors get priority when money is disbursed.

To file for bankruptcy or a Wage Earners' Plan, you need a lawyer. The lawyer's fees will be supervised by the court. Under the Wage Earner Plan, your lawyer's fees can be paid off, bit by bit, over the three-year period.

Under the new law, each bankruptcy court (which can be found under U.S. government federal court listings in your phonebook) will have more counseling through an expanded trustee's office.

Through informal conversations with debtors, trustees might even suggest that some cases might not warrant bankruptcy or even a Wage Earner Plan.

Debtors may only need more personal budget and money management counseling. In this case, debtors can get excellent advice from a local office of the Consumer Credit Counseling Service.

These nonprofit organizations can help you set up a budget and a payment schedule for your debts. They can even work on local creditors to stretch out your debts and eliminate interest.

There's no charge for the counseling, but there might be a small charge to cover mailing costs if you're put on a monthly debt payment plan.

Q: Your column about buying a used "gas guzzler" instead of a new, compact car in order to save money on the purchase price upset me very much.

You literally endorsed larger cars with larger gas tanks. Our oil resourses are dwindling. We must switch to smaller cars that give the best possible mileage. Cost is immaterial compared to the need for conservation.

A: The cost is not immaterial, especially when someone turns in a perfectly good, big car with plenty of years use left in order to buy a much more expensive, current-model small car. Thousands of dollars are lost. According to the Energy Research Group at the University of Illinois, 150 million BTU's of energy are consumed in the production of a car. That's an equivalent of 1,000 gallons of fuel oil. By turning in a big car before its time, we are contributing to another form of energy waste.

Q: You recently wrote about the Uniform Gifts to Minors Act and how a gift should be made to a minor. You should advise your readers that the grantor of the gift should not name himself or herself as the custodian of the funds. If the grantor is also custodian and dies prior to the minor attaining majority, the funds placed in the custodian account by the grantor will be included in his or her estate for tax purposes. The correct procedure is to appoint the other parent as custodian. The funds will not be included in either estate.

A: Thanks for the tip.