Sen. Robert J. Dole (R-Kan.), who has been working for months to resolve the legal status of the nation's troubled bankruptcy courts, said yesterday that he would be willing to consider breaking last year's legislation into two bills to avoid the controversy over a provision that prevented passage last year.
The provision--heavily lobbied by the consumer credit industry--would give creditors the right to force some individuals declaring bankruptcy to repay most of their debts over a five-year period.
In a hearing yesterday of the courts subcommittee of the Senate Judiciary Committee, Robert B. Evans, general counsel of the National Consumer Finance Association, insisted that the provision is necessary because the law has allowed individuals to declare bankruptcy when they have income and can repay debts.
But Henry J. Sommer, of the National Consumer Law Center, charged that the change would "give creditors a wide array of methods to make consumer bankruptcy more difficult, expensive and intimidating, and to obtain leverage to force repayment of consumer debts."
Meanwhile, Assistant Attorney General Jonathan Rose urged the subcommittee to take quick action on the nation's bankruptcy courts, which have been operating in limbo since Dec. 24, when the Supreme Court refused to postpone its ruling that the entire system is illegal.
The problem has been brewing since last June 28, when the Supreme Court initially struck down the bankruptcy system. The court twice stayed its decision to give Congress time to act, but when Congress adjourned last month without being able to agree on a solution the court refused to provide another extension.
Meanwhile, at a time when as many as half a million new bankruptcies are expected in a single year, no one is sure what powers the bankcruptcy court does or does not have.
Richard L. Merrick, a bankruptcy judge from Illinois, agreed that in the interim the bankruptcy courts are being run on an "unworkable" basis, with no one sure what is or is not legal.
In its ruling last June, the Supreme Court found that a 1978 congressional revision of the system gave the bankruptcy judges too much authority without giving them the full protection of regular federal judges, who have life tenure and the guarantee that Congress cannot reduce their salaries.
Congress has a choice now of upgrading bankruptcy judges to full status or transferring a number of their functions to the already overcrowded U.S. District Courts.
The Judicial Conference of the United States, the top policy-making body of the federal courts, has urged that Congress leave the bankruptcy courts in their inferior status with bankruptcy "administrators" to handle the everyday questions and 115 new federal judges to handle the more significant problems.