Repayment plans "are pretty fragile documents to begin with, but they're going to get a lot more fragile under these conditions," said Ronald Barliant, a former bankruptcy judge from the northern district of Illinois in Chicago.
"It's going to take away of lot of the incentives" for people to enter repayment plans, said David W. Houston III, a bankruptcy judge from the northern district of Mississippi in Aberdeen.
Overhaul proponents respond to such criticisms by contending that the current bankruptcy system is rife with fraud and abuse and is stacked against creditors. Many proponents are deeply scornful of bankruptcy judges, who they charge have let the system spin out of control.
"They're part of the ... problem," declared Jeff Tassey, a Washington lobbyist who heads the coalition of credit card companies, banks and others that has spearheaded the overhaul drive.
"They're not real judges, not Article 3 judges," Tassey said. He was referring to Article 3 of the U.S. Constitution, under which judges in the regular federal court system are appointed for life. Bankruptcy judges are appointed under Article 1 to 14-year renewable terms.
As matters now stand, financially distressed Americans generally have two options in bankruptcy. They can file a Chapter 7 case, in which they forfeit most of their assets in return for cancellation of most debts and a debt-free "fresh start." Or, they can file a Chapter 13 case, in which they get to keep most of their property but must agree to repay a portion of their debts over a period of time.
Some advocates for changing the system have contended that these provisions should be rewritten to address a kind of moral laxness in bankruptcy practices.
"When you have seen a system that has gone from a few hundred thousand cases to 1.5 million last year -- most of that increase during the fat years of the Clinton administration -- you must conclude something is not right," said Edith H. Jones, a federal appellate court judge in Houston who served on a blue-ribbon panel to review bankruptcy law in the 1990s and is widely believed to be seen as on President Bush's short list for a position on the Supreme Court.
"People have been encouraged to see bankruptcy as an easy way out of uncomfortable situations," Jones said.
Overhaul proponents have also said that the new measure is so narrowly cast that it would affect no more than 15% of bankruptcy filers.
