Bankruptcy is a last resort for financially troubled families. Debts mount. Creditors hover. Financial counseling founders. The Natchez area has followed a nationwide trend of increased bankruptcy cases during the past 10 to 15 years.

&uot;And we’re likely to see more if our economy turns down and we have more layoffs,&uot; said Ann Siddall, an attorney who handles bankruptcy cases as a part of her practice in Vidalia, La.

Most clients approach the status with fear and embarrassment, Siddall said. &uot;I’ve had people come in who wanted to hide. This was the height of failure to them. They are angry at themselves and they are embarrassed.&uot;

How does the law work?

The two best known chapters in the law are Chapter 7 and Chapter 13.

Under Chapter 7, the individual, family, partnership or corporation wipes the slate clean, clearing debts and giving the filer a chance at a fresh start.

Under Chapter 13, the individual or family is put on a strict budget and repayment plan, an option often very difficult for the financially failing person to complete, Siddall said.

Siddall and other attorneys who work with bankruptcy law are concerned about changes under consideration now by Congress.

The U.S. House and Senate have passed separate but similar versions of a bankruptcy reform law, and a conference committee will work out differences before the bill goes back to both houses and then to the president for signature.

Siddall fears the new law is less friendly to the needy filer and more friendly to big creditors such as credit card companies.

The bill as proposed by House members George W. Gekas of Pennsylvania, a Republican, and Rick Boucher of Virginia, a Democrat, would pose a means test for families, barring those who do not meet the test from opting for Chapter 7.

&uot;That is ridiculous,&uot; Siddall said. &uot;How are you going to take into account the single mother with five children, the family with a child who has special medical needs and all kinds of other special cases not covered under a means test?&uot;

Who benefits from new law?

Natchez attorney Eileen Maher also has concerns about changes in the law, saying the reforms are designed to the benefit of credit card companies and other big creditors.

Both attorneys believe credit card companies have made it too easy for individuals and families to accrue huge debts that pushes card-holders into bankruptcy.

Who is to blame? Proponents of the bill say too many wealthy people declare bankruptcy as a way to walk away from debt they could afford to pay.

Siddall said she has seen only a handful of clients during the past 18 years of her practice who might have been able to pay their way out of debt rather than declare bankruptcy. The others truly had no other recourse.

&uot;Sure, they used their credit cards, but most of them used them to live, to buy food, to take care of their children, to pay medical bills,&uot; said Siddall.

The large majority of clients she has served have experienced special circumstances, such as layoffs from jobs, unusually high medical bills or financial changes caused by divorce.

Maher agreed. &uot;The reforms could make it impossible for a lot of young families to get out of trouble,&uot;

Both Siddall and Maher cited one of the most troubling aspects proposed – removing child support payments as a priority claim, that is, one that must be paid in full before other claims are paid.

&uot;Mothers will have to line up with other creditors to get paid,&uot; Maher said.

Other concerns Siddall has are with a proposal that would allow a single creditor to block the reorganization plan under Chapter 13.

Another trouble spot, Siddall said, is a proposed 90-day waiting period for credit counseling, during which time she said creditors likely would take advantage of the time to go to court and have the filer’s wages garnished.

On the other hand …

Reps. Gekas and Boucher, in their plea for House support, acknowledged the need to provide an escape hatch for those who need the bankruptcy option.

&uot;While everyone agrees that the vast majority of bankruptcy filers are in desperate straits and that they need the protection of the bankruptcy system, under current law it is far too easy for wealthy debtors to declare bankruptcy and walk away from their debts, even though they have the ability to pay a substantial portion of those debts,&uot; they said.

Page Ogden, president and chief executive officer of Britton & Koontz First National Bank in Natchez, has seen first-hand some of the abuses the new law addresses.

&uot;This legislation has been debated for a long time,&uot; Ogden said. &uot;The bill’s intent is to create fairness in the bankruptcy system.&uot;

During his tenure as a banker in Louisiana in the 1980s, Ogden saw many wealthy individuals with great earning potential, who could shelter significant wealth ,claim bankruptcy.

&uot;These high-profile cases drive the price of credit up for everyone. Other consumers pay for this,&uot; Ogden said.

U.S. Rep. Ronnie Shows, a Democrat who represents Mississippi’s 5th District, agreed, pointing out the billion-dollar debt to American businesses each year as a result of bankruptcy cases filed by those who in truth could afford to pay their creditors.

&uot;In Natchez and across Mississippi we know that the margin of profits in our family businesses cannot sustain such losses,&uot; Shows said.

His office prepared this brief list of some provisions the new law could contain:

4An extension of time between Chapter 7 filings from six to eight years after prior discharge and to five years for Chapter 13 filings.

4A cap of $100,000 on home equity a debtor could claim for exemption. The cap would apply only to homes purchased in the two-year period prior to the bankruptcy filing.

4A change to make debt such as bank loans or credit card charges incurred to pay debts that normally must be paid after filing for bankruptcy non-dischargeable.

4Establishment of an expedited form of Chapter 11 for certain small businesses.

4Creation of a permanent Chapter 12, designed to give bankruptcy relief to farmers.

4Establishment of certain procedures relating to the bankruptcy of a health care business, including the disposal of patient records, prioritization of expenses and the appointment of an ombudsman to serve as a patient advocate.

The U.S. Chamber of Commerce is a proponent of the bill, citing the need for reform in dealing with wealthy debtors who abuse the system.

&uot;People who can’t afford to pay their debts have nothing to fear from bankruptcy reform, but those who can better start worrying,&uot; said Thomas Donohue, the organization’s president and CEO.