Only a fraction of American families declare bankruptcy each year, but the number is growing. Last year, reports show, about 1.3 million new bankruptcies came before U.S. courts, an alarming 75 percent rise from only 10 years before.

On the one hand, financial analysts and many lawmakers fear the growing number of bankruptcies are eroding the nation’s credit system and costing the average American family about $400 a year.

On the other hand, advocates for debtors see a declining economy and widespread company layoffs continuing to make bankruptcy the only way out for many families.

This session, Congress is nearing agreement on bankruptcy reform, both the U.S. House and Senate having passed similar versions of a bill which now is in conference committee and expected to move quickly into law and onto the president’s desk for his signature. The bill is not without controversy. Former President Clinton vetoed a similar bill during the last session of Congress, saying it was too hard on debtors. President Bush is expected to sign the updated bill even though he, too, has problems with some of the details in current versions, including a cap on homestead exemptions.

Six months from the date the president signs the bill, it becomes law. In the meantime, current law stands. Proponents of the bill insist it will not deny needy debtors the bankruptcy option.

In a memo to other congressmen, sponsors of the bill Reps. George W. Gekas, R-Penn., and Rick Boucher, D-Va., state the primary goals of the legislation as:

To restore the fundamental concept of personal responsibility in the bankruptcy system by requiring those who have the ability to repay to do so.

To ensure that only those debtors who have the ability to repay are targeted while those who lack this ability will receive their fresh start forthwith and not be affected by these reforms.

Opponents of the bill state otherwise, declaring it a tangled web of regulations that will make it more complex for the average filer and therefore more expensive.

Writing for the Wall Street Journal, David Wessel expressed fear that Congress is losing sight of the basic premises on which bankruptcy law has operated, first stating much the same principles as the bill’s sponsors.

&uot;At the loftiest level, bankruptcy law is about striking a balance between two deeply rooted, and sometimes conflicting, American principles: (1) those who can afford to pay their debts should, and (2) honest, overextended borrowers deserve a fresh start, not debtors’ prison.&uot;

Wessel goes on to say, however, that he fears bankruptcy today is more about &uot;consumer lenders – car dealers, credit-card issuers, furniture stores – jockeying for position to get what they can from families with little money left.&uot;

Additionally, Wessel said, the new legislation likely will make bankruptcy costlier to pursue and therefore will discourage some needy families from the option.

Ronnie Shows, a Democrat, who represents the Natchez area and the rest of Mississippi’s 5th District, voted for the bill, as did both of the state’s Republican senators.

The bill is necessary, Shows said, to stop bankruptcy abuse and to protect family businesses.

&uot;Studies tell us that 3 to 10 percent of all people who file for bankruptcy each year, or between 50,000 and 150,000 people, actually have the capacity to repay most of their debt,&uot; Shows said. &uot;This adds up to be close to $1 billion that America’s Main Street and small businesses are short-changed.&uot;

Still, Alan Reuther, legislative director for the United Auto Workers, warns that proposed changes will &uot;increase lenders’ leverage to pressure consumers to pay bills instead of going to court to void them.&uot;

Changes in the law, which has roots in the 19th century, merit a close watch.

Joan Gandy can be reached at (601) 445-3549 or by e-mail at joan.gandy@natchezdemocrat.com.