Lenders Push for Reform as Bankruptcies Hit Record.

Last year was a record one for bankruptcy filings, but some members of Congress are continuing to push for legislation that would make it more difficult for consumers to extinguish debts by filing for bankruptcy protection.

In March, the House Judiciary Committee of the U.S. House of Representatives voted 18-11 to tighten bankruptcy standards, a move that set up a lopsided 315-113 victory for bankruptcy reform in the full House. The Senate has also been considering this legislation, though it has yet to pass the Senate in this session.

Supporters of the legislation say it will limit abuses of the bankruptcy system by people who can afford to pay all or some of their debts. In the home mortgage world, bankruptcy filings are often used as a tactic to delay foreclosure.

The Mortgage Bankers Association of America applauded the House for passing the bill. MBA chairman John Courson said that commercial mortgage servicers stand to benefit along with residential lenders. Under current law, commercial property owners with more than $4 million in debt can file for bankruptcy protection and freeze the foreclosure process without being required to either create a repayment plan or make post-petition payments on the property, the MBA said.

"The provision that removes the $4 million cap on single-asset bankruptcies is very important to MBA's commercial members. We strongly urge the Senate to pass this legislation that will protect lenders from the potential abuse of the nation's bankruptcy laws."

The bill also has strong backing from the credit card industry.

Opposition Mounts