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Fight looms over bill to toughen bankruptcy rules

WASHINGTON -- A Senate fight lies ahead for legislation that would make it harder for consumers to erase their debts in bankruptcy court.

The measure was approved yesterday by the Senate Judiciary Committee. But Democrats have prepared amendments that would protect employees of bankrupt companies and exempt military personnel from new restrictions on filing for bankruptcy.

An even bigger hurdle could be a proposed amendment that would prohibit protesters from using bankruptcy to avoid paying court fines for blocking abortion clinics if the demonstrators knowingly violated the law. That issue has blocked the bankruptcy overhaul legislation from passage before.

''I will do everything I can to hold this bill up in every way," said Senator Charles Schumer, Democrat of New York, who wrote the clinic-protest amendment.

Senator Orrin Hatch, Republican of Utah, who was acting as committee chairman, told his colleagues: ''We know the [Senate] floor is going to be an ordeal."

The vote approving the bill was 12-5. Three of the committee's eight Democrats -- senators Joseph Biden of Delaware, Dianne Feinstein of California, and Herb Kohl of Wisconsin -- voted with the Republican majority.

Banks, credit card companies, and retailers have pushed since 1997 for a bill overhauling the bankruptcy laws. Consumer and civil rights groups and unions say the legislation is unfair to low-income working people, single mothers, minorities, and the elderly, and would remove a safety net for those who have lost their jobs or face mounting medical bills.

''Illness is bankrupting millions of Americans who've done everything right," Senator Edward M. Kennedy, Democrat of Massachusetts, said during the committee debate. ''They have worked hard, played by the rules, earned a good salary, saved their money, even purchased health insurance -- only to find that's not enough."

One of his proposals would exempt families facing bankruptcy due to burdensome medical expenses from the bill's new income-based test for those seeking to dissolve debts under Chapter 7 bankruptcy protection.

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