For better or worse, the use of personal bankruptcy to make a fresh start is about to be sharply curtailed.

Legislation moving through the Senate this week is, to backers, a long overdue tightening in an era of rising indebtedness and bankruptcy declarations.

But even as it promises to make it harder for debtors to "game the system," the policy change will fall heavily on Americans who face illness or sudden healthcare costs, which some experts say account for roughly half of personal bankruptcies.

The first overhaul of US bankruptcy law in a quarter century will mark a clear shift in the balance of power in a nation where credit is king. Overcoming opposition from Senate Demo- crats this week, the measure will mark a victory for President Bush and Republicans. But debate over the legislation is putting new focus on the challenges that ordinary Americans face at a time of job loss and soaring medical costs.

"Longtime unemployment is at its highest level ever," says Travis Plunkett, legislative director of the Consumer Federation of America. "This bill simply doesn't balance responsibility between families in debt trouble and the creditors whose practices have contributed to the rise in bankruptcies."

Drafted before 9/11 and big corporate bankruptcy scandals, the bill aims to make it harder for individuals to escape debt by declaring bankruptcy.

From 1983 to 2003, bankruptcy filings have increased 500 percent. To the bill's supporters, this represents a "bankruptcy tax" that other consumers pay in the form of higher penalty and late fees on their credit cards and higher down-payment requirements on auto loans. Banks and credit-card companies say many who declare bankruptcy are gaming the system and could afford to pay more.

At the heart of the proposed new law is the creation of a "means test" to help sort out those who can afford to pay back at least a portion their debts and those who cannot. Under the current system, individuals can file under Chapter 7, which allows many to keep some protected assets while discharging their debts.

Under the proposed new bankruptcy regime, individuals with incomes above the state median will have to make a case to a bankruptcy court to determine whether the filing should be dismissed for abuse of the system or converted to a repayment plan under Chapter 13.

Driving the debate are diverging views over why consumers get deeply into debt. Republicans and moderate Democrats who support the bill say the issue is one of personal responsibility and a need to restore the integrity of the bankruptcy system. Critics, including most consumer groups, say the real issue is the vulnerability of American families.

"It will affect people's ability to raise children, educate them and afford medical care," says Marc Abrams, a bankruptcy lawyer at Wilkie Farr & Gallagher in New York. "When bankruptcy was conceived, it was supposed to give an individual a fresh start. This is the end of the fresh start."

The measure comes on the heels of a tough winter, when consumers are paying high energy prices to heat their homes. In fact, according to Mark Wolfe, executive director of the National Energy Assistance Directors' Association, many people can no longer afford their utility bills. "We are hearing that energy bills are pushing more people into bankruptcy," says Mr. Wolfe. "We will work harder to get utility forgiveness programs approved."

The medical profession may be the most affected by the proposed changes in the law. According to a recent Harvard study between 46 percent and 54 percent of personal bankruptcies are the result of illness or medical bills.

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