White House Watch: Bankruptcy law may bring more grief to Katrina victims
With the new federal bankruptcy law scheduled to go into effect next month, consumer advocates worry that its requirements could deliver "a cruel second blow" to thousands of hurricane victims.
The Consumer Federation of America and the National Association of Consumer Bankruptcy Attorneys have called on Congress to delay "harsh new provisions" for those whose lives, finances, or businesses were affected by Katrina. In a statement, the groups said the delay should cover victims who were in financial trouble and planned to file for bankruptcy before the law's effective date, October 17, and others who were driven into bankruptcy because of the hurricane.
"The new law's harshest provisions that impose the biggest hurdles to bankruptcy," said Travis Plunkett, the CFA legislative director, "should be permanently waived for victims of Hurricane Katrina." CFA and NACBA urged Congress to waive a provision that would keep victims from filing for bankruptcy, a move that would provide some with a safety net. They also said that victims did not need credit counseling, as required by the new law, and that Congress should waive a provision making it easier for landlords to evict tenants in bankruptcy. In addition, they said, the law mandates burdensome new paperwork–tax returns, paycheck stubs, and other documents–and that, too, they said, should be set aside.
"These proposed changes to the bankruptcy law are the minimum first step that Congress should take to help Katrina's victims," said Brad Botes, a member of the NACBA board of directors.
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