Quote: Nadler plans bankruptcy bill in Katrina's wake by Erik Engquist
Four Democratic members of Congress including Rep. Jerrold Nadler, D-Manhattan, plan to introduce a bill that would make it easier for victims of Hurricane Katrina to declare bankruptcy.
A bankruptcy reform law that passed earlier this year and takes effect on October 17 imposes new hurdles for people seeking to escape their debts through bankruptcy. Democrats had offered an amendment carving out an exception for victims of natural disaster, but it was defeated on a party-line vote.
The bill’s sponsors believe the measure has a better chance in Katrina’s wake.
“We are concerned that just as survivors of Hurricane Katrina are beginning to rebuild their lives, the new bankruptcy law will result in a further and unintended financial whammy,” Nadler and his colleagues said in a statement. “The new law is likely to have the consequence of preventing devastated families from being able to obtain relief from massive and unexpected new financial obligations they are incurring and by forcing them to repay their debt with income they no longer have, but which is counted by the law.”
The other sponsors are Reps. John Conyers, Jr., D-Mich., Mel Watt, D-N.C., and Sheila Jackson Lee, D-Texas. They plan to introduce the bill on Tuesday.
NEW YORK, Sept 1 (Reuters) - Hurricane Katrina is expected to cause a spurt of bankruptcy filings by storm victims -- and sweeping changes in U.S. bankruptcy laws may leave them even more strapped than they otherwise might be.
The Bankruptcy Abuse Prevention and Consumer Protection Act, which takes effect Oct. 17, includes a slew of rules and restrictions intended to curb abuse. These are expected to make it harder for individuals to file to keep creditors away, and more difficult for businesses to reorganize.
But the law wasn't directed at people who file because of catastrophes such as Katrina, in which people lost homes, businesses and perhaps months of regular paychecks. Katrina has caused widespread devastation in Louisiana and Mississippi and left New Orleans, population 462,269, virtually uninhabitable.
"People who are seriously affected by this hurricane are not going to be able to file bankruptcy by October 17," said Henry Sommer, co-editor of "Collier on Bankruptcy," a leading reference work. "They have more pressing things in their lives, like survival."
Michigan's John Conyers, the ranking Democrat on the U.S. House of Representatives' Judiciary Committee, and three other House members pledged to soon introduce legislation to provide flexibility for victims of natural disasters in bankruptcy.
Conyers' aides said legislation may be introduced next week, but aides to House Republicans said the law doesn't need amending because it only cracks down on abuse. Aides to Sen. Russ Feingold, a Wisconsin Democrat, said he might try to postpone the Oct. 17 implementation date.
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