Washington – Some Democratic lawmakers and consumer groups urged Congress on Wednesday to give victims of Hurricane Katrina relief from the new bankruptcy law that will make it tougher for people to wipe out their debts.
The new bankruptcy law, schedule to take effect Oct. 17, requires people filing for bankruptcy to provide six months of paperwork about their income and expenses, including pay stubs and tax statements, and also attend credit counseling.
It will be impossible for Katrina victims to meet these requirements, said Brad Botes, director of the National Association of Consumer Bankruptcy Attorneys and principal in Bond & Botes, a law firm with offices in areas affected by Katrina.
Botes said the new law will force bankruptcy judges to ignore the plight of those devastated by the hurricane, sending them deeper into debt with no chance for a new financial start.
“What we really need to do here is avoid kicking hurricane victims when they already are down,” he said.
Some Democrats on the U.S. House Judiciary Committee say they plan legislation that would give Katrina victims relief from the new law. Sen. Russ Feingold, D-Wis., said he will introduce a similar bill in the Senate.
President Bush earlier this year signed the legislation after a long campaign by credit-card companies and other financial institutions to make it tougher to declare bankruptcy. Consumer groups and some Democrats in Congress opposed the bill.
Rep. John Conyers, D-Mich., said Wednesday that 34 House Democrats have agreed to co-sponsor his bill, which would allow leniency for victims of natural disasters, including Katrina. No Republicans have agreed to support the measure, he said. Republicans control the Congress.
The law has exceptions for special circumstances, such as military leave, but not for natural disasters.
Travis Plunkett, legislative director of Consumer Federation of America, said financial help for Katrina victims goes beyond the new bankruptcy law. He said credit-card companies and other financial institutions should bend over backwards to be lenient to Katrina victims.
