Ramblings of Silver Blue

01 Sep

America: Let’s Screw The Victims

As if natural disaster isn’t enough to break someone’s will, leave it to the changes submitted to the Bankruptcy code to take effect to finish destroying lives.

New bankruptcy law a problem for Katrina victims

By Jonathan Stempel
Thursday, September 1, 2005; 6:41 PM

NEW YORK (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 October 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 October 17 implementation date.


For now, New Orleans’ federal bankruptcy court is closed indefinitely, and referring emergency filers to the bankruptcy court in Baton Rouge, which is Louisiana’s state capital. Courthouses in Alexandria, Lake Charles, Monroe, Opelousas and Shreveport are also taking emergency filings.

But there may be a reprieve soon.

A spokesman for the Administrative Office of the U.S. Courts said officials there are asking Congress to let federal district and bankruptcy courts in New Orleans move temporarily, perhaps to Baton Rouge or Shreveport.

Bill Gates, deputy in charge of the Alexandria office, said there is a “very good likelihood” that by late next week a satellite bankruptcy court office will open in Baton Rouge.

“Once they get that opened, they’ll essentially be running as close to normal as possible,” said Gates.

Courthouses also remain closed in Jackson, Mississippi and Mobile, Alabama.


Under the new bankruptcy law, individuals who file will face extra paperwork and costs, and many will be subject to a “means test” that will force them to pay off at least some debts. Businesses will face new time limits that could force them to make key business decisions before they’re ready.

Some lenders are trying to accommodate Katrina victims already. Ford Motor Co.’s finance arm on Thursday said it will let customers defer three loan payments, up from the two it offered on Tuesday. And banks such as Wachovia Corp. are relaxing some fees and providing loan assistance.

“Banks have a lot of experience dealing with debtors in difficulty because of natural disasters,” said Wayne Abernathy, an executive policy director at the American Bankers Association. “The first focus will be on making sure people can meet their immediate financial needs.”

Still, Lynn LoPucki, a bankruptcy law professor at the University of California at Los Angeles, said it’s hard for debtors to get individualized attention in an event of Katrina’s magnitude. “There are simply too many,” he said.

(Additional reporting by Susan Cornwell and Peter Kaplan in Washington, D.C.)

Thanks to Neil for sending this on

One Response to “America: Let’s Screw The Victims”

  1. 1
    Gemini Blue Says:

    […] When what to my wandering eyes should appear, but this post over at Silver Blue’s. Seems that he has a friend, Neil, who sent the article on how the suffering of Hurricane Katrina victims isn’t enough. […]

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