- The Washington Times - Sunday, September 11, 2005

Consumer protection advocates and lawyers have persuaded Democrats to try to delay by one year the implementation of tougher bankruptcy rules that make it more difficult to erase debt, arguing that Hurricane Katrina victims will be hurt by the new policies.

Bankruptcy is a foregone conclusion for many of the victims in the Gulf Coast region who have lost their homes, cars, other assets and perhaps their jobs. But filing for Chapter 7 bankruptcy will cost a lot more if they don’t file before Oct. 17, when the new regulations take effect, said Travis Plunkett, legislative director of the Consumer Federation of America.

“We’re particularly concerned about low-income folks who can’t pay the fees or for an attorney and also midincome who make more than the state’s median income but not much more,” Mr. Plunkett said.

Brad Botes, a member of the board of directors of the National Association of Consumer Bankruptcy Attorneys, said allowing the rules to go into force would be synonymous to “kicking hurricane victims when they already are down.”

“Unfortunately, the new bankruptcy law deliberately removes the flexibility and give in the old system that made it possible for attorneys and judges to work with people in disaster situations and find a way to meet their often quite dire needs,” Mr. Botes said.

At least one member of Congress, Sen. Russell D. Feingold, Wisconsin Democrat, will introduce legislation to delay the rules changes or grant the hurricane victims an exemption.

Mr. Feingold’s bill will help those forced into bankruptcy by the hurricane by providing a one-year grace period after the law takes effect, preventing payments from the Federal Emergency Management Agency or other disaster relief agencies from being treated as income and allowing expenses incurred as a direct result of a natural disaster to be treated as legitimate expenses.

The bill also would prohibit the dismissal of any bankruptcy cases involving hurricane victims.

But some Republicans say special provisions aren’t necessary.

Hurricane victims “are already covered under the new law,” said Jeff Lungren, spokesman for Rep. F. James Sensenbrenner Jr., Wisconsin Republican and chairman of the House Judiciary Committee.

Mr. Lungren said the law has a provision designed for bankruptcy forced by a natural disaster, “and obviously Katrina qualifies as a special circumstance.”

Delaying the rules changes, he said, would continue the problems that the bill was designed to fix, with debtors filing frivolous bankruptcies and letting other taxpayers foot the bill.

“It is a push by bankruptcy opponents to try and delay the implementation, more so than a good-faith effort to help Katrina victims,” Mr. Lungren said.


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