September 27, 2005

Even we could have predicted this.

But not Dubya's administration or the congressional Republicans. Hell, they don't even want to acknowledge the problem now that it's staring them right in the face.

What are we talking about? The fact that the new bankruptcy law will make life miserable for survivors of hurricanes Katrina and Rita. The new law is much more restrictive than the current one, and it kicks in on October 17.

To understand what we mean, just put yourself in the place of a survivor for a moment: Your house is destroyed. Your job is gone. Your life is shattered. Federal aid helps you some in rebuilding, but you still have to take on a lot of debt to get things back in some sort of order. Your creditors start hounding you and you decide you need the protection of bankruptcy.

Don't hold your breath looking for relief, since the new bankruptcy law doesn't care why you went bankrupt. Just as the credit card companies on whose behest the new law was written don't care if you were pushed over the financial edge by long-term unemployment or a mountain of medical bills, they really don't care if you lost everything in a natural disaster.

So if you had a relatively high income before the hurricane hit, you can expect to be held in bankruptcy for several years longer than you would otherwise, so that you can use that high income to pay off your debts. Never mind that your highly paid job blew away with the wind. And you'll need to go through the mandatory credit counseling, too, even though a hurricane caused your financial problems, not bad management. Oh, and there's all those additional records the new law requires debtors to produce. Too bad they were destroyed by Katrina or Rita, isn't it?

Even worse, all of the effects of the new bankruptcy law will hit hurricane survivors long after the public stops paying attention to them. According to a study by University of Nevada professor Robert Lawless, the financial effects of a major hurricane don't peak until two or three years after the storm hit — after the infusion of federal disaster aid has dried up.

The obvious solution to the problem is to loosen the bankruptcy requirements for hurricane survivors and, in fact, US senator Russ Feingold has introduced a bill that would do just that. Under that bill, hurricane survivors could file for bankruptcy under the current, more relaxed law until October 2006, and they would be exempted from the credit counseling requirement.

Neither the White House or congressional Republicans are having any of this, though:

Representative F. James Sensenbrenner Jr. of Wisconsin, the chairman of the House Judiciary Committee, rejected the notion of reopening the legislation, saying it already included provisions that would ensure that people left "down and out" by the storm would still be able to shed most of their debts. Lawmakers who lost the long fight over the law, he said, "ought to get over it," according to The Associated Press.

A White House spokesman, Trent Duffy, said the administration "doesn't see a lot of merit" in calls to delay the law's effective date but was considering making allowances for hurricane victims.

That's pretty damn compassionate conservatism, isn't it?

Via NY Times.

Posted by Magpie at September 27, 2005 05:11 PM | US News | Technorati links |