Sept. 4, 2005 – When Congress passed a controversial bankruptcy bill back in April, it did not approve a proposed amendment that would have made it easier for victims of natural disaster to gain protection from creditors. Now, in the wake of the devastation caused by Hurricane Katrina, some lawmakers will ask their colleagues to reconsider.
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"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," wrote four US representatives in a press statement announcing their intent to reintroduce a proposal the proposal.
The Bankruptcy Abuse and Consumer Protection Act, which passed earlier this year, came under intense fire from advocates for low-income people because of provisions that will make it harder for the heavily-indebted to find debt relief through bankruptcy. The legislation, which takes effect in October, will force some debtors to set up a repayment plan, instead of having their debt wiped away. The Act was heavily supported by the credit card industry, which, according to the government watchdog group Center for Responsive Politics, spent more than $40 million in political fundraising and lobbying for the changes.
The four representatives -- Jerrold Nadler (D-New York), John Conyers, Jr. (D-Michigan), Mel Watt (D-North Carolina), and Sheila Jackson Lee (D-Texas) -- said the legislation they plan to introduce will "prevent new bankruptcy provisions from having adverse and unintended consequences for the hundreds of thousands now facing financial catastrophe by providing needed flexibility for victims of natural disasters in bankruptcy proceedings."
They did not elaborate on exactly what the provisions of the new legislation will entail.
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But Jeff Lungren, a spokesperson for House Judiciary Committee Chairman James Sensenbrenner (R-Wisconsin), told Reuters the bankruptcy law does not need to be changed. "The goal of this law was to insure that all bill-paying Americans, including victims of Hurricane Katrina, don't have to pay the debts of others that can afford to pay," he said.
