The world remains horrified at the tremendous destruction caused
throughout the Gulf Coast recently by Hurricane Katrina. An
unknown number of people are dead and thousands more are
homeless, jobless and completely destitute. It may be months
before the city of New Orleans is inhabitable again, and in the
meantime, most residents of the city will have little or no
income. This is a problem, as most people will continue to have
payments due for credit cards, auto loans and mortgages. A
number of people will probably be forced to file for bankruptcy
as their debts continue to pile up with no income to offset
them. Unfortunately for them, recently passed legislation may
make it difficult, if not impossible, for them to have their
debts wiped away through bankruptcy.
The Bankruptcy
Abuse and Consumer Protection Act, signed into law by President
Bush last April, makes it more difficult to file for bankruptcy
than in the past. New, stricter guidelines, which take effect
next month, require proof of income for six months prior to
filing as well as credit counseling. The documentation
requirements of the new law are fairly strict, and even hold
attorneys who represent bankruptcy filers liable for incorrect
information filed on their clients’ behalf.
These will
be huge obstacles for hurricane victims, many of whom have lost
their homes and contents. Along with their furniture, clothes
and other possessions, victims of the storm have also lost vital
paperwork outlining their debt obligations and income. Without
this paperwork, it will be virtually impossible to file under
Chapter 7 of the Federal code, which allows the courts to wipe
out most consumer debts. Instead, filers will have to file under
Chapter 13 and establish a repayment plan. This will undoubtedly
create an undue burden on thousands of largely uninsured
hurricane victims as they try to pay the bills for personal
belongings that no longer exist.
Congress has taken note
of this situation and a number of Democrats are attempting to
pass new legislation that will assist victims of Hurricane
Katrina with bankruptcy filings. It appears at present that no
Republicans are willing to support this legislation, so anyone
who has suffered a loss from the storm should try to gather
financial information together as best they can and prepare for
a long and expensive day in court
Charles Essmeier
http://www.articlesbase.com/finance-articles/bankruptcy-and-debt-new-law-may-hurt-katrina-victims-1360.html
