Hurricane Katrina survivors hit by bankruptcy code

Changes to the US Bankruptcy Code, which come into force on 17 October, will
make it harder for Hurricane Katrina survivors to wipe out their debts.

The changes were passed by Congress earlier this year in an attempt to
reverse the record levels of personal bankruptcy filings, which reached 458,597
over the three months to June.

The new code contains stricter documentation requirements, including a means
test intended to identify people who are still able to repay their debts.

However, the Consumer Federation of America says the government should not be
‘throwing up new barriers to bankruptcy’ at a time when hurricane victims are
trying to get back on their feet.

Democratic senator Russ Feingold told the BBC that people driven to
bankruptcy by losses from the hurricane damage should not become ‘test cases’
for the new code. He is proposing to give them another year under the old law.

He said many residents of the affected areas have suffered ‘catastrophic
losses’ and will most likely have to file for bankruptcy ‘through no fault of
their own’.

‘Bankruptcy lets them get a fresh start. And a fresh start is what so many of
the relief efforts going on are all about,’ he told the Senate last week.

He said victims of natural disasters such as Hurricane Katrina should be
exempt from the means test.

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