Congress Considers Katrina Impact
Congress moved quickly to enact legislation authorizing federal courts, including bankruptcy courts, to hold court sessions outside their usual places of business. The law is called the Federal Judiciary Emergency Special Sessions Act of 2005, Public Law 109-63. It permits the bankruptcy court in New Orleans (E.D. La.) to hold court in Baton Rouge, which is in the Middle District. It could be months before the federal courts in New Orleans are operative.
While several House and Senate Democrats called for relief from BAPCPA as applied to Hurricane Katrina victims, Republicans appear to be considering only minor modifications to the law, due to go fully into effect on Oct. 17. "We're open to considering highly targeted fixes that would make...[victims'] recovery easier," said Sen. Mitch McConnell (R-Ky.), the Senate's second ranking Democrat. But Sen. Charles E. Grassley (R-Iowa), the law's chief sponsor, said delaying or overhauling the new law is not necessary. "The new bankruptcy law already allows bankruptcy courts significant flexibility to look at the special circumstances surrounding an individual's financial situation," Grassley said.
Sen. Russ Feingold (D-Wis.), an opponent of the law, and several others introduced legislation that would provide a one-year grace period from the law's application. The bill would prevent payments made by the Federal Emergency Management Agency from being counted as income and allow any spending resulting from the storm and its aftermath to be treated as legitimate expenses. The bill would also prohibit the dismissal of a chapter 7 case or conversion to a chapter 13 case under the means test if the debtor is the victim of a natural disaster, and permit disaster victims to file for bankruptcy without first meeting the credit counseling requirement. Finally, the bill would allow courts to extend time limits for victims of disasters to comply with the paperwork requirements and extend deadlines in place for small business filers under the law.
More than 80 percent of ABI members responding to a Quick Poll on the ABI World Web site urged Congress to delay implementation of the new law to account for the natural disaster.