U.S. lawmaker won't reopen bankruptcy for Katrina

Reuters

U.S. lawmaker won't reopen bankruptcy for Katrina

WASHINGTON (Reuters) - The chairman of the U.S. House Judiciary Committee said on Tuesday he had no intention of reopening a sweeping bankruptcy law passed by Congress earlier this year, despite proposals to exempt Hurricane Katrina victims from some of its provisions.

The new, more stringent bankruptcy law will not harm people left "down and out" by the storm, Wisconsin Republican Rep. James Sensenbrenner said.

He said he would not hold a hearing in his committee on a bill by the panel's ranking Democrat, Michigan Rep. John Conyers, and 31 other Democrats who want to exempt Hurricane Katrina victims from parts of the new bankruptcy law. A chairman's decision not to hold a hearing usually prevents a House bill form advancing.

Congress last spring passed the new bankruptcy law, which makes it harder for heavily indebted Americans to wipe out their obligations. It goes into effect on October 17.

Backers said it was needed to crack down on abuse of the bankruptcy system.

But after Hurricane Katrina struck the Gulf Coast, Conyers said hurricane victims should be exempted from a means test in the new law that determines whether filers can be put on debt repayment plans.

Sensenbrenner said Conyer's argument was "specious" because someone completely wiped out financially, whether by Katrina or anything else, would not be put on a repayment plan under the new law.

"If someone in Katrina is down and out, and has no possibility of being able to repay 40 percent or more of their debts, then the new bankruptcy law doesn't apply," Sensenbrenner told Reuters.

Such a person would still be able to file to have their debts canceled under what is known as Chapter 7 bankruptcy, Sensenbrenner said.

In the Senate, Wisconsin Democrat Russell Feingold has introduced legislation that would let Katrina victims file under the old bankruptcy law for another year.

Even before the hurricane, record numbers of people were rushing to file for bankruptcy before the more stringent new law goes into effect. The American Bankruptcy Institute said recently that quarterly filings for the period from April to the end of June were the highest in U.S. history at 467,333 -- up 11 percent from the same quarter a year earlier.