New Bankruptcy Law Takes Effect Today

Today is the day the creditors have been waiting for. Starting today, it will be much harder to file for bankruptcy, even if the reason for your poor financial predicament is not of your own making. Some people get so far into debt that they can't reasonably ever pull themselves out--the major causes are crushing medical bills, job loss, and divorce. But now bankruptcy will be more expensive and more onerous.

One group that will be especially hard hit is those who escaped from the recent hurricanes. Many, from the poorest to the middle class, lost everything. How will the new bankruptcy law affect them? Loren Steffy in the Houston Chronicle says this:

The Justice Department waived some of the new provisions, such as mandatory credit counseling, for storm victims, but others remain.

Filers must, for example, produce six months of pay stubs and three years of tax returns. For many of Lightfoot's clients, those documents were destroyed by floodwaters.

A few weeks ago, consumer advocates and bankruptcy lawyers urged Congress to postpone the new law for Katrina victims. Although several lawmakers backed the plan, it was blocked by Rep. James Sensenbrenner, R-Wis., the law's author.

As Sensenbrenner so eloquently put it, those who wanted the changes "ought to get over it."

People who owe on mortgages for destroyed houses and on car payments for useless cars will just have to get over it. People who get jobs may be required to meet steep repayment schedules at the same time they try to rebuild what they lost, but they'll just have to get over it.

Louisiana bankruptcy attorney Claude Lightfoot is quoted as saying, "This is the kind of thing that Chapter 7 was designed for — people who are in dire straits." The Chronicle replies,

Not anymore. Now they're on the Sensenbrenner plan:

Get over it.