The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 goes into effect on October 17th, bring sweeping changes to an overburden system while encouraging personal responsibility.

In the wake of the massive devastation caused by Hurricane Katrina, some lawmakers have proposed changes to ensure the new bankruptcy law has the flexibility to provide adequate relief to the victims of Katrina and other natural disasters.

The law, however, includes an exception for "special circumstances" that are considered to determine an individual's ability to repay debts. Hurricane Katrina victims would most likely qualify under the "special circumstances" section of the bankruptcy law. Qualification for "special circumstances" allows individuals — in this case, Hurricane Katrina victims — to make adjustments to current monthly income determinations. Thus, they are more likely to qualify for Ch. 7 or for lower payments under Ch. 13.

AFSA applauds the United States Trustee Program's announcement of a temporary waiver of the statutory requirements for credit counseling for bankruptcy filers in Louisiana and the Southern District of Mississippi due to the effects of Katrina. This action demonstrates that the new bankruptcy reform law, signed by President Bush on April 20th, already gives regulators ample flexibility to address the special circumstances faced by those affected by the Gulf Coast hurricanes.

See AFSA's statement on the new law.