Consumer Bankruptcy:

Relief for Victims of Disaster

Following Hurricane Katrina and Hurricane Rita, there has been much concern about the effects of the new bankruptcy law passed in 2005 (The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, or BAPCPA) on the victims of disaster. As a result, the US Trustee’s office released a new set of guidelines which are meant to relieve victims of disaster filing for bankruptcy under the new law. This is because many victims lost their homes and along with that, much of the paperwork needed to meet the strict requirements found in the new law with regard to paperwork. Some exceptions for victims of disasters include but are not limited to:

  • The requirement for credit counseling is waived.
  • There is no penalty associated with the inability of filers to provide required paperwork.
  • The requirements of the “means test” are relaxed, making it possible for more victims of disaster to file for Chapter 7 bankruptcy. This is because the tremendous negative financial effects of the disaster are viewed as extenuating circumstances.

The official press release can be found on the Department of Justice’s website, here.