News from the Tennessee Valley Opinion


Katrina victims show flaws of bankruptcy law

The widely recognized disaster of applying a new bankruptcy law to the victims of Hurricane Katrina should prod Congress to scrap the legislation altogether.

On Oct. 17 a new bankruptcy law, the crown jewel of the credit-card industry, will go into effect. The law would have disastrous ramifications for the survivors of Hurricane Katrina and, because of the attention focused on those victims, Congress will likely amend the law to lessen the impact.

Such an amendment would be a positive. By pushing the effective date back or issuing a waiver of those directly impacted by the storm and ensuing floods, thousands would escape the double whammy that comes when financial disaster comes at the heels of tragedy.

Congress has no problem understanding the lesson that mass disasters like Katrina bring in the context of bankruptcy law, but it needs to wake up to the fact that the lesson applies with just as much force in the arena of individual disaster.

Congress is missing the trees for the forest.

Katrina brought calamity to the people of the Gulf Coast. Like all calamities, however, this one wrought its vengeance on individuals. The misery it brought was not on some abstract collective but on individual human beings. John Doe lost his house. Jane Doe lost her job. Mary Doe lost her husband. Jim Doe had to be hospitalized.

The same argument that has politicians calling for a temporary delay in the new bankruptcy law to temper the financial consequences of a forest of tragedy should likewise compel a rescission of the new law for its effect on the myriad individual tragedies that never make the evening news.

By and large, the financial disaster that forces an individual to endure the stigma of bankruptcy is unexpected. The trigger may be a lost job, lost health insurance, health problems, a deceased spouse or divorce. For the individual, each is a calamity of Katrina proportions.

The dividing line between mass and individual disaster is a difference in our perceptions, not in the consequences to the individual debtor.

If Congress rethinks the new bankruptcy law as it applies to the forest of Hurricane Katrina victims, it should rethink it for the individual victims of diverse and personal tragedies.

The lesson of Katrina is not just that the new bankruptcy law unfairly tramples on the victims of Katrina. It is that the new law fails in its treatment of every tragedy, be it personal or collective.

Congress should show it learned the lesson of Katrina by rescinding the new law before its effective date.

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