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Bills Introduced in Congress to Ease Effects of 2005 Bankruptcy Reform Legislation in Response to Hurricane Katrina

Bills have been introduced in both the United States House of Representatives and Senate to ease the effects of the Bankruptcy Reform Act of 2005 (the "Act"), which was signed into law by President Bush on April 20, 2005 with an effective date of October 17, 2005. The Act introduced a means-test for consumer bankruptcies that will disallow some debtors with an ability to repay creditors from obtaining a discharge of most debt under Chapter 7 of the Bankruptcy Code, and instead require them to repay creditors under a Chapter 13 plan.

The House bill (H.R. 3662) would make a single change to the Act; it would postpone the current October 17, 2005 effective date by two full years. The bill was referred to the Judiciary and Financial Services Committees. The chair of the Judiciary Committee has declined to hold hearings on the bill. No action has been taken by the Financial Services Committee.

The Senate bill (S. 1647) is much more wide-ranging. One section of the bill would allow those in the federally-declared Hurricane Katrina disaster area to proceed under the pre-Act version of the Bankruptcy Code if they file their petition within one year of Katrina's August 29, 2005 landfall. Other provisions would ease certain Bankruptcy Code provisions in favor of individuals and businesses who are victims of natural disasters in general. The bill has been referred to the Committee on the Judiciary, which has not taken action on the bill.

The text and current status of both bills are available on the Library of Congress' webite at http://thomas.loc.gov/home/search.html.

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