U.S. Senator Chuck Grassley recently announced that the bankruptcy filing requirements will be eased for the victims of the Midwestern floods in the same way as they were relaxed for the victims of Hurricane Katrina.
According to an article by the Gazette, this decision by the feds to give the flood victims a break when filing bankruptcy means that the victims can get a waiver for the requirement of credit counseling and debtor education prior to filing bankruptcy.
Since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, people filing bankruptcy have been required to obtain credit counseling services before filing bankruptcy and to enroll in a debtor education program after filing but before receiving a discharge.
Failure to meet these financial literacy requirements means that the bankruptcy case will be thrown out of court, unless a waiver has been obtained.
The U.S. Bankruptcy Trustee's Office also plans to soften certain bankruptcy filing deadlines and other bankruptcy filing requirements for the flood victims.
In Iowa and other parts of the Midwest that were flooded, there is expected to be a surge in the number of people filing bankruptcy. Many families and businesses have been financially devastated by the flooding.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was passed in order to reduce bankruptcy fraud and to reduce the number of people unnecessarily filing bankruptcy. The new bankruptcy law took effect on October 17, 2005, which was right around the same time that Hurricane Katrina slammed into the southern coast of the United States.
There was a public outcry to have the new requirements for filing bankruptcy waived for Hurricane Katrina victims and as a result, these victims were granted waivers for the credit counseling and debtor education requirements.
Bankruptcy lawyers and political leaders in Iowa felt that the flood victims deserved the same considerations and breaks that were given to the hurricane victims.
Grassley sent a letter to Attorney General Michael Mukasey on July 10 saying that it was his understanding that the waivers for those filing bankruptcy after Hurricane Katrina worked well and asked that these waivers also be granted to the flood victims in the Midwest, and as a result the requirements of filing bankruptcy will be relaxed for the flood victim