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Wednesday, October 05, 2005

Largesse 

Boy, Lake George sure is full of lucky duckies:
The Justice Department temporarily waived a provision of a tough new bankruptcy law to aid people filing for bankruptcy in Louisiana and southern Mississippi because of Hurricane Katrina.

The department's United States Trustee Program said Tuesday that for the time being applicants in those areas would not have to undergo credit counseling before they file. Some observers had said the new law, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, would produce hardships for hurricane victims . . . .

U.S. Trustees, who oversee private trusts and promote and maintain efficiency in the bankruptcy system, are authorized by the new law to waive the counseling requirement in any judicial district where the existing counseling agencies are not reasonably able to provide adequate services to filers. The U.S. Trustee for Region 5 made this determination for the Eastern, Middle and Western judicial districts of Louisiana and the Southern district of Mississippi.

So far, 13 counseling agency offices have been approved for Louisiana filers, and another five for southern Mississippi filers, but none is located in Louisiana or Mississippi. The Web site list says these offices provide telephone and Internet counseling where in-person counseling is not available.

So, to reiterate: thanks to the extraordinary generosity of the DoJ, families whose homes, possessions, and livelihoods were wiped out by a particularly thuggish act of God (with a spectacular assist from DHS and FEMA) will no longer be required by law to seek out the government's advice on how best to manage the assets they no longer possess. They can go ahead and declare bankruptcy -- as long as they meet all the other provisions of the new law:

The new bankruptcy laws require passing a "means test" to verify if the petitioner can pay their debts via other means or not. Nathalie Martin, resident scholar at the American Bankruptcy Institute (ABI), said this will require "lots more in the way of paperwork, including providing pay stubs and invoices," much of which is no longer accessible post-Katrina.

"Employees lost their paperwork records. Whole companies lost their paperwork. The technology requirements needed to maintain these records are simply not available to these people," Martin told ConsumerAffairs.Com . . . .

Katrina survivors are already starting to run up huge debts on their credit cards as they struggle to find new jobs, new homes, and new lives. Although many banks and credit card companies have offered leniency on payments and loans in the short term, the long-term effects of their displacement and loss of finances may put them hopelessly in debt.

The new bankruptcy legislation has been criticized by consumer-rights advocates and finance experts for turning the bankruptcy courts into "collection agencies" for credit card companies such as MBNA.

In addition to requiring extensive paperwork and mandated credit counseling for bankruptcy petitioners, the law also limits the protections of homeowners who have refinanced their homes, and broadens the definition of "nondischargeable" debts to include monies owed to "governmental units."

This could conceivably mean that Katrina survivors who received emergency loans from the Federal Emergency Management Agency (FEMA) might be liable to pay it back, even if they file for bankruptcy.
Yes, yes, we know what you're thinking: why should a bunch of shiftless, indigent panhandlers, who (let's face it) chose to tempt nature's wrath by living in a tropical storm zone, get all the breaks? Well, they shouldn't! -- and we are most definitely pleased to report that they don't. The news is also good for solid, productive citizens who have the common sense to A) build their residences, both primary and secondary, on dry land, and B) earn over $327,000 a year:

After falling for two years, the share of income going to the richest slice of Americans - the top tenth of 1 percent - grew significantly in 2003 while the share going to 99 percent of Americans fell, tax data released yesterday showed.

At the same time, the effective income tax rates paid by the top tenth of 1 percent fell sharply, declining at more than 10 times the rate reduction for middle-class taxpayers, the new report, by the Internal Revenue Service, showed . . . .

Only for those Americans in the top 1 percent, the nearly 1.3 million taxpayers who made at least $327,000, did incomes increase significantly more in 2003 than the rate of inflation. And this increase was concentrated within the top tenth of 1 percent. The income of that group grew by 9.5 percent in 2003 over the previous year while the rest of the top 1 percent had a gain of 3.7 percent.

For the bottom 99 percent of taxpayers, income rose by slightly less than 2 percent, which was below the inflation rate of 2.3 percent . . . .

The top tenth of 1 percent had more income in 2003 than the poorest third of taxpayers, a group with 330 times the number of people, analysis of the data showed. This is a sharp change from 1979, the earliest year in the I.R.S. report, when the total income of the poorest third of Americans exceeded that garnered by the top tenth of 1 percent by 2.5 to 1.

The I.R.S. data tend to understate incomes for those at the very top because of different rules for reporting wages and capital gains, meaning the actual disparity was larger than the official data show.
(Thanks to our revered colleague Avedon Carol for the tax link.)

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