YBK [Part 22]: Bankruptcy Reform Determined to Strike at U.S.

During the months necessary for economic stabilization, thousands of Gulf Coast residents will be without a paycheck. For some, savings will deplete within a month or two. Others never had any. While incomes plummet, bills pile up: car payments are due regardless of the operability of the vehicle; medical bills, credit card debt, car loans, mortgages and student loans have to be repaid.

One of the consequences of so many Americans living paycheck to paycheck is their extreme vulnerability during crises. About half of families roll over credit card balances every month, and balances average almost $5,000. Last year 1.6 million cardholders declared bankruptcy. To meet their financial obligations, many Americans have refinanced their homes; about 42 percent of new mortgages are refinances, and 77 percent strip equity from homeowners, leaving them with higher monthly payments. Many of the victims fell into that camp even before the hurricane. The federal bankruptcy reform is on a collision course with those left behind.

Evacuees will be eligible for disaster assistance, but such aid will be inadequate to protect them from bankruptcy reform scheduled to strike on October 17. FEMA has promised each evacuee household $2,000, which will hardly cover the expenses of hotel rooms, food and other necessities, let alone mounting loan payments. Some will be eligible for Disaster Unemployment Assistance, but beneficiaries will receive 50 to 70 percent of their weekly salary for only 26 weeks. Private charities, especially the Red Cross, will also assist victims, but such assistance is short-term and often capricious.

--Howard Karger, Alternet