In the latest twist in the Bankruptcy Potboiler, the Justice Department has announced that it will waive enforcement of portions of the new bankruptcy law for Louisiana residents and some Mississippi residents. They got it right: On the eve of the effective date of the new laws, they see that the bill is a terrible mess for people who are in desperate financial trouble. Hurrah for the Justice Department for saying they will back off this terrible bill. Notice that to provide even minimal protection for people following a catastrophe, the Justice Department must offer wholesale waiver of enforcement of multiple provisions that Congress specifically put into the bill. That’s pretty strong evidence that the changes in the law are going to have a hard impact on families in trouble — including those who don’t get a special hurricane break.
But the Justice Department action raises another question: Can they solve this problem alone?
The short answer is no. The Justice Department can certify that no credit counseling is available, but most of the provisions to which the Justice Department refers are provisions that can be enforced by the Justice Department OR by any creditor. Much of the point of the means test, for example, was to unleash the creditors to raise a host of objections if the debtor failed to comply with the new statutory provisions. If the Justice Department says it will hang back, that helps, but it doesn’t stop the credit card companies, the payday lenders, the mortgage company, the landlords, or any other creditor from charging full steam ahead on every single provision where they have the legal right to do so. And the judges have already said they fear their hands may be tied. Indeed, the Justice Department action puts the lawyers in a dilemma: Can anyone really advise a client that she will be safe if she violates the new law? Can an attorney sign the paperwork, knowing that the legally required documents are not in place? The Justice Department has just told families in trouble to go ahead and jump in shark-invested waters. One shark (the Justice Department) just declared itself a vegetarian, but the others did not take the pledge.
What’s going on?
The Justice Department’s announcement came in response to a letter from Republican head of the House Judiciary Committee, James Sensenbrenner. He’s the one who voted against any disaster relief and said he wouldn’t even hold hearings to consider changes in the bankruptcy laws. Those who don’t like the new laws, he said, should “get over it.”
Representative Sensenbrenner may have been feeling some political heat over his flat-out refusal to consider any changes, especially after leading Republicans said that perhaps some changes would be in order. He needed some good press for the bankruptcy bill, something showing how “flexible” it is. In response to his letter, the Justice Department quickly proclaimed itself a vegetarian shark — at least where some Hurricane Katrina victims are concerned. Good move, except that the Justice Department didn’t cover all the bad parts of the law nor did the Justice Department bind anyone but themselves.
Is this just a big public relations game designed to reduce the pressure to amend the bankruptcy laws to give people real relief? Heaven forbid that Chairman Sensenbrenner be forced to admit that the bankruptcy laws written by the credit card industry are a bit harsh for people who are in trouble through no fault of their own.
If the Justice Department has now jumped on board that it isn’t going to enforce the law as written, then why can’t Congress make that the official rule for everyone — creditors included? No need for more litigation or to worry that a creditor is waiting just around the corner — just make it clear that these people are protected.
The headline for the Justice Department action reads, “the water is safe,” but the reality is that the sharks are still swimming.
