Airlines flying high, but new bankruptcy law threatens Katrina victims with endless debt

A federal bankruptcy court judge on Sept. 15 approved Delta Air Lines’ request to borrow $2.05 billion from its creditors in a move that will help the carrier maintain operations following its bankruptcy filing earlier this week.

Delta, the third-largest U.S. airline, filed for Chapter 11 bankruptcy protection on Sept. 14 after losing an uphill struggle with soaring oil prices and tough competition from low-cost rivals who have no pension obligations and contract out many services to foreign operations. Northwest Airlines, the No. 4 U.S. carrier, also filed for bankruptcy protection the same day.

Not to worry too much, however. New York Judge Prudence Carter Beatty gave interim approval for Delta’s “debtor-in-possession” financing of $1.7 billion from General Electric and $350 million from American Express.

Delta’s financial adviser Tim Coleman was delighted that Delta was able “to get this kind of financing with the amount of [lousy] collateral we had.”

In the meantime, Delta informed its pilots that it would not pay their October pension payments. (I suppose the loans from GE and Amex are going to a “higher cause.”) Both Delta and Northwest claim to be operating almost normally after their nearly simultaneous bankruptcy filings. In the nick of time, they escaped a tougher bankruptcy law scheduled to take effect next month!

Incidentally, Northwest’s claims of normalcy were belied this week by a report that federal aviation inspectors have found deficiencies in training, staffing and maintenance in the wake of the current strike by the company’s mechanics.

Hurricane Katrina is expected to cause its own eruption of bankruptcy filings by storm victims — but, unfortunately, these folks will get no relief before the harsh and sweeping changes in U.S. bankruptcy laws go into effect Oct. 17.

Thus, Michigan’s Rep. John Conyers (D) and Wisconsin’s Sen. Russ Feingold (D) introduced legislation (HR 3697, S 1647) to provide flexibility for victims of natural disasters in bankruptcy. As expected, Republicans are loath to forgo their “constituency obligations” to the big credit card lenders such as MBNA. These companies will soon be able to more easily foreclose on homeowners. Gone are the provisions in the old bankruptcy law that loosened filing rules for people who had been through a hurricane or flood. Under the new bankruptcy law, individuals will face staggering paperwork and costs, as well as a “means test,” that will force them to pay off some debts even if they have no assets. More often than not, homeowners are forced into bankruptcy by large medical expenditures combined with lousy or no health coverage.

The Cherokee nation, relocated to Oklahoma by a forced march known as the Trail of Tears, were forced to leave the infirm, elderly and sick on hillsides with nothing more than a blanket for “survival” through the bitter 1840 winter. Unless the Conyers-Feingold legislation moves forward, the real Bush Katrina relief will be a similar threadbare blanket of “compassionate conservatism” for the displaced and exhausted Gulf Coast victims of Katrina. A death sentence for many in the coming winter — a winter of blown budgets, blown war-mongering, blown drug, health care and retirement plans. Blown to smithereens.

We can do something!

Provisions of the Conyers-Feingold bill include:

• Allowing Katrina victims to file under the old bankruptcy law through Oct. 17, 2006, a year after the new law goes into effect.

• Modifying the law’s “means test” so that disaster relief payments aren’t counted as income.

• Forbidding courts to automatically convert bankruptcy cases from Chapter 7 to Chapter 13.

• Allowing courts to extend paperwork filing deadlines.

• Striking the new law’s provisions that make it easier for landlords to evict tenants during bankruptcy proceedings. This would ensure that Katrina victims who are unable to pay rent as a result of the disaster aren’t evicted.

Were the airlines just “lucky” to escape the new bankruptcy law? Or is there a plan to simply leave everyone but the wealthy on the side of a hill to die, while the rich and the biggest corporations get billion-dollar bailouts?

Winter is coming. Let’s pass Conyers-Feingold!

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