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Feb 8, 2012 12:32 PM by AP

FEMA has plan to waive debts of disaster victims

NEW ORLEANS (AP) - The Federal Emergency Management Agency announced Wednesday that it is rolling out a plan to waive debts for many victims of Hurricane Katrina and other disasters who may have mistakenly received millions of dollars in aid.

The debts, which average about $4,622 per recipient, represent slightly less than 5 percent of the roughly $8 billion that FEMA distributed to victims of Katrina and other 2005 storms. Some of the overpayments were caused by FEMA employees' own mistakes, ranging from clerical errors to failing to interview applicants, according to congressional testimony.

FEMA is expected to mail out roughly 90,000 letters next week to inform disaster victims that they may be eligible for debt waivers. The recipients will have 60 days to respond and request a waiver.

Last year, the agency sent out debt notices in an effort to recover more than $385 million it says was improperly paid to victims of hurricanes Katrina, Rita and Wilma in 2005.

People are eligible for waivers if their household adjusted gross income on their most recent federal tax return was less than $90,000 and a FEMA error was solely responsible for the improper payment. The improper payment can't involve any fraud or misrepresentation by the recipient. The waiver only applies to disasters declared between Aug. 28, 2005 - the day before Katrina's landfall - and the end of 2010.

Another requirement is that collecting a debt would have to be "against equity and good conscience," meaning that it would be "unfair under the circumstances of the case to collect the debt," FEMA says.

In their responses to the waiver letter, disaster victims must explain why collecting the debt would cause them "serious financial hardship," FEMA says. Recipients also must specify how they spent the money and why they can't return the funds to FEMA.

In December, Congress approved legislation that allows FEMA to waive many of the debts. Before President Barack Obama signed it into law, FEMA had said it was required to make an effort to recover improper payments, even if the recipient wasn't at fault.

Sen. Mary Landrieu, a Louisiana Democrat who was one of the provision's sponsors, praised FEMA for "moving swiftly and aggressively" to implement a waiver plan.

"This announcement will bring great relief to many honest disaster survivors who never intended to misuse funds or take anything to which they were not entitled," Landrieu said in a statement. "To have forced people who experienced great tragedy to pay large sums of money back to the government because of someone else's mistake would have been incredibly unfair."

FEMA's collection efforts aren't limited to the 2005 storms. The agency has mailed out more than 6,000 debt letters to survivors of other recent disasters, including floods.

About 2,500 recipients, including 930 victims of the 2005 hurricanes, had appealed their debt notices as of December. FEMA says about 30 percent of those appeals successfully erased at least some of the debt.

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