Jan. 7 (UPI) — Democratic presidential candidate Sen. Elizabeth Warren unveiled a bankruptcy reform proposal Tuesday that would undo many of the legal provisions supported by rival Joe Biden.
Warren’s proposal would roll back many key aspects of a bankruptcy measure passed by Congress in 2005, which critics have long criticized as tilting the playing field in bankruptcy procedures away from consumers and in favor of banks and lenders.
One of the main backers of the bill was then-Sen. Joe Biden, whose home state of Delaware is headquarters to many of the nation’s largest credit card issuers.
The debate marked one of Warren’s first high-profile moments on the national political stage — as a Harvard law professor with expertise in bankruptcy, she forcefully testified against the measure. Now, with some polls showing her trailing Biden in the race for the Democratic nomination and losing fundraising momentum, she has returned to the issue.
Though not mentioning the front-running Biden by name, Warren’s bankruptcy platform revisits the 2005 fight between progressive Democrats such as Sens. Paul Wellstone of Minnesota and Russ Feingold of Wisconsin and Biden, who sided with Republicans against efforts to make the measure more consumer friendly.
“The banking industry spent more than $100 million to turn that bill into a law because they knew it would be worth much more than that to their bottom lines,” Warren writes in her plan. “And they were right — by squeezing families harder, they managed to rake in giant profits.”
The Massachusetts senator blamed its provisions making it harder for consumers to discharge debt in bankruptcy for worsening the 2008 financial crisis, citing research showing the bill “caused about 800,000 additional mortgage defaults and 250,000 additional foreclosures.”
Under Warren’s reforms, several key aspects of the current law would be eliminated, such as “onerous paperwork requirements” placed on middle-class filers, filing fees for low-income consumers and requirements that Chapter 7 filers to pay attorneys’ fees up front rather than during or after bankruptcy.
Another key aspect would end “the absurd special treatment of student loans in bankruptcy and [make] them dischargeable just like other consumer debts.”